REG - Aquila Energy Effcn. - Half-year Report
27/09/2023 07:00
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RNS Number : 7465N Aquila Energy Efficiency Trust PLC 27 September 2023
LEI No: 213800AJ3TY3OJCQQC53
AQUILA ENERGY EFFICIENCY TRUST PLC
HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS TO 30 JUNE 2023
Consolidated Financial Highlights
Financial information At 30 June At 31 Dec
2023 2022
Net asset value ("NAV") per Ordinary Share (pence) 93.54 95.23
Ordinary Share price (pence) 62.00 71.00
Ordinary Share price discount to NAV(1) (33.7%) (25.4%)
Net assets (in £ million) 93.54 95.23
Ongoing charges(1) 3.5% 2.6%
Performance summary % change % change
NAV total return per Ordinary Share(1) (0.5) 0.1
Share price total return per Ordinary Share(1) (11.2) (23.5)
1 These are Alternative Performance Measures ("APMs") for
the period ended 30 June 2023. Definitions of these APMs and other performance
measures used by the Company, together with how these measures have been
calculated, can be found further below in this Half-yearly Report.
STRATEGIC REPORT
CHAIR'S STATEMENT
I am presenting my Chair's Statement for the Company's Half-yearly Financial
Report (the "Half-yearly Report") which covers the six months to 30 June 2023
(the "Period"). The Company's 2022 Annual Report for the year ended
31 December 2022 was published on 2 May 2023 (the "2022 Annual Report and
Accounts") and, therefore, there is some duplication in the content of the
2022 Chair's Statement and this Statement.
Investment Performance
The Company's unaudited NAV as at 30 June 2023 on a cum-income basis was 93.54
pence per ordinary share (95.23 pence as at 31 December 2022), representing a
decrease of only 1.8%. The Company's share price traded at a significant
discount to NAV over the period to 30 June 2023, resulting in a total return
of minus 33.7%.
Contractual obligations and Deployment
As at 30 June 2023, the Company had investments of £65.7 million and
contractual obligations to fund committed investments equivalent to £23.4
million. Following the failure of the February 2023 Continuation Vote on 28
February 2023, which was followed by a successful combined Continuation
Managed Run-Off Resolution on 14 June 2023 (the "Continuation Votes"), the
Company has been operated with the primary intention of preserving cash to be
returned to shareholders. As a result, it was decided, after the Period end,
not to proceed with one investment of £4.5 million which, therefore, reduces
the Company's contractual obligations to fund investments to £18.9 million.
The Investment Adviser expects that the majority of this amount will be
deployed by the end of January 2024, leaving only £1.7 million to be invested
in the subsequent months of 2024. These funding obligations and deployment are
covered in full detail in the Investment Adviser's Report.
By 31 March 2024, as a result of the expected run-off of certain investments,
in particular the Superbonus projects, the Investment Adviser expects the
Company and its immediate investment holding entities, to have no less than
£24.0 million of cash (prior to any dividend or return of capital to
shareholders). It should be noted that the nature of the Company's investments
in Superbonus projects is such that it is difficult to be sure when the
investments will be realised. They will, however, continue to be income
producing if actual redemption is later than forecast.
Continuation Managed Run-Off and next steps
As noted above, the successful vote in favour of the Continuation and Managed
Run-Off Resolution in June 2023 has resulted in a fundamental change to the
governance of the Company, ensuring that the shareholders' instruction to see
that a return of their investment capital is effected in an orderly manner.
However, as we have highlighted on a number of occasions, the 37 assets that
comprised the Company's portfolio as at 30 June 2023 are complex in structure,
spanning several geographies and include many investments with long maturities
(some as long as 18 years). A return of capital is, therefore, a complicated
process. The Board, together with its advisers, has been fully engaged in
ensuring that the realisation process and maximisation of return is conducted
effectively. The Board continues to review strategic options for the
portfolio, which include the sale of all of the Company's assets as well as
other proposals to address the Company's size and liquidity. On 16 August
2023, we provided shareholders with an update on the process to market test
the portfolio sale which is being conducted by Stifel Nicolaus Europe Limited.
That process is underway - albeit, it may not result in a sale - and the
Board will keep shareholders updated on progress, as appropriate.
I cannot conclude this brief statement without some comment on the costs
associated with the production of the Company's 2022 Annual Report and
Accounts, two Continuation Votes in a six-month period and preparation for a
possible complex sale process. The results for the six months ended 30 June
2023 include Investment Adviser's fees which have been based on the level of
committed assets. This was agreed with the Investment Adviser in the course of
the Investment Strategy Review conducted in early 2022 and resulted in
relatively low Investment Adviser fees in 2022. The results for the Period
also include exceptional costs relating to the two Continuation Votes
conducted in the Period, and the actions initiated by the Board following
those votes, as well as costs for the preparation of the 2022 Annual Report
and Accounts. The latter included the increased costs resulting from the
necessary assessment and implementation of a revised accounting approach for
the valuation of some of the Company's investments. The Board will be further
considering whether there is scope to recoup these increased costs from its
service providers.
Dividends
Following the failure of the February 2023 Continuation Vote the Board
announced that future dividends will only be paid from net income, and after
reviewing cash flow forecasts, only in respect of six-month periods, not
quarterly periods. The Board has decided that in the current circumstances, a
dividend will not be paid in respect of the Period.
Outlook
We are now exploring a portfolio sale process which inevitably will take some
time given the complexity of the asset portfolio and the Board's intention to
carefully consider the potential options for realising value for shareholders.
As such, it is not possible, at this early stage, to provide further clarity
on the timescale for realisation.
Miriam Greenwood OBE DL
Chair of the Board
26 September 2023
INVESTMENT ADVISER'S REPORT
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 as announced on 16
August 2023. While pre-existing contractual commitments are being honoured,
the Investment Adviser has taken opportunities to withdraw the Company from
commitments of £5.4 million as at 31 December 2022 to invest into two Spanish
projects. In addition, since 30 June 2023 an agreement in principle has been
reached to withdraw from a partially invested Solar PV investment which was
valued at £0.7 million at 30 June 2023 and had an unfunded commitment of
£4.5 million (see "Investments in Spain" section below). Repayment to the
Company of the initial funding and accrued interest is expected in October
which would take the number of projects to 36.
During the first six months of 2023, £19.7 million was deployed taking total
invested capital, before redemptions and value adjustments, to £68.0 million.
£12.8 million was deployed into nine commitments which had already been made
as at 31 December 2022 and the balance of £6.9 million to nine new
commitments. These new investments comprised:
· Three Spanish Solar PV investments with three new ESCOs for
a total commitment of £4.8 million of which £4.2 million was deployed as at
30 June 2023;
· Two additional rooftop Solar PV projects in Italy, with a
total commitment of £1.3 million of which £0.8 million was deployed as at 30
June 2023; these projects are with Noleggio Energia and take the total number
of projects with this ESCO to seven and the total committed capital to £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 30 June 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.
As a result of the agreement to withdraw from a partially invested Solar PV
investment, in principle, to sell the investment with an unfunded commitment
of £4.5 million, as referred to in the Chair's Statement, the Company now
forecasts a further £18.9 million will be invested into existing commitments
following 30 June 2023 (including expected transaction costs). The majority of
this capital is forecast to be deployed by the end of January 2024, of which
£0.4 million has been deployed since the Period end, leaving only £1.7
million to be deployed through the remainder of 2024.
By 31 March 2024, as a result of the expected run-off of certain investments,
in particular the Superbonus projects, the Investment Adviser expects the
Company and its immediate investment holding entities to have no less than
£24.0 million of cash (prior to any dividend or return of capital to
shareholders).
PORTFOLIO OVERVIEW
As at 30 June 2023, the Company's portfolio of 37 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 77% of the Company's forecast project cash flows are investment
grade, 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 83% of the total investment value
provides a fixed rate of return from contractual cash flows, approximately 17%
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 yield of 8% per annum, in line with the figure reported
in the Audited Annual Report and Accounts for the year ended 31 December 2022.
Investments in Italy (£37.4m committed; £32.7m deployed at Period end)
In the six months to 30 June 2023, the Company committed £1.3 million to two
new rooftop Solar PV projects developed by Noleggio Energia, with whom the
Company has now made seven investments. During the Period, £11.7 million was
deployed to both these new investments and other existing commitments in
Italy, the majority of which was deployed into Superbonus projects.
As at 30 June 2023, total cash deployed into investments in Italy was £32.7
million with £4.7 million of outstanding commitments across a total of 13
investments. The Investment Adviser forecasts that only £1.5 million of these
outstanding commitments will be deployed, primarily to two rooftop Solar PV
investments because it expects that only a further £0.2 million (instead of
£3.4 million) will be deployed to Superbonus projects due to the expected
timings of cash inflows versus cash outflows on individual projects. The full
commitment of £4.7 million may be required if the timings of cash receipts
from completing projects are later than expected.
Investments in Italian "Superbonus" projects (£32.5m committed; £29.0m
deployed at Period end)
The Company had committed £32.5 million to five clusters of Superbonus
projects, as at 30 June 2023, a small increase in base currency terms compared
with the position as at 31 December 2022 of £33.0 million. The net cash
deployed increased from £18.1 million as at 31 December 2022 to £29.0
million as at 30 June 2023. Significant progress has been made on the 109
individual projects within the five clusters such that construction has been
completed on 84 of these projects to date. 40 of these 84 projects have
secured their final tax credit accreditation and 9 projects have been fully
completed, with payments totalling £0.9 million for those tax credits
received. However, the ESCOs are experiencing delays in receiving
certification that the projects qualify for tax credits and the buyers of the
tax credits are taking time to make the payments due. As a result of this, the
projects now have a longer maturity than originally forecast. This results in
additional interest, currently at the rate of 10% per annum, being earned by
the Company on the capital committed and deployed. As a result of the delays,
the ESCOs are expecting the majority of the capital deployed to be redeemed by
the end of the second quarter of 2024 with final payments expected in
September 2024. This compares with their earlier expectation of the majority
of capital deployed being redeemed by the end of January 2024.
"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.
Solar PV Investments for self-consumption in Italy (£4.9m committed; £3.7m
deployed)
As at 30 June 2023, the Company had committed £4.9 million to eight rooftop
Solar PV projects with an aggregate capacity of 5.1MWp. As at 30 June 2023,
£3.7 million had been deployed into seven operational projects with one
project under construction. The balance of the commitments is expected to be
deployed by the end of September 2023. These projects enable companies to
reduce their energy expenses and CO2 emissions and avoid grid losses through
the self-consumption of the electricity produced.
Projects with Noleggio Energia
Of these eight 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% p.a.
The projects with Noleggio Energia are summarised below at Period end:
Commitment Capacity Credit Term
Counterparty Description £k kWp Rating Yrs
Acetificio Galletti SNC Producer of vinegars, dressings, pickles, and other food products 312 238 B 7
Enofrigo Manufacturer of wine cabinets and hot and cold food display units 116 127 BBB+ / BBB- 7
Tecnocryo Manufacturer of machines for handling cryogenic fluids 1,285 1,000 BB+ / BB 10
Ali Group Manufacturer of food service equipment 335 443 A- 7
Orlandi Manufacturer of non-woven fabric products for a range of applications 796 876 BB+ / BB 10
Marangoni Manufacturer of tyre retreading systems and products 829 1,000 BB+ / BB 10
Carpigiani Manufacturer of machinery to produce ice cream 498 479 A- 5
Total 4,171 4,163
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 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 through until April 2028. Thereafter, the investment is based on a
feed-in tariff for an additional six years, aggregating to a 12-year tenor.
The investment is forecast to generate a return of 7.2% p.a.. 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 has a credit
rating of BBB+ from the Italian government.
Investments in Spain (£28.7m committed; £10.8m deployed)
In the six months to 30 June 2023, the Company committed £4.5 million to a
further three Solar PV projects in Spain with three new project developers,
including a £3.4 million project at the site of a Spanish agricultural
company and two smaller commitments of £0.7 million and £0.6 million to
finance groups of projects across Spain.
During the Period, £6.1 million was deployed to these investments and
existing commitments.
As at 30 June 2023, the Company had made total commitments of £28.7 million
to 11 investments in Spain. Ten of these investments, with total commitments
of £24.5 million, are Solar PV investments for self-consumption and a
£4.2 million commitment to a building energy efficiency investment.
As at 30 June 2023, cash deployed into these investments was £10.8 million
with £17.9 million of commitments outstanding. The Investment Adviser expects
that the majority of these commitments will be deployed by the end of January
2024, primarily to complete Solar PV projects, leaving £1.7 million to be
invested in the subsequent months of 2024 to complete the building energy
efficiency investment programme. The reduction in forecast deployment is
primarily due to the decision to not proceed with one Solar PV project due to
the project not satisfying the conditions precedent contractually agreed for
the release of the subsequent tranche. This is expected to result in the
repayment of the initial tranche and accrued interest by the project
developer.
Solar PV investments in Spain (£24.6m committed; £9.3m deployed)
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.
Six of these investments are now operating while four projects remain to be
constructed and/or financed, including a single large project of £8.7
million, which requires certain conditions precedent to be fulfilled.
Buildings Energy Efficiency investments in Spain (£4.2m committed; £1.5m
deployed)
The Spanish Government has established incentive schemes to promote buildings
energy efficiency measures, 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 buildings, improving their energy rating by
at least one energy class. Under this scheme, the Company has committed £4.2
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 at the S&P equivalent of A+/A.
£1.5 million has been deployed as at 30 June 2023 and the balance is forecast
to be deployed in full by the end of 2024.
Investments in Germany (£22.7m committed; £19.1m deployed)
In the Period, no further investments were made in Germany. The Company has
four investments in Germany, across four distinct technologies including smart
metering technologies, water management solutions, heat pumps and Bio-LNG,
with total commitments of £22.7 million, of which £19.1 million has been
deployed. £3.7 million of the outstanding commitments of £3.8 million is
expected to be deployed in the fourth quarter of 2023 or in the first quarter
of 2024, following receipt of all necessary permits, to finance the
installation of liquefaction equipment at a biogas plant in Northern Germany.
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%
p.a., which is equivalent to 8% of revenue generated by the asset company,
capped at £1.1 million across eight years. This arrangement results in an
overall forecast return from this project of 9.0% p.a.
Investments in the United Kingdom (£6.2m committed; £5.3m deployed)
In the Period, the Company committed £2.1 million to four new investments
taking total commitments to investments in the UK to £6.2 million across ten
investments with seven ESCOs. 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 £1.3 million of which £0.2 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 30 June 2023, total cash deployed to investments in the UK was £5.3
million with £0.7 million of commitments outstanding including £0.2 million
for lighting investments to be deployed in Q4 2023. The remaining outstanding
commitment of £0.5 million is to a CHP investment, for a food producer, Vale
of Mowbray, to which £0.9 million has been previously deployed. As previously
reported, this project remains on hold because Vale of Mowbray has been 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 been focused on repurposing
the site to cold store operations and 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 made an ECL
provision of £0.24 million against this investment 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 export tariffs, which are renewed each year,
although a significant percentage of revenues are based on feed in tariffs
which benefit from annual inflation adjustments. The other investments in CHP
and lighting projects are all fixed return investments although the lighting
projects with Lumenstream have annual inflation adjustments.
Valuations and Expected Credit Loss Provisions as at 30 June 2023
As at 30 June 2023, the Company's investments had a book value of £65.7
million with investments held at amortised cost valued at £54.1 million and
investments held at fair value through profit or loss valued at £11.6 million
(see Note 3 of the Interim Accounts).
The investments held at amortised cost are net of expected credit loss
provisions of £0.36 million, which increased by £0.22 million from £0.14
million as at 31 December 2022. The principal reason for the increase is the
provision made against the Ega Energy Vale of Mowbray investment, referred to
above, for which the provision increased to £0.24 million. Apart from this
project, the Company has not experienced significant payment issues on the
receivables due to be paid to it in the Period.
The half year valuation of the investments held at fair value through profit
or loss resulted in a loss of £1.7 million, a change of minus 7.3%.
While there were relatively minor upwards adjustments to the Company's
investments held at fair value in Germany and the UK, there was an overall
downwards valuation adjustment in the Period, mainly due to the Spanish Solar
PV investments. This downwards adjustment in Spanish Solar is due mainly to a
reduction in forecast power prices, after CPI inflation adjustments. Further
downward adjustments have resulted from foreign exchange effects and an
increase in discount rates of c. 20bps compared with those used at 31 December
2022. The discount rate increase is attributable to interest rate rises.
The downwards valuation adjustment to the Spanish Solar PV investments seen in
this Period is greater than the positive valuation adjustment reported for the
year ended 31 December 2022. This means that these investments held at fair
value are currently valued at £4.4 million, which is lower than cost of £5.8
million. A significant part of this negative valuation, compared with cost, is
expected to be recovered in October when one of the investments, as referred
to in the Chair's Statement, is expected to be realised. This investment will
be realised at cost, plus a holding interest rate of 8.5% p.a., in accordance
with the agreement in principle, which has been reached with the relevant
ESCO.
Summary of Investments as at 30 June 2023
Description Receivables Weighted Avg. Credit rating Contract Technology Status Country Committed, Dec 22 Committed, June 23 Deployed, Dec 22 Deployed, June 23
term years (FX rate at 1.1295 EUR to GBP) £'000 (FX rate at 1.1647 EUR to GBP) £'000 (FX rate at 1.1295 EUR to GBP) £'000 (FX rate at 1.1647 EUR to GBP) £'000
238 kWp Solar PV plant at food manufacturer in Lombardy; fixed income BB- 7 Solar PV Operating Italy 314 312 310 301
127 kWp Solar PV plant installed at manufacturer in Veneto; fixed income BBB+ / BBB- 7 Solar PV Operating Italy 120 116 120 116
Superbonus scheme; fixed income from sales of tax credits BB- 1 - 2 Building Retrofit Construction Italy 5,498 5,952 5,498 5,146
Superbonus scheme; fixed income from sales of tax credits BBB+ / BBB- 1 - 2 Building Retrofit Construction Italy 10,793 10,346 10,539 10,048
LED lighting contracts with 6 UK companies; fixed income with RPI BBB+ / BBB- 5 Lighting Operating United Kingdom 390 390 362 362
901.6 kWp Solar PV plant at site in Ascoli Piceno (Central Italy); fixed & BBB+ / BBB- 12 Solar PV Operating Italy 740 718 730 708
variable income
Superbonus scheme; fixed income from sales of tax credits AAA / AA- 1 - 2 Building Retrofit Operating Italy 1,609 1,552 1,600 1,552
1,000 kWp Solar PV plant at manufacturer in Lombardy; fixed income BBB+ / BBB- 10 Solar PV Operating Italy 1,325 1,285 1,316 1,275
Sub-metering contracts with landlords of multi-occupancy buildings; fixed A- 9 Sub-meters Operating Germany 1,821 1,768 1,787 1,733
income
CHP energy services for major conference centre in Wales; fixed income BBB+ / BBB- 6 CHP Operating United Kingdom 200 200 171 171
CHP energy services for food manufacturer; fixed income CCC / CC 7 CHP Construction United Kingdom 1,396 1,395 907 907
Superbonus scheme; fixed income from sales of tax credits BBB+ / BBB- 1 - 2 Building Retrofit Construction Italy 8,722 8,450 7,099 6,641
3,830 kWp Solar PV plant at facility in Tarragona, Northern Spain; variable BBB+ / BBB- 15 Solar PV Construction Spain 2,947 2,851 1,467 1,423
income from PPA
Three Solar PV plants for poultry producer; variable income from PPA BB- 15 Solar PV Operating Spain 286 273 134 260
CHP energy services for a hotel in the Midlands; fixed income BB+ / BB 8 CHP Operating United Kingdom 433 433 407 407
Superbonus scheme; fixed income from sales of tax credits BB+ / BB 2 Building Retrofit Construction Italy 6,356 6,164 6,347 6,155
Five Solar PV plants in Spain; variable income from PPAs with multiple BBB+ / BBB- 15-18 Solar PV Construction Spain 9,888 9,342 639 623
counterparties
8,800 kWp Solar PV plant in Zaragoza; variable income from PPAs with multiple BB+ / BB 15 Solar PV Construction Spain 6,321 6,138 1,549 1,503
counterparties
Two Solar PV plants at two businesses in Spain; fixed income BB- 10 & 12 Solar PV Operating Spain 155 150 153 148
443 kWp Solar PV plant at foodservice equipment manufacturer in Veneto; fixed BBB+ / BBB- 7 Solar PV Operating Italy 345 335 ‒ 335
income
745.5 kWp Solar PV project at Spanish ceramic tiles manufacturer; variable BBB+ / BBB- 15 Solar PV Operating Spain 966 918 733 888
income from PPA
Three operating wind turbines in the UK; variable income from FiTs and export BBB+ / BBB- 10.6 Wind Operating United Kingdom 484 484 400 400
tariffs
Operating bio-gas plant in Northern Germany with planned upgrade to a Bio-LNG1 A- 8.25 Biogas / BioLNG Operational (Phase 2 construction) Germany 8,282 8,036 4,429 4,295
facility; fixed & variable income
Solar PV for agricultural company in Cordoba; variable income from PPA BB- 15 Solar PV Operating Spain 677 303 ‒ 296
875.6 kWp Solar PV plant at non-woven fabrics manufacturer in Lombardy; fixed BB- 10 Solar PV Construction Italy 821 796 ‒ ‒
income
Water management services for condominiums and multi-family homes; fixed BBB+ / BBB- 10 Water management Operating Germany 11,067 10,698 10,978 10,647
income
Two energy saving contracts for five Spanish condominiums located around A+ / A 15 Building Retrofit Construction Spain 5,959 4,164 211 1,472
Madrid, Guadalajara and Gerona; fixed income
Two operating wind turbines in Scotland; variable income from FiTs and export BBB+ / BBB- 13 Wind Operating United Kingdom 1,162 1,494 1,132 1,447
tariffs
Heat pump service and maintenance contracts for the residential sector AAA / AA- 15 Heating Construction& Operational Germany 2,240 2,173 2,213 2,146
throughout Germany; fixed income
4,000 kWp Solar PV plants for leading agricultural business; fixed income BB+ / BB 10 Solar PV Operating Spain ‒ 3,378 ‒ 3,306
869 kWp Solar PV plants at two sites around Alicante, Spain; variable income BB+ / BB 14 & 15 Solar PV Operating Spain ‒ 598 ‒ 581
from PPAs
1,300 kWp Solar PV plants at four sites in Spain; variable income from PPAs BBB+ / BBB- 18 Solar PV Construction Spain ‒ 607 ‒ 138
and grid sales
Metering and LED contracts with eleven different counterparties in the UK; BBB+ / BBB- 5 to 7 Various Construction United Kingdom ‒ 875 ‒ 662
fixed income with RPI
1,000 kWp Solar PV plant at leading tyre retreading business in Central Italy; BB+ / BB 10 Solar PV Construction Italy ‒ 829 ‒ 343
fixed income with RPI
478.8 kWp Solar PV plant at ice cream equipment manufacturer in Northern BBB+ / BBB 5 Solar PV Operating Italy ‒ 498 ‒ 491
Italy; fixed income
LED lighting contracts for 17 different clients in the UK; fixed income BBB+ / BBB- 10 Lighting Operating United Kingdom ‒ 456 ‒ 456
LED lighting contract for UK logistics business; fixed income BBB+ / BBB- 5 Lighting Operating United Kingdom ‒ 432 ‒ 411
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Investment Approach and ESG Approach
Prior to the New Investment Policy (as adopted consequent to the passage of
the Continuation Managed Run-Off Resolution), the Company's goal was to
generate attractive returns for investors by reducing Primary Energy
Consumption ("PEC"). AEET's investments positively contribute to the
environment by reducing carbon dioxide emissions, by decreasing PEC and by
increasing the amount of renewable energy used. The synergies generated by the
reduction of PEC and simultaneously using renewable energy sources to further
support global energy decarbonization(1). This is reflected across the
investment philosophy and approach, including the Company's Investment
Adviser, which has a strong focus on the energy transition.
Over the Period, the portfolio performed as follows(2):
· 7,883.1 tonnes of avoided CO2 emissions; and
· 24,544.9 MWh of energy saved,
· For total emission savings equivalent to 3,449 passenger
flights around the world(3).
The Company has adopted Aquila Capital's ESG policy, ensuring that
environmental, social and governance criteria which are incorporated into
day-to-day investment decisions as well as generating a positive contribution
for society. AEET's 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 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
typically include:
· LED Lighting System;
· LED Street Lighting System;
· Solar PV;
· Biomass Boilers;
· HVAC/Buildings;
· Smart Metering/Submetering; and
· Electrification of transportation vehicles (batteries).
Environmental Contribution
The Company's investment approach is focused on reducing PEC, which should
lead to significant reductions in carbon dioxide 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.
Aquila Capital ensures all required regulations and corresponding approvals
are completed prior to the acquisition of the assets, for example, planning
permissions.
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%20about,country%2C%20sector%20and%20
technology%20levels
2 The energy (in kWh) and avoided emission (in t CO2e) are
reported to Aquila Capital by third parties, including the development
companies, ESCO, 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 reconciles
the reported values for plausibility. Only energy savings and avoided
emissions for operational projects are considered on a pro-rata basis for the
time of operation during the reporting period. Avoided CO2e emissions are
estimated in gross terms and derived from energy savings in kWh using a
conversion factor (except CHP) 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.
3 Passenger flights around the world: This number is derived
from passenger flight emissions data retrieved on April 4th 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 CO2.
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 in order to make sure casualties and
injuries are avoided. Aquila Capital's ESG policy, as adopted by the Company,
excludes 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
is 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 partners are
required to provide evidence that they adhere to anti-bribery and corruption
laws.
Due Diligence
The Investment Advisor performs detailed ESG due diligence for each asset
prior to investment. The investment management team follows a structured
screening, due diligence and investment process which is designed to ensure
that investments are reviewed and compared on a consistent basis. Execution of
this process is 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, considers:
· Total PEC reduction, and implied CO2 emissions reduced
and/or avoided; and/or
· Total energy production from renewable and non-renewable
sources.
Governance Framework
AEET has an independent Board of Directors, with FundRock Management Company
(Guernsey) Limited (formerly Sanne Fund Management (Guernsey) Limited) as the
Alternative Investment Fund Manager ("AIFM"). The Board of Directors supervise
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 to inform the implementation
of appropriate controls and processes. 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 CO2 savings, where appropriate,
monitoring additional environment and ESG relevant developments both at the
portfolio and asset level;
· Annual reporting, including ESG aspects, to relevant
stakeholders including ad-hoc reporting of any material and urgent issues
identified in the monitoring process; and
· A semi-annual ESG risk report to the Board will be
implemented later in 2023.
AEET 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.
Aquila Capital Investmentgesellschaft mbH
26 September 2023
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority's ("FCA") Disclosure Guidance
and Transparency Rules ("DTR"). The Directors consider that the Chair's
Statement and the Investment Adviser's Report in this Half-yearly Report,
provide details of the important events which have occurred during the six
months ended 30 June 2023 (the "Period") and their impact on the financial
statements. The statement on related party transactions and the Directors'
Statement of Responsibility (below), the Chair's Statement and the Investment
Adviser's Report together constitute the Interim Management Report of the
Company for the Period. The outlook for the Company for the remaining six
months of the year ending 31 December 2023 is discussed in the Chair's
Statement and the Investment Adviser's Report.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Company are summarised below:
(i) The consequences of the shareholder vote not to continue the
Company
(ii) Service provider risk
(iii) Counterparty / credit risk
(iv) Inappropriate investment advice
(v) Portfolio valuation
(vi) Interest rate / inflation
(vii) Liquidity / discount risk
(viii) Political risk
(ix) Investment performance
(x) IT security
(xi) Act of war / sanctions
(xii) ESG
(xiii) Exchange rates
Since the end of the financial year ended 31 December 2022, the decision by
shareholders on 28 February 2023 not to continue the Company and the
subsequent approval at the Annual General Meeting on 14 June 2023 of the
Continuation and Managed Run-Off Resolution, the Board has paid and continues
to pay particular attention to the first two risks in the above list and is
reviewing on a regular basis the performance of its service providers, in
particular in terms of level of resource deployed in delivering services to
the Company and the standard of performance of those services.
The Company's Annual Report for the period ended 31 December 2022 contains
more detail on the Company's principal risks and uncertainties, including the
Board's ongoing process to identify, and where possible mitigate, the risks.
The Annual Report can be found on the Company's website.
Related Party Transactions
Details of the investment advisory arrangements were provided in the Annual
Report. There have been no changes to the related party transactions described
in the Annual Report that could have a material effect on the financial
position or performance of the Company. Amounts payable to the Investment
Adviser in the Period are detailed in the unaudited Statement of Profit or
Loss and Comprehensive Income.
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
August 2023, the latest practicable date before publication of this report,
the total commitments were £94.6 million and income generating capital
deployed since IPO was £68.1 million. As at 31 August 2023, the Group had
cash of £28.56 million (including the £2.5 million held as collateral for FX
hedging). The Directors are also satisfied that the Group and Company would
continue to remain viable under downside scenarios. Total expenses for the
Period were £1.65 million (excluding impairment losses) (from the period from
incorporation to 30 June 2022: £1.4 million annualised), which, when
annualised, represented approximately 3.5% of average net assets during the
Period (period from incorporation to 30 June 2022: 1.44%). At the date of
approval of this document, based on the aggregate of investments and cash
held, the Group and Company has 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, 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 Managed Run-Off").
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.
The Board continues to review the strategic options for the portfolio,
including a sale of all of the Company's assets, and other proposals that
address the Company's size and liquidity. Accordingly, the process to market
test the portfolio sale commenced on 16 August 2023 and is being conducted by
Stifel Nicolaus Europe Limited on behalf of the Company.
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.
However, 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.
Directors' Statement of Responsibility
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within
the Interim Financial Report has been prepared in accordance with IAS 34
Interim Financial Reporting and gives a true and fair view of the assets,
liabilities, financial position and return of the Company;
· the Interim Management Report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.7R; and
· the Interim Financial Report includes a
fair review of the information required by Disclosure and Transparency Rule
4.2.8R.
Miriam Greenwood OBE DL
Chair of the Board of Directors
26 September 2023
David Fletcher
Chair of the Audit & Risk Committee
26 September 2023
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS TO 30 JUNE 2023
For the six months to 30 June 2023 For the six months to 30 June 2022
Notes Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Unrealised (loss)/gain on investments - (3,277) (3,277) - 555 555
Unrealised (loss)/gain on derivatives - (300) (300) - 81 81
Realised gains on derivatives - 2,515 2,515 - - -
Net foreign exchange (loss)/gain - (87) (87) - 21 21
Investment Income 4 2,584 - 2,584 667 - 667
Investment Advisory fees 5 (447) - (447) (112) - (112)
Impairment loss 3 (224) - (224) - - -
Other expenses (1,202) - (1,202) (837) - (837)
(Loss)/profit on ordinary activities before taxation 711 (1,149) (438) (282) 657 375
Taxation 6 - - - - - -
(Loss)/profit on ordinary activities after taxation 711 (1,149) (438) (282) 657 375
Return per Ordinary Share 7 0.71p (1.15p) (0.44p) (0.28p) 0.66p 0.38p
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. The acquisition of Attika Holdings Limited and SPV
Project 2013 S.r.l. effective 1 January 2022 has been reflected in the above
statement for the Period. No operations were discontinued during the Period.
Profit/(loss) on ordinary activities after taxation is also the "Total
comprehensive income/(expense) for the Period".
The accompanying notes form part of these financial statements.
COMPANY STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS TO 30 JUNE 2023
For the six months to 30 June 2023 For the six months to 30 June 2022
Notes Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Unrealised (loss)/gain on investments - (800) (800) - 946 946
Net foreign exchange (loss)/gain - (549) (549) - 61 61
Investment income 4 2,082 - 2,082 314 - 314
Investment Advisory fees 5 (447) - (447) (112) - (112)
Other expenses (953) - (953) (694) - (694)
(Loss)/profit on ordinary activities before taxation 682 (1,349) (667) (492) 1,007 515
Taxation 6 - - - - - -
(Loss)/profit on ordinary activities after taxation 682 (1,349) (667) (492) 1,007 515
Return per Ordinary Share 7 0.68p (1.35p) (0.67p) (0.49p) 1.01p 0.52p
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 Period.
(Loss)/profit on ordinary activities after taxation is also the "Total
comprehensive (expense)/income for the Period".
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
As at As at
30 June 31 December
2023 2022
Notes £'000 £'000
Fixed assets
Investments at fair value through profit or loss 3 11,625 11,742
Investments at amortised cost 3 54,048 38,550
65,673 50,292
Current assets
Trade and other receivables 606 70
Cash and cash equivalents 28,687 46,625
29,293 46,695
Creditors: amounts falling due within one year (1,127) (904)
Derivative financial instrument 3 (300) (856)
Net current assets 27,866 44,935
Net assets 93,539 95,227
Capital and reserves: equity
Share capital 8 1,000 1,000
Special reserve 9 93,500 94,750
Capital reserve (718) 431
Revenue reserve (243) (954)
Shareholders' funds 93,539 95,227
Net assets per Ordinary Share 10 93.54 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 26 September
2023.
Signed on behalf of the Board of Directors
Miriam Greenwood OBE DL
Chair of the Board of Directors
David Fletcher
Chair of the Audit & Risk Committee
Aquila Energy Efficiency Trust Plc is incorporated in England and Wales with
Company number 13324616.
The accompanying notes form part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
As at As at
30 June 31 December
2023 2022
Notes £'000 £'000
Fixed assets
Investment in subsidiaries 3 33,660 31,220
Loans to subsidiary 3 27,514 -
61,174 31,220
Current assets
Cash and cash equivalents 20,930 32,714
Intercompany receivable 11,791 32,966
Interest Income Receivable from a subsidiary 967 -
Trade and other receivables 110 33
33,798 65,713
Creditors: amounts falling due within one year (1,006) (1,050)
Net current assets 32,792 64,663
Net assets 93,966 95,883
Capital and reserves: equity
Share capital 8 1,000 1,000
Special reserve 9 93,500 94,750
Capital reserve 650 1,999
Revenue reserve (1,184) (1,866)
Shareholders' funds 93,966 95,883
The prior period comparison figures for the period from 1 January 2022 to 30
June 2022 consolidated financial statements have been restated as a result of
the acquisition of AHL and the Italian SPV on 1 January 2022.
Approved by the Board of directors and authorised for issue on 26 September
2023.
Signed on behalf of the Board of Directors
Miriam Greenwood OBE DL
Chair of the Board of Directors
David Fletcher
Chair of the Audit & Risk Committee
Aquila Energy Efficiency Trust Plc is incorporated in England and Wales with
Company number 13324616.
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS TO 30 JUNE 2023
Share Special Capital Revenue
capital reserve reserve reserve Total
For the six months to 30 June 2023 Notes £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2023 1,000 94,750 431 (954) 95,227
Dividends paid 11 - (1,250) - - (1,250)
Loss for the Period - - (1,149) 711 (438)
Closing equity as at 30 June 2023 1,000 93,500 (718) (243) 93,539
Share Special Capital Revenue
capital reserve reserve reserve Total
For the six months to 30 June 2022 £'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)
Profit for the Period - - 657 (282) 375
Closing equity as at 30 June 2022 1,000 97,000 611 (896) 97,715
The prior period comparison figures for the period from 1 January 2022 to 30
June 2022 consolidated financial statements have been restated as a result of
the acquisition of AHL and the Italian SPV on 1 January 2022.
The accompanying notes form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS TO 30 JUNE 2023
Share Special Capital Revenue
capital reserve reserve reserve Total
For the six months to 30 June 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 11 - (1,250) - - (1,250)
Loss for the Period - - (1,349) 682 (667)
Closing equity as at 30 June 2023 1,000 93,500 650 (1,184) 93,966
Share Special Capital Revenue
capital reserve reserve reserve Total
For the six months to 30 June 2022 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2022 1,000 97,000 (46) (573) 97,381
Profit for the Period - - 1,007 (492) 515
Closing equity as at 30 June 2022 1,000 97,000 961 (1,065) 97,896
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS TO 30 JUNE 2023
For the For the
six months to six months to
30 June 2023 30 June 2022
Notes £'000 £'000
Operating activities
(Loss)/profit on ordinary activities before taxation (438) 375
Adjustments for:
Unrealised loss/(gain) on investments 3,277 (555)
Unrealised loss/(gain) on derivative instruments 300 (81)
Impairment loss 224 -
Non-cash currency (gains)/loss (718) 51
(Increase)/decrease in trade and other receivables (536) 498
Increase/(decrease) in creditors: amounts falling due within one year 223 (858)
Net cash flow from/(used in) operating activities 2,332 (570)
Investing activities
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
Purchase of investments (19,658) (9,556)
Repayment of investments 638 47
Net cash flow (used in)/from investing activities (19,020) 7,242
Financing activities
Dividends paid 11 (1,250) -
Net cash flow used in financing activities (1,250) -
(Decrease)/Increase in cash and cash equivalents (17,938) 6,672
Cash and cash equivalents at start of Period 46,625 80,129
Cash and Cash equivalents at end of Period 28,687 86,801
The prior period comparison figures for the period from 1 January 2022 to 30
June 2022 consolidated financial statements have been restated as a result of
the acquisition of AHL and the Italian SPV on 1 January 2022.
The accompanying notes form part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS TO 30 JUNE 2023
For the For the
six months to six months to
30 June 2023 30 June 2022
Notes £'000 £'000
Operating activities
(Loss)/profit on ordinary activities before taxation (667) 515
Adjustments for:
Unrealised loss/(gain) on investments 800 (946)
Non-cash currency exchange gain (88) -
Decrease/(increase) in intercompany receivables 21,175 (7,685)
Increase in interest income receivable from a subsidiary (967) -
(Increase)/decrease in trade and other receivables (77) 4,825
Increase in creditors: amounts falling due within one year 44 176
Net cash flow from/(used in) operating activities 20,220 (3,115)
Investing activities
Purchase of investments 3 (3,851) (61)
Repayment of investments 3 611 -
Loans to subsidiary 3 (27,514) -
Net cash flow used in investing activities (30,754) (61)
Financing activities
Dividends paid 11 (1,250) -
Net cash flow used in financing activities (1,250) -
Decrease in cash and cash equivalents (11,784) (3,176)
Cash and cash equivalents at start of Period 32,714 80,129
Cash and cash equivalents at end of Period 20,930 76,953
The accompanying notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS TO 30 JUNE 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 so 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.
The Company's New Investment Policy Objective is to realise all the remaining
assets in the Portfolio in a prudent manner consistent with the principles of
good investment management 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.
FundRock Management Company (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") 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 included in this Interim Report have
been prepared in accordance with IAS 34 "Interim Financial Reporting". The
accounting policies, critical accounting judgements, estimates and assumptions
are consistent with those used in the latest audited consolidated financial
statements to 31 December 2022 and should be read in conjunction with the
Group's annual audited consolidated financial statements for the year ended
31 December 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 consolidated financial
statements for the year ended 31 December 2022 have been prepared in
accordance with the UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006.
The interim 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") issued in July 2022.
These consolidated financial statements do not include all information and
disclosures required in the annual consolidated financial statements and
should be read in conjunction with the Group's annual consolidated financial
statements as of 31 December 2022. The audited consolidated annual accounts
for the year ended 31 December 2022 have been delivered to Companies House.
The audit report thereon was unmodified.
The financial statements are presented in Sterling rounded to the nearest
thousand.
Company Financial Statements
The financial statements included in this Interim Report have been prepared in
accordance with IAS 34 "Interim Financial Reporting". The accounting policies,
critical accounting judgements, estimates and assumptions are consistent with
those used in the latest audited financial statements to 31 December 2022 and
should be read in conjunction with the Company's annual audited financial
statements for the year ended 31 December 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 financial
statements for the year ended 31 December 2022 have been prepared in
accordance with the UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006.
The interim financial statements have also been prepared as far as is relevant
and applicable to the Company in accordance with the SORP issued by the AIC in
July 2022.
These financial statements do not include all information and disclosures
required in the annual financial statements and should be read in conjunction
with the Company's annual financial statements as of 31 December 2022.
The audited annual accounts for the year ended 31 December 2022 have been
delivered to the Companies House. The audit report thereon was unmodified.
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.
Basis of consolidation
The Group's financial statements consolidate those of the Company and of its
subsidiaries at 30 June 2023. 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 Period-end rate for the Statement of Financial Position accounts
and at an average rate during the Period 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.
Restatement of six-month period ended 30 June 2022 comparatives
During the year 2022, as a result of the development of the portfolio of
investments, the actual investments made and the structure of those
investments, many of which were receivables purchase investments with fixed
rates of return, the Directors determined that this required judgement and
re-assessment of the Company's investment entity status in the year 2022. As a
result of this re-assessment, which identified that fixed rate of return
investments constituted a substantial proportion of the pipeline of
investments and resultant actual investments, the Directors determined that as
from 1 January 2022 the Company does not meet the characteristic 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.
For the Period, the financial statements are presented on a consolidated basis
of the Company, AHL and the Italian SPV. The prior period comparative figures
for the period from 1 January 2022 to 30 June 2022 consolidated financial
statements have been restated as a result of the acquisition of AHL and the
Italian SPV on 1 January 2022. The net impact on the consolidated NAV as at 30
June 2022 in comparison to the Company's NAV as at 30 June 2022 is to reduce
the NAV by £181,000, mainly due to the valuation of the Italian SPV compared
to consolidating the Italian SPV within the Group. At the Company level, the
NAV of the Company as at 30 June 2022 remained the same. The comparative
figures as at 31 December 2022 are as stated in the audited Annual Report and
reflect the acquisition of AHL and Italian SPV.
Acquisition of AHL
The Net Assets acquired by the Company from AHL on 1 January 2022 amounted to
£153,000. The amount of assets and liabilities as at 1 January 2022 of AHL
have been consolidated by the Company at the acquisition date. The opening
assets, liabilities, equity and reserves of the Company remained the same due
to the acquisition of the subsidiary.
The cost of acquisition of AHL is the deemed valuation at 1 January 2022 which
was £153,000. No additional consideration was paid and since the acquisition
of the subsidiary is not considered to constitute a business under IFRS 3, no
goodwill arises.
Acquisition of the Italian SPV
The amount of assets and liabilities as at 1 January 2022 of the Italian SPV
have been consolidated by the Company at the acquisition date. The opening
assets, liabilities, equity and reserves of the Company remained the same due
to the acquisition of this wholly owned compartment.
The cost of acquisition of the Italian SPV is the deemed valuation at 1
January 2022 which was (£170,000). No additional consideration was paid and
since the acquisition of the subsidiary is not considered to constitute
a business under IFRS 3, no goodwill arises.
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 finances its subsidiary, AHL, under
the terms of an intercompany loan agreement effective as of 1 January 2023 and
AHL finances Energy Efficiency Investments 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 the notes. The Company does not have an
economic interest in any of the other securities receivables issuances by
other compartments of 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 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.
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 3 to the consolidated financial statements for the
Period.
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 cashflows 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. Fixed interest investment 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 effective interest rate.
The calculation involves the formulation and incorporation of multiple
conditions into ECL to meet the measurement objective of IFRS 9. Refer to Note
3 to the consolidated financial statements for the Period for more details.
3. INVESTMENTS
Investments at fair value through profit and loss
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 3 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:
30 June 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 - - 11,625 11,625 - - 11,742 11,742
Derivative financial instrument - (300) - (300) - (856) - (856)
- (300) 11,625 11,325 - (856) 11,742 10,886
There are no transfers between investment levels for the Group during the
Period/year.
The classification of the Company's investments held is detailed in the table
below:
30 June 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
Investments in subsidiaries - - 33,660 33,660 - - 31,220 31,220
Loans to subsidiary - - 27,514 27,514 - - - -
- - 61,174 61,174 - - 31,220 31,220
There were no transfers between investment levels for the Company during the
Period/year.
The movement on the Level 3 unquoted investments of the Group during the
Period/year is shown below:
30 June 31 December
2023 2022
£'000 £'000
Opening balance 11,742 -
Additions during the Period/year 1,675 10,926
Disposals during the Period/year (92) (43)
Unrealised (loss)/gain on investments (1,700) 859
Closing balance 11,625 11,742
The movement on the Level 3 unquoted investments of the Company during the
Period/year is shown below:
30 June 31 December
2023 2022
Company Company
£'000 £'000
Opening balance 31,220 12,307
Additions for investment in subsidiaries during the Period/year 3,851 16,769
Disposals for investment in subsidiaries during the Period/year (611) -
Unrealised (loss)/gain on investments in subsidiaries (800) 2,144
Additions for loans to subsidiary* 27,514 -
Closing balance 61,174 31,220
* On 27 July 2023, Aquila Energy Efficiency Trust Plc (the
'Lender') and Attika Holdings Limited (the 'Borrower') entered and signed a
Shareholder loan agreement effective 1 January 2023. By way of a non-interest
intercompany transaction, the Lender has provided to the Borrower an amount of
£32,966,000 of which a portion of £23,076,000 as the advanced amount was
transformed into a loan under the facility. The Lender and the Borrower
verbally agreed in January 2023 that the Lender would provide a loan facility
to the Borrower in the amount of up to £70,000,000 to be made available to
the Borrower by the Lender in whole or in partial amounts. Interest rate on
the loan outstanding is at 7.9%. As of 30 June 2023, the outstanding balance
of the loan from the Lender to the Borrower is £27,514,000.
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 30 June 2023
but for which fair value is disclosed:
30 June 30 June 31 December 31 December
2023 2023 2022 2022
Carrying Fair Carrying Fair
Value Market Value Value Market Value
£'000 £'000 £'000 £'000
Assets
Investments at amortised cost 54,048 55,506 38,550 38,755
Total 54,048 55,506 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
30 June 2023. The Directors have satisfied themselves as to the fair value of
the debt instrument investments as at 30 June 2023.
Valuation Assumptions
The Investment Adviser has carried out fair market valuations on some of the
debt instruments held by the subsidiaries as at 30 June 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 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 is shown below.
Discount rate:
30 June 2023 31 December 2022
-0.5% +0.5% -0.5% +0.5%
Change Change Change Change
Discount rate (£'000) (£'000) (£'000) (£'000)
Net Asset Value (645) 674 (488) 512
The weighted average valuation discount rate applied to calculate the
investment valuation is 8.2% as at 30 June 2023 (31 December 2022: 8.3%).
Power price:
30 June 2023 31 December 2022
-10.0% +10.0% -10.0% +10.0%
Change Change Change Change
Power price (£'000) (£'000) (£'000) (£'000)
Valuation (426) 439 (542) 547
Energy yield:
30 June 2023 31 December 2022
-10.0% +10.0% -10.0% +10.0%
Change Change Change Change
Energy yield (£'000) (£'000) (£'000) (£'000)
Valuation (2,009) 2,027 (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.
The following table analyses loans by Stages for the Group as at 30 June 2023:
30 June 2023 31 December 2022
Gross Gross
Carrying Allowance Net Carrying Carrying Allowance Net Carrying
Amount for ECL Amount Amount for ECL Amount
Group £'000 £'000 £'000 £'000 £'000 £'000
Fixed Value Investments at amortised cost
Stage 1 53,458 (123) 53,335 37,735 (77) 37,658
Stage 2 950 (237) 713 951 (59) 892
Total Assets 54,408 (360) 54,048 38,686 (136) 38,550
b) Expected Credit Loss allowance for IFRS 9
Impairment provisions are driven by changes in the 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.
30 June 31 December
2023 2022
Group £'000 £'000
Opening Balance 136 -
Charge for the Period - Stage 1 46 77
Charge for the Period - Stage 2 178 59
Impairment loss 224 136
Ending Balance 360 136
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 reflect the effect on expected
credit losses of a range of two possible outcomes, calculated on a
probability-weighted basis, based on the economic scenarios described in Note
2 of the 2022 annual 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 two outcomes that have
been evaluated to estimate the 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 the base case scenario, the ECL at Period end is £254,413. Under the
downside scenario the ECL increases to £677,647. Giving the base case a 75%
weighting and the downside scenario a 25% weighting, this results in an ECL
provision in the accounts of £360,222.
Furthermore, if the Investment Adviser assumes that in the downside scenario
loss given default ("LGD") increased to 100%, this would increase the
provision to £1,171,578. Finally, using an LGD of 100% even in the base case
scenario, the maximum ECL would total £2,514,358.
4. INVESTMENT INCOME
Six months Six months
ended ended
30 June 2023 30 June 2022
Group £'000 £'000
Investment interest income 2,186 518
Bank interest income 398 149
Total Investment Income 2,584 667
Six months Six months
ended ended
30 June 2023 30 June 2022
Company £'000 £'000
Investment interest income 851 186
Bank interest income 264 128
Loans to subsidiary interest income 967 -
Total Investment Income 2,082 314
5. INVESTMENT ADVISORY FEES
Six months ended 30 June 2023 Six months ended 30 June 2022
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Investment Advisory fees 447 - 447 112 - 112
Six months ended 30 June 2023 Six months ended 30 June 2022
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Investment Advisory fees 447 - 447 112 - 112
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.
6. TAXATION
Six months ended 30 June 2023 Six months ended 30 June 2022
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Corporation tax - - - - - -
Taxation - - - - - -
Six months ended 30 June 2023 Six months ended 30 June 2022
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Corporation tax - - - - - -
Taxation - - - - - -
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 maintain such
approval for the foreseeable future, the Company has not provided for deferred
tax on any capital gains or losses arising on the revaluation of investments.
7. RETURN PER ORDINARY SHARE
Group
Return per share is based on the consolidated loss for the Period of £438,000
attributable to the weighted average number of Ordinary Shares in issue of
100,000,000 in the Period (30 June 2022: profit of £488,000; weighted average
number of Ordinary Shares in issue 100,000,000). Consolidated revenue profit
and capital loss are £711,000 (30 June 2022: revenue loss of £169,000) and
£1,149,000 (30 June 2022: capital gain of £657,000) respectively.
Company
Return per share is based on the loss for the Period of £667,000 attributable
to the weighted average number of Ordinary Shares in issue of 100,000,000 in
the Period (30 June 2022: profit of £628,000; weighted average number of
Ordinary Shares in issue of 100,000,000). Company revenue profit and capital
loss are £682,000 (30 June 2022: Company revenue loss of £492,000) and
£1,349,000 (2021: Company capital gain of £1,007,000) respectively.
8. SHARE CAPITAL
As at 30 June 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 nominal value £0.01 and £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 admission of the Ordinary Shares to trading on the London Stock Exchange 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.
9. 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 30 June 2023 the total
special reserves were £93,500,000 (31 December 2022: £94,750,000).
10. NET ASSETS PER ORDINARY SHARE
The Group's net assets per ordinary share as at 30 June 2023 is based on
£93,539,000 (31 December 2022: £95,227,000) of net assets of the Group
attributable to the 100,000,000 Ordinary Shares in issue as at 30 June 2023
(31 December 2022: 100,000,000).
The Company's net assets per ordinary share as at 30 June 2023 is based on
£93,966,000 (31 December 2022: £95,883,000) of net assets of the Company
attributable to the 100,000,000 Ordinary Shares in issue as at 30 June 2023
(31 December 2022: 100,000,000).
11. DIVIDEND
The Company has paid the following interim dividends in respect of the periods
under review:
For the period ended 30 June 2023 For the period ended 30 June 2022
Pence per Total Pence per Total
Total dividends paid in the Period Ordinary Share £'000 Ordinary Share £'000
31 December 2022 interim - Paid 20 March 2023 (2022: Nil) 1.25p 1,250 - -
Total 1.25p 1,250 - -
For the period ended 30 June 2023 For the period ended 30 June 2022
Pence per Total Pence per Total
Total dividends declared in the Period Ordinary Share £'000 Ordinary Share £'000
30 June 2023: Nil (30 June 2022 interim - paid 31 October 2022) - - 1.00p 1,000
Total - - 1.00p 1,000
12. RELATED PARTY TRANSACTIONS
Fees payable to the Investment Adviser are shown in the Consolidated Statement
of Profit or Loss and Comprehensive Income. As at 30 June 2023, the fee
outstanding to the Investment Adviser was £447,000 (30 June 2022:
£112,000; 31 December 2022: £463,000).
The Company owns 100% of AHL and 100% of the notes issued by one compartment
of Italian SPV, as disclosed in note 1. All intercompany transactions between
the subsidiaries and the Company are eliminated at the consolidation level.
Fees payable to the Directors during the Period were based on an annual rate
of £60,170 to the Chair, £45,948 to the Chair of the Audit & Risk
Committee, £45,948 to the Chair of the Management Engagement Committee and
£40,478 to the remaining Director. As set out in the 2022 Annual Report the
decision by Shareholders to vote against continuation of the Company at the
end of February 2023 means that the duties of the Directors going forward will
be beyond those normally expected as part of their appointment. Therefore, in
accordance with the AIC Code, additional fees of £10,000 and £7,600 have
been paid in the period from 1 March 2023 to 30 June 2023 to the Chair of the
Board and the Chair of Audit and Risk respectively and £4,600 and £4,040 in
the same period to the Chair of the Management Engagement Committee and the
other Director. These additional fees are paid on a monthly basis and subject
to regular review.
Directors' holdings
At 30 June 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 30 June 2023 As at 31 December 2022
Connected Connected
Shares Person Total Shares Person Total
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 vehicle, owns underlying investments Italy
Via Vittorio Betteloni, 2 20131, Milan, Italy
13. DISTRIBUTABLE RESERVES
The Company's distributable reserves consist of the special reserve and
revenue reserve. Capital reserve represents unrealised gains and losses on
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 30 June 2023, the Company
has no distributable revenue reserves as the Company is in an accumulated loss
position of £1,184,000 (31 December 2022: Loss of £1,866,000).
The Company's special reserve, which is also distributable, was £93,500,000
as at 30 June 2023 (31 December 2022: £94,750,000).
14. SUBSEQUENT EVENTS
On 16 August 2023, the Company announced the commencement of the process to
market test the sale of all of the Company's assets. This process is being
conducted by Stifel Nicolaus Europe Limited on behalf of the Company.
OTHER INFORMATION
ALTERNATIVE PERFORMANCE MEASURES OF THE GROUP
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. The APMs presented in this report are shown below:
Discount
The amount, expressed as a percentage, by which the share price is more than
the Net Asset Value per Ordinary Share.
As at
30 June 2023
NAV per Ordinary Share (pence) a 93.54
Share price (pence) b 62.00
Discount (b÷a)-1 (33.7%)
Ongoing charges
A measure, expressed as a percentage of average net assets, of the regular,
recurring annual costs of running an investment company.
As at
30 June 2023
Average NAV a 94,383
Annualised expenses b 3,324
Ongoing charges (b÷a) 3.5%
Total return
A measure of performance that includes both income and capital returns. This
takes into account capital distributions of dividends paid out by the Company
to the Ordinary Shares of the Company on the ex-dividend date.
30 June 2023 Share price NAV
Opening at 1 January 2023 (pence) a 71.00 95.23
Closing at 30 June 2023 (pence) b 62.00 93.54
Dividend paid during the Period c 1.25 1.25
Dividend/income adjustment factor(1) d 0.8384 1.00
Adjusted Closing at 30 June 2023 (pence) (e=b+(c*d)) e 63.05 93.54
Total return (e÷a)-1 (11.2%) (0.5%)
1 The dividend adjustment factor is calculated on the
assumption that the dividends paid out by the Company are reinvested into the
shares of the Company at share price and NAV per share, respectively.
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