REG - Aquila Energy Effcn. - Annual Financial Report
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RNS Number : 5201G Aquila Energy Efficiency Trust PLC 29 April 2025
LEGAL ENTITY IDENTIFIER ('LEI'): 213800AJ3TY3OJCQQC53
AQUILA ENERGY EFFICIENCY TRUST PLC
Aquila Energy Efficiency Trust Plc (the "Company" or "AEET") is pleased to
announce its audited results for the year ended 31 December 2024.
Investment Objective
FOLLOWING THE ADOPTION OF A NEW INVESTMENT POLICY AT THE 2023 AGM, AQUILA
ENERGY EFFICIENCY TRUST PLC IS BEING MANAGED WITH THE INTENTION OF REALISING
ALL REMAINING ASSETS IN THE PORTFOLIO IN A PRUDENT MANNER CONSISTENT WITH THE
PRINCIPLES OF GOOD INVESTMENT MANAGEMENT AND WITH A VIEW TO RETURNING CASH TO
SHAREHOLDERS IN AN ORDERLY MANNER.
Management
The Company has appointed FundRock Management Company (Guernsey) Limited as
its Alternative Investment Fund Manager ("AIFM") to provide portfolio and risk
management services. The AIFM is part of the Apex Group.
The AIFM has appointed Aquila Capital Investmentgesellschaft mbH as its
Investment Adviser ("Aquila Capital" or "Investment Adviser"). The Investment
Adviser is part of the Aquila Group, which was founded in 2001. Since its
inception it has undertaken a range of advisory mandates, mostly focused on
renewable energy infrastructure, including energy efficiency.
The Board comprises four non-executive Directors, all of whom are independent
of the Investment Adviser, from relevant and complementary backgrounds
offering experience in the management of listed funds, as well as in the
energy efficiency and infrastructure sectors.
Capital Structure
As at 31 December 2024, the Company's share capital comprised 81,438,268
ordinary shares of £0.01 each ("Ordinary Shares") (31 December 2023:
100,000,000). The Ordinary Shares are admitted to trading on the Main Market
of the London Stock Exchange.
Highlights (Consolidated figures)
As at As at
31 December 31 December
Financial information 2024 2023
NAV per Ordinary Share (pence) 85.55 94.28
Ordinary Share price (pence) 52.00 57.25
Ordinary Share price discount to NAV(1) (%) (39.2) (39.3)
Dividend per Ordinary Share (pence)(2) 6.139 -
Net assets (£ million) 69.67 94.28
Ongoing charges(1) (%) 3.8 3.5
For the year For the year
ended ended
31 December 31 December
2024 2023
Performance summary % change % change
NAV total return per Ordinary Share(1,3) (2.7) 0.3
Share price total return per Ordinary Share(1,3) 1.6 (17.6)
1 Alternative Performance Measures ("APMs"), as defined by
the European and Markets Authority. Definitions of APMs, and other terms used
in the report, together with supporting calculations where appropriate can be
found at the end of this announcement.
2 Dividend declared and paid in respect of the financial
year.
3 Adjusted for dividends paid during the financial year.
CHAIR'S STATEMENT
ON BEHALF OF THE BOARD, I AM PLEASED TO PRESENT THE ANNUAL REPORT (THE "ANNUAL
REPORT") FOR AQUILA ENERGY EFFICIENCY TRUST PLC, FOR THE YEAR ENDED 31
DECEMBER 2024.
Investment Performance
The Company's NAV per share as at 31 December 2024 was 85.55p (2023: 94.28p),
representing a decrease of 9.3% which, amongst other things, reflects the
payment of a dividend of 6.139 pence per ordinary share on 1 November 2024 as
part of the return of capital to Shareholders. The Company's shares continued
to trade at a significant discount to NAV over the period. The NAV total
return, which includes an adjustment for the dividend paid, amounted to a
negative 2.7% return. As discussed in previous Statements, the focus has been
on maximising value for the return of capital to Shareholders. This has meant
working on withdrawing from pre-existing commitments where legally possible,
negotiating exits to achieve acceptable realisations and only advancing
commitments of further capital where legally committed to do so. The results
of this are further detailed in the Investment Adviser's report.
The Group's investments continue to produce income. In 2024, total investment
income was £5.4 million, a decrease of £0.6 million versus the previous year
and net revenue loss was £0.2 million (2023: £0.9 million profit). In the
same period, investment income from investments was £4.7 million compared to
£5.0 million in the previous year, a decrease of £0.3 million, which was
largely attributable to lower investment income from the Company's Superbonus
investments in Italy. The Superbonus investments are described in further
detail further in the Investment Adviser's Report . In the same period,
interest income from cash deposits was £0.7 million compared to £0.9 million
in the previous year, a decrease of £0.2 million as a consequence of the
lower level of average cash balances held during the period following the
return of capital referred to.
In line with the Company's investment policy, on 31 December 2024, £53.3
million of the Company's investments of £56.3 million were denominated in
Euros. Information on the Company's continued use of forward foreign exchange
agreements to hedge the value of the Euro-denominated investments can be found
further down in the Investment Adviser's report.
Following an extensive asset sale process run on behalf of the Company, by its
financial advisors, and which ended in February 2024, the Board has continued
to seek and assess opportunities to realise capital through the sale of
assets. This remains challenging. As discussed in previous reports, the
portfolio consists of assets that are geographically diverse, small in size,
contractually complex and many have lengthy maturities of between ten to
eighteen years. Furthermore, because of the Managed Run-Off status of the
Company, additional complexities have arisen around the realisation of and
protection of value in the Company's assets. Our counterparties on some of
these investments are aware of the Managed Run-Off position of the Company,
and it appears that this is potentially placing us at a disadvantage in
certain negotiations/relationships. The Board remains actively involved in
negotiating terms to protect the value in the portfolio and continues to work
actively with its financial and legal advisers on seeking alternative ways to
deliver the return of capital to our Shareholders.
Return of Capital
On 6 March 2024, the Company announced that it intended to return capital to
Shareholders by way of a Tender Offer to ordinary Shareholders of up to
18,561,732 ordinary shares for a maximum aggregate cash consideration of
£17.5 million. This entitlement to tender was undertaken at a price of
94.28p, the Company's NAV per share at 31 December 2023. The Tender Offer was
launched on 19 April 2024 and the result of the Tender Offer was announced on
13 May 2024; 90,231,121 shares were validly tendered, and the requisite
Special Resolution was passed, resulting in the purchase by the Company of
18,561,732 shares, which was the maximum amount possible under the terms of
the Tender Offer.
The Board intends to continue returning capital to Shareholders, either
through the payment of dividends or by means of Tender Offers as soon as
sufficient realisation proceeds are received. We have engaged with the
majority of our largest Shareholders who have expressed a preference for
returns of capital to occur in meaningful tranches, and we will continue with
that strategy, if appropriate. However, if realisations are either delayed or
it takes longer to make sizeable returns of capital, the Board will still
consider the payment of dividends which provide a much more cost‑effective
return of capital. As noted, a dividend of 6.139p per share was paid on 1
November 2024.
Significant Developments since 31 December 2024
In the 3 months ended 31 March 2025, proceeds of £23.8 million were realised
from repayments:
· In January and February 2025, the Company received £0.5
million and £7.0 million from a quarterly contractual payment and full
repayment, respectively, of the Bio-LNG investment in Germany; and
· In February and March 2025, three of the five Superbonus
investments were largely repaid realising proceeds of £16.3 million. This
represents repayment of the majority of Superbonus investments in Italy.
The repayments of the Superbonus investments were made after negotiation by
two of the three developers of these projects (the "ESCOs"), and not from
proceeds received from the purchasers of the tax credits generated from these
projects, which was the expected source of repayment when these investments
were initially made. The return from the Superbonus projects was in two parts,
payments for the tax credits and an interest element calculated by reference
to the delay in receiving payment. In order to mitigate the significant
delayed interest cost, which was being borne by ESCOs, a repayment plan was
proposed to reduce the impact of late payment interest accruing on these
investments. To accelerate the realisation of these Superbonus investments,
which has been significantly slower than originally anticipated, the Company
accepted a modest discount of the full late payment interest due on these
investments. These investments achieved internal rates of return of greater
than 9% p.a.
The Board is in discussions whether an early repayment plan for the two other
Superbonus investments is feasible and in Shareholders' interests, taking into
account the contractual arrangements.
Costs
The Board continues to be very mindful of the costs incurred in the running of
the Company whilst it is in Managed Run-Off. The unintended and unhelpful
consequences of the Managed Run-Off are numerous. In particular, some
investment counterparties and service providers no longer have the same
incentives and motivation to cooperate with the Company and this is, in some
cases, leading to additional costs being incurred. We will remain focused on
cost recovery and reduction, in particular, where additional costs have been
incurred as a consequence of underperformance of particular services
provision.
Return of Capital post year end
Given the recent substantial repayments of investments and the accumulated
cash position at 31 March 2025 of £36.4 million, excluding £2.5 million
cash held as collateral for hedging, the Company will make a distribution of
£30 million as quickly and as cost-effectively as practicable. The assets
remaining after the realisations referred to above and excluding the two
Superbonus investments, have an average life of 8.9 years. Currently, no
significant realisations are expected on a contractual basis for several
years.
The Board of Directors has declared a special interim dividend of 36.837 pence
per Ordinary Share in respect of the first six months of the financial year
ending 31 December 2025 payable on 30 May 2025 to Shareholders on the register
on 9 May 2025. The ex-dividend date is 8 May 2025.
Miriam Greenwood OBE DL
Chair of the Board
28 April 2025
INVESTMENT ADVISER'S REPORT
Overview
During 2024, the Investment Adviser continued to support the Managed Run-Off
of the Company's Portfolio by, (i) limiting new investment activity to the
execution of commitments agreed up to the date of the continuation vote in
February 2023, (ii) the withdrawal from pre-existing legally binding
commitments where feasible on acceptable terms, (iii) undertaking negotiations
to achieve the realisation of individual investments at acceptable terms
before their contracted maturity date, and (iv) the monitoring of performance
and addressing where necessary operating performance and/or payment issues in
the Company's Portfolio.
During 2024, the Company invested the second and final tranches of two
investments, a rooftop Solar PV project in Italy with an investment of £0.4
million and a biogas investment in Germany with an investment of £3.7
million. These investments were completed in the first half of 2024 and no
additional investments, except for transaction costs, were made in the second
half of 2024. The final tranche of an investment for the Spanish building
refurbishment project was not required because it was offset against the
receipt of grant funding for this project. There now remains only one small
investment commitment, excluding sundry investment costs, of less than £0.05
million to a UK lighting project.
During 2024, the Company realised two Solar PV investments in Spain generating
proceeds of £1.0 million. One of these transactions enabled the Company to
withdraw from an existing commitment to invest £0.5 million in another solar
PV project in Spain. In February 2025, the Company completed the sale of its
Bio-LNG investment in Germany at a small premium to book value of £7.4
million as at 31 December 2024. Total proceeds from this investment in 2025
amounted to £7.5 million after taking account of a scheduled cash receipt of
£0.5 million in January 2025.
During 2024, the Company received £5.0 million of cash from the Superbonus
investments in Italy, which were valued at £24.8 million as at 31 December
2024 (£30.9 million as at 31 December 2023). This amount was substantially
less than expected. However, as reported in the Chair's Statement above,
following negotiations with two ESCOs, £16.3 million was received by the end
of March 2025, from the repayment of the majority of the Superbonus
investments.
The Investment Adviser is in discussions whether an early repayment plan for
the two remaining Superbonus investments is feasible and in Shareholders'
interests, taking into account the contractual position.
The Investment Adviser continues to closely monitor the performance of all of
the Company's investments and, in particular, the receipt of cash payments,
which are due on a monthly, quarterly and annual basis. In 2024, the large
majority of the Company's other (i.e. non-Superbonus) investments and, in
particular, all of the larger investments, performed in accordance with their
contractual terms. However, there are investments in the portfolio which
continue to be problematic:
· Two Solar PV investments in Spain, which were written
down as at 31 December 2024 to £0.4 million (£1.3 million as at 31 December
2023) because of operational difficulties with individual projects, the
failure of the ESCOs which developed the projects to remedy these difficulties
and expected higher O&M costs from having to replace these ESCOs.
· The two wind investments in the UK, which were written
down to a value of £1.0 million as at 31 December 2024 (£1.9 million as at
31 December 2023), principally because of operational problems at individual
sites, which have resulted in lower than expected electricity production and
higher operational and maintenance costs.
It has also been necessary in 2024 to make further provisions of £0.8 million
against three amortised cost investments, taking these investment values to
zero:
· The German sub-metering investment, which had a book
value of £0.2 million as at 31 December 2023 versus cost of £1.7 million,
was fully provided against as at 30 June 2024 and 31 December 2024 because,
following the insolvency of the service provider in October 2023, it now
appears that any sale proceeds from selling the sub-metering contracts are
unlikely to exceed tax and other liabilities of the SPV into which the
original investment was made.
· The UK CHP investment, which had a book value of £0.5
million as at 31 December 2023 versus cost of £1.0 million, was reduced to a
book value of zero because, following the ESCO's client, Vale of Mowbray,
entering into administration and subsequently liquidation, there has been no
significant progress to date with the new owner of the site nor in securing a
new customer for the CHP equipment.
· A Solar PV project in Spain, which had a book value of
£0.1 million as at 31 December 2023 versus cost of £0.2 million, was also
fully impaired as at 31 December 2024. This investment, which comprised two
Solar PV installations, was developed and maintained by an ESCO which entered
into bankruptcy in 2024 and it has not proved possible to secure a new O&M
provider to replace the ESCO on economic terms to protect the value of the
investment.
As at 31 December 2024, £53.3 million of the Company's total investments of
£56.3 million were denominated in Euros. During 2024, the Company continued
to use forward foreign exchange agreements to hedge the value of the Euro
denominated investments. In the year ended 31 December 2024 the Company
reported realised foreign exchange gains of £3.5 million, receiving £3.6
million in cash upon settlement of these forward foreign exchange agreements.
The Company continues to seek to hedge approximately 100% of the value of the
Company's Euro denominated investments. The quantum of the forward foreign
exchange agreements is modified upon the rollover of the contracts, which have
maturities of between one and three months, to reflect additional deployment
and returns of capital and changes in valuation. As at 8 April 2025, the
Company had entered into forward foreign exchange agreements in an amount of
£31.3 million following the significant repayment of Euro denominated
investments. £2.5 million of the Company's cash balances continue to be held
as security by the bank providing the forward foreign exchange contracts.
As at 31 December 2024, the Company's cash position, including cash held as
collateral for foreign exchange hedging, was £14.4 million. The cash position
increased significantly to £38.9 million as at 31 March 2025 because of the
repayments of the Bio-LNG investment in Germany and the partial repayments of
the Superbonus investments.
Portfolio Overview
As at 31 December 2024, the Company's portfolio of 29(1) 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 84% of the Company's investments by value as at 31 December 2024
(72% as at 31 December 2023) had investment grade counterparties, as assessed
using either the Investment Adviser's credit analysis or external agencies.
The increase in the percentage of investment grade counterparties is mostly
attributable to an improvement in the credit rating of one of the ESCOs
managing two Superbonus investments from BB+/BB to BBB+/BBB-. However, the
percentage of the higher investment grade ratings, i.e. above BBB+/BBB-,
reduced from 19% of the Company's investments by value as at 31 December 2023
to 8% as at 31 December 2024. This change was primarily due to a change in the
credit rating of the German Bio-LNG investment from A- to BBB+/BBB-. As
reported above, this project has now been realised.
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 ('ECL').
The Company's portfolio comprises largely fixed return cash flows. Following a
renegotiation of the terms of the German Bio-LNG investment, 95% of the total
investment value provides a fixed rate of return from contracted cash flows
(84% as at 31 December 2023). Approximately 5% 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 overall
unlevered average return of 9.2% per annum, an increase from the yield of 8.1%
per annum reported in the Half-Yearly Financial Report for the six months
ended 30 June 2024. The increase is mostly attributable to reductions in the
carrying value of the Company's investments as at 31 December 2024.
Investments in Italy (£28.7 million value as at 31 December 2024)
In 2024, the Company invested £0.4 million to complete a rooftop Solar PV
project developed by Noleggio Energia, with whom the Company has made seven
investments. As at 31 December 2024, total investment value in Italy was
£28.7 million across a total of 13 investments and there were no outstanding
investment commitments.
1) Investments in Italian "Superbonus" projects (£24.9 million value as at 31
December 2024)
In 2024, the Company received £5.0 million from the Superbonus investments
while no further capital was required to be deployed. The ESCOs continued to
experience delays with final payments from the buyers of the tax credits.
However, in the three months ended 31 March 2025 the Company received £16.3
million in substantial repayment of three of the five Superbonus investments.
"Superbonus" is an incentive measure introduced by the Italian Government
through Decree "Rilancio Nr. 34" on 19 May 2020, which aimed to make
residential buildings (condominiums and single houses) more energy efficient
through improvements to thermal insulation and heating systems. When
qualifying measures were completed, ESCOs delivering the measures were awarded
a tax credit equal to 110%(2) 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 involve a range of energy efficiency measures
including insulation, the replacement of heating systems with more efficient
solutions and energy efficient windows.
2 The Italian Government has made various modifications to
Superbonus, including the value of tax credits awarded and how these tax
credits can be utilised.
2) Solar PV investments for self-consumption in Italy (£3.8 million value as
at 31 December 2024)
As at 31 December 2024, the Company had invested in eight rooftop Solar PV
projects with an aggregate capacity of 5.1 MWp and a book value of £3.8
million. Following completion of the final project in January 2024 with an
investment of £0.4 million, all of these projects are operational and cash
generative. These projects enable companies to reduce their energy costs and
CO(2) emissions and avoid grid losses through the self-consumption of the
electricity produced.
2.i) Projects with Noleggio Energia
Of the eight Solar PV projects which the Company has committed to finance,
seven projects have been developed by the ESCO Noleggio Energia, which was
established in 2017 and is an Italian company that specialises in providing
operating leases for energy efficiency and renewable energy projects for
commercial and industrial clients in Italy. These projects are all structured
as the purchase of receivables from operating leases with maturities of five
to ten years, with a remaining weighted average maturity of 7.3 years
outstanding, and all use very similar documentation. Energia has paid the SPV
the monthly receivables from these operating lease agreements, which provide
for fixed rates of return with a weighted average return of 8.4% per annum.
2.ii) Project with CO-VER Power Technologies
In January 2022, the Company refinanced the acquisition of an existing rooftop
Solar PV plant in Ascoli Piceno (Central Italy) with a generating capacity of
902 kWp. The investment, with an original cost of £0.7 million, is based on
the purchase of receivables generated by an energy service contract between
the leading Italian engineering firm CO‑VER Power Technologies ("CO-VER")
and its subsidiary Futura APV S.r.l. ("Futura"). The contract governs the
management of an operating roof-mounted Solar PV plant until April 2028.
Thereafter, the investment is based on a feed-in tariff for an additional six
years, aggregating to a twelve-year tenor. The investment, which generated
total cash receipts of £0.3 million in the period from inception of the
investment until 31 December 2024, is forecast to generate a return of 8.4%
per annum based on the valuation as at 31 December 2024 of £0.58 million.
CO-VER has a successful 20-year history in developing industrial projects in
the areas of energy storage systems, co/tri-generation plants and renewable
energies. Futura is the owner of the PV plant which benefits from feed-in
tariffs payable by Gestore dei Servizi Energetici ("GSE"). GSE is a joint
stock company managed by the Italian Government which is responsible for
promoting and developing the growth of renewable assets in Italy. GSE
currently has a credit rating of BBB+ from the Italian Government.
Investments in Spain (£6.1 million value as at 31 December 2024)
In 2024, the Company deployed no further capital into investments in Spain,
other than a small amount for investment costs. As at 31 December 2024, total
investment value in Spain was £6.1 million across a total of six investments
and there were no outstanding investment commitments.
1) Solar PV investments in Spain (£3.8 million value as at 31 December 2024)
During 2024, the Company completed the sale of two Solar PV projects,
generating cash proceeds of £1.0 million. As at 31 December 2024, the
Company had capital invested in five Solar PV installation projects throughout
Spain with five project developers. The largest project, with a value of £2.8
million as at 31 December 2024 has been structured to provide a fixed rate of
return. The other four projects have been structured under Power Purchase
Agreements ("PPAs") with maturities of up to eighteen 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.
As reported earlier in the Investment Adviser's Report, there are operational
issues with three Solar PV projects in Spain, which were developed by ESCOs
which have entered into administration. These issues resulted in negative fair
value adjustments or impairments of £1.0 million as at 31 December 2024
compared to the position as at 31 December 2023. In all of these cases, the
Investment Adviser has been seeking to exercise its legal rights including its
step in rights to procure a new ESCO to manage the projects so that the PPAs
can be maintained with the counterparties.
2) Building Energy Efficiency Investments in Spain (£2.3 million value as at
31 December 2024)
The Spanish Government has established incentive schemes to promote energy
efficiency measures in buildings, including the "Programa de Rehabilitacion
Energetica de Edificios" ("PREE"). PREE is a €402.5 million incentive scheme
in Spain which is designed to promote and reward energy efficiency
improvements for condominiums and other buildings, improving their energy
rating by at least one energy class. Under this scheme, the Company has
invested £2.3 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, which are expected to commence in the second quarter of 2025, are based
on the purchase of receivables generated by the underlying energy saving
contracts between the ESCO and the "Comunidad de Proprietarios"; the legal
entities which represent each of the owners of the apartments in a residential
building. The receivables have been rated with the S&P equivalent of
AAA/AA-.
Investments in Germany (£18.6 million value as at 31 December 2024)
In 2024, the Company invested £3.7 million to complete the financing of the
installation of liquefaction equipment at a biogas plant in Northern Germany.
There are no further investment commitments outstanding to investments in
Germany. Following the decision as at 30 June 2024 to provide in full against
this sub-metering investment in Germany, the Company has three investments
across three distinct technologies including water management solutions,
Bio-LNG and heat pumps.
All of the investments in Germany now provide for fixed rates of return
because in December 2024 the Company agreed to modify the terms of the Bio-LNG
investment to take out the variable return element, which previously provided
for the right to receive 5% of revenue generated by the project in addition to
a fixed return of 5% per annum on the capital invested, capped at £1.1
million across eight years. The investment was therefore structured to provide
for a fixed rate of return of 8.5% per annum.
As reported earlier in the Investment Adviser's Report, the Company completed
the sale of the Bio-LNG investment in Germany in February 2025 at a small
premium to the net book value at 31 December 2024. The two other investments
with a book value of £11.1 million as at 31 December 2024 are performing in
line with their contracts.
Investments in the United Kingdom (£3.0 million value as at 31 December 2024)
In 2024, the Company deployed no further capital into investments in the
United Kingdom. There remains, however, a small commitment outstanding of
less than £0.05 million for lighting investments. In May 2024, one of the CHP
investments was realised through a refinancing arranged by the ESCO which
developed the project. The realisation resulted in proceeds of £0.1 million,
which was equal to the book value at the date of realisation. As at 31
December 2024, the CHP investment with EGA Energy was provided against in
full, resulting in an impairment cost in 2024 of £0.5 million. Seven
investments remain in the United Kingdom of which four are lighting, one is
CHP and two are in wind power.
The lighting and CHP investments are fixed return investments although one of
the lighting investments benefits from annual inflation adjustments to the
income. The wind investments are variable return investments due to the
variability of operation and maintenance costs, power production and export
tariffs, which are renewed each year, although a significant percentage of
revenue is based on feed-in tariffs which benefit from annual inflation
adjustments.
The fixed return investments performed satisfactorily. However, the wind
investments, which had a value of £1.9 million as at 31 December 2023, have
been written down to a value of £1.0 million as at 31 December 2024 due
primarily to operational problems at individual sites, which have resulted in
lower than expected electricity production and higher operation and
maintenance costs. In addition, the ESCO has withheld payments due to the
Company in 2024 because it has not generated sufficient income to cover its
operating costs. The Company is in negotiations with the ESCO to restructure
the wind investments.
Valuations and ECL Provisions as at 31 December 2024
As at 31 December 2024, the Company's investments had a book value of £56.3
million, with investments held at amortised cost valued at £46.3 million and
investments held at fair value through profit or loss valued at £10.0 million
(see Note 4 to the Accounts).
The investments held at amortised cost are net of ECL provisions of £4.4
million, which increased by £2.5 million from £1.9 million as at 31 December
2023, reflecting:
· an increase for Superbonus investments to reflect the
credit risk moving to the ESCOs themselves rather than the purchasers of the
tax credits generated by these investments; and
· additional provisions against the three investments which
were fully impaired as at 31 December 2024.
Apart from these projects, the Company has not experienced payment issues of
material significance on the receivables from amortised cost investments due
to be paid to it in 2024.
As at 31 December 2024, the Company's eight fair value investments had a book
value of £10.0 million and comprised:
· The German Bio-LNG investment with a value of £7.4
million;
· four Solar PV projects in Spain with an aggregate value
of £1.0 million;
· two wind projects in the United Kingdom with an aggregate
value of £1.0 million; and
· a Solar PV project in Italy with a value of £0.6
million.
The change in valuation of the investments held at fair value through profit
or loss, as reported above, was impacted primarily by operational issues with
the wind investments in the United Kingdom and Solar PV investments in Spain:
· The two wind investments in the UK, which had a value of
£1.9 million as at 31 December 2023, have been marked down to a value of
£1.0 million as at 31 December 2024 due primarily to operational problems at
individual sites, which have resulted in lower than expected electricity
production and higher operation and maintenance costs.
· Two Solar PV investments in Spain, which had a value of
£1.3 million as at 31 December 2023, have been marked down to a value of
£0.4 million as at 31 December 2024 due to operational difficulties with
individual projects and the failure of the ESCOs, who developed the projects,
which resulted in the need to introduce new operational and maintenance
service providers.
These operational issues have resulted in negative changes to the forecast
cash flowsand resulted in a negative change of -11.9%. Other negative impacts
on valuation were:
· An overall increase in the discount rates applied to the
valuations, which had a negative effect of -3.7%
· FX effects, -3.7%;
· Distributions from these investments, -10.1%; and
· Changes to forecast power price and inflation
assumptions, -0.1%.
These impacts were offset by valuation timing, that is the time value of money
effect between the two valuation dates, which had a positive effect of +7.1%.
In addition, the Company benefited from gains from forward foreign exchange
contracts which mitigated the negative FX effects reported above.
Summary of Investments as at 31 December 2024
Description Receivables Weighted Avg. Credit Ratings Term Years Technology Status Country Value Commitment o/s
£k
£k
Receivables (fixed) from sales of tax credits generated under the Italian BB- 2 Building Retrofit Construction Italy 24,835 -
Superbonus, which supports energy efficiency retrofits of residential
buildings.
Subscription for Notes (fixed) entitling the Note holder to receivables BBB+ / BBB- 9-15 Heat Pumps Water Management Sub-meters Default Germany 11,128 -
generated through services agreements for heat pump systems, water management
services and sub-metering hardware and services in Germany.
Subscription for a Note (fixed) for the refinancing of an operating biogas BBB+ / BBB- 8 Biogas / Operational Germany 7,423 -
plant in north-eastern Germany and an upgrade to a Bio-LNG facility.
Bio-LNG
Receivables (fixed/variable) from solar PV plants and building refurbishment BBB+ / BBB- 10-18 Solar PV Operational Spain 6,098 -
projects in Spain.
Receivables (fixed/variable) from Solar PV projects in Italy. BBB+ / BBB- 7-10 Solar PV Operational Italy 3,826 -
Receivables (fixed/variable) from wind, CHP, metering and lighting as a BBB+ / BBB- 5-14 Wind Lighting CHP Metering Operational United Kingdom 3,021 41
service contracts in the UK.
Note: The term is the original maturity of the investment.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
Introduction
The Company's goal is to generate attractive returns for investors by reducing
Primary Energy Consumption ("PEC"). The Company seeks to achieve this through
investing principally in a diversified portfolio of energy efficiency projects
with high-quality counterparties. The Company's investments positively impact
the environment by reducing the amount of carbon dioxide produced, by
decreasing PEC and by increasing the amount of renewable energy used. The
synergies(3) generated by the reduction of PEC and simultaneously using
renewable energy sources further decrease CO(2) emissions.
3 International Renewable Energy Agency (Irena), "Synergies
between renewable energy and energy efficiency" (2017), available at:
https://www.irena.org/publications/2017/
Aug/Synergies-between-enewable-energy-and-energy-efficiency#:~:text=Renewables%20would%
20account%20for%20about,country%2C%20sector%20and%20 technology%20levels
This is reflected across the investment philosophy and approach of both the
Company and its Investment Adviser, Aquila Capital, who are dedicated to the
green energy transition. The Company is committed to being a responsible
investor, ensuring that environmental, social and governance criteria are
incorporated into day-to-day investment decisions as well as generating a
positive impact for society. By reducing PEC, the Company often improves life
standards for end users; for example, better lights, easier maintenance,
reduced danger, security of supply and, very importantly, the reduction of
emissions like Nitrogen Oxides. In 2024, the portfolio performed as follows:
· 5,285 tonnes of avoided CO(2) emissions ("tCO(2)e"); and
· 19,581 MWh of energy saved,
· for total emission savings equivalent to 2,312 passenger
flights around the world(4).
4 Passenger flights around the world: This number is derived
from passenger flight emissions data retrieved on 4 April 2023 from the
International Civil Aviation Organization;
https://applications.icao.int/icec/Home/Index. The total emissions associated
with a passenger flight around the world based on a standard itinerary from
New York to Dubai, Bangkok, Sydney, Los Angeles and back to New York in the
economy class is 2,285.80 kg CO(2).
Method of Calculation for Energy Savings (kWh) and Avoided CO(2) Emissions
(tCO(2)e)
The energy savings (in kWh) and avoided CO(2) emissions (in tCO(2)e) are
reported to Aquila Capital by third parties, including the development
companies, ESCOs and other third parties. These reports are supported by
asset-level documentation of individual methodologies. Aquila Capital has
reviewed the individual methodologies for technical consistency and reconciled
the reported values for plausibility. Where quantification of likely energy
savings and avoided CO(2) emissions is not clear, for example, with the
Superbonus projects in Italy and the Bio-LNG, water metering and heat pump
projects in Germany, no estimations are included in the avoided CO(2)
emissions and energy savings statistics above.
Only energy savings and avoided CO(2) emissions for operational projects are
considered on a pro-rata basis for the time of operation during the reporting
period. Avoided CO(2) emissions are estimated in gross terms and derived from
energy savings in kWh using a conversion factor (except CHP, see below) which
measures the grid's emission intensity. Emissions incurred during the life
cycle of light bulbs such as materials sourcing, manufacturing, installation,
maintenance etc. are not available. The reported metrics are estimations based
on assumptions. For technical reasons, it is not possible or feasible to
observe or measure actual energy or emission avoidance in real-time.
· LED/Lighting: Savings estimates are derived based on
technical, product-specific attributes provided by the product manufacturer.
Lighting assets are typically not connected to a distinct circuit. These
solutions are designed according to the requirements of a given functional
unit, i.e. office, street or space, which varies on asset level. Changes in
the number of light bulbs or lumen are not considered.
· Solar PV: Electricity production is translated into
emissions avoidance with a conversion factor (see above). Production estimates
for Solar PV assets are evaluated during technical due diligence processes.
· CHP: Avoided CO(2) emissions are calculated directly by
comparing the asset's emissions based on the feedstock used for a specific
plant with a reference co-generation unit's emission factor.
ESG Approach
The Company has adopted Aquila Capital's ESG Integration Policy(5), ensuring
that environmental, social and governance criteria have been incorporated into
day-to-day investment decisions as well as generating a positive contribution
for society. The Company'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 adoption of
the New Investment Policy by Shareholders in June 2023 the Company sought to
invest in projects for the long term with a focus on optimising and improving
the assets' PEC (and, of course, the Company's investments continue to meet
this initial objective). Technologies include:
· LED Lighting Systems;
· Solar PV;
· HVAC/Buildings; and
· Bio LNG.
5 For details please refer to:
https://www.aquila-capital.de/fileadmin/user_upload/ESG_report/Aquila_Group_ESG_Integration_Policy.pdf
Environmental Contribution
The Company's investments are focused on reducing PEC, which should lead to
significant reductions in greenhouse gas emissions. In addition, local
production of energy (CHP, biomass boilers, Solar PV) reduces transportation
energy losses and grid over-utilisation. Smart meters and other control
technologies enable a better visibility and management of energy and therefore
represent a basis for energy savings.
Social Contribution
Energy efficiency measures not only reduce PEC, but typically also have a
positive impact on health and quality of life for different stakeholders, such
as employees and users of public facilities. This is largely achieved through
the installation of advanced solutions for lighting, heating, cooling,
ventilation and the associated control units. All project developers are
required to adhere to local, regional and national health and safety laws, to
train and educate employees accordingly, to make sure casualties and injuries
are avoided. Aquila Capital's ESG Integration Policy, as adopted by the
Company, has sought to exclude suppliers and manufacturers that do not meet
Aquila Capital's criteria (exclusion of certain sectors/subsectors, or
companies that, for example, use unfavourable labour conditions). For all
counterparties, a rating has been performed (in collaboration with a
third-party rating agency) assessing the creditworthiness of the relevant
counterparty as well as a "Know Your Client" check for the relevant parties
involved to increase transparency of the counterparties' activities.
Governmental Contribution
The Company's business partners are required to adhere to the requirements of
the relevant social security and tax authorities. The Company's business
partners are required to provide evidence that they adhere to anti-bribery and
corruption laws.
Due Diligence
The Investment Adviser performed detailed ESG due diligence for each asset
prior to investment. The investment management team followed a structured
screening, due diligence and investment process designed to ensure that
investments are reviewed and compared on a consistent basis. Execution of this
process 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, considered:
· total PEC reduction, and implied CO(2) emissions reduced
and/or avoided; and/or
· total energy production from renewable and non-renewable
sources.
Governance Framework
The Company has an independent Board of Directors, with FundRock Management
Company (Guernsey) Limited as the AIFM. The Board of Directors supervises the
AIFM, which is responsible for making recommendations in relation to any
investment proposals put forward by the Investment Adviser. The Investment
Adviser is fully regulated and supervised by BaFin in Germany. The Company
maintains a comprehensive risk register which is regularly updated and
reviewed by the AIFM and the Board of Directors. The Company has established
procedures to deal with any potential conflicts of interest in circumstances
where Aquila Capital (or any affiliate) is advising both the AIFM (for the
Company) and other Aquila Capital managed funds. In the context of an
investment decision, these procedures may include a fairness opinion in
relation to the valuation of an investment, which is obtained from an
independent expert.
Monitoring of ESG
The Company's commitment to and compliance with the Company's established ESG
approach is monitored on a continuous basis throughout the lifecycle of
investments, as they become operational. This includes:
· ongoing monitoring of the PEC based on the energy
consumption and deriving from that the CO(2) savings, where appropriate,
monitoring additional environment and ESG relevant developments both at the
portfolio and asset level; and
· annual reporting, including ESG aspects, to relevant
stakeholders including ad-hoc reporting of any material and urgent issues
identified in the monitoring process.
The Company has been awarded the Green Economy Mark from the London Stock
Exchange. The Green Economy Mark identifies London-listed companies and funds
that generate between 50% and 100% of total annual revenues from products and
services that contribute to the global green economy.
Aquila Capital Investmentgesellschaft mbH
28 April 2025
INVESTMENT POLICY
As at the date of this Annual Report, the Company's investment policy
(including defined terms) is as adopted at the June 2023 AGM pursuant to the
Continuation Managed Run-Off Resolution, which replaced the previous
investment objective and policy in its entirety and is set out below.
The Company will be managed with the intention of realising all remaining
assets in the Portfolio in a prudent manner consistent with the principles of
good investment management and with a view to returning cash to Shareholders
in an orderly manner.
The Company will pursue its investment objective by effecting an orderly
realisation of its assets in a manner that seeks to achieve the best balance
for Shareholders between maximising the value received from those assets and
making timely returns of capital to Shareholders. This process might include
sales of individual assets, mainly structured as loans/receivables, or groups
of assets, or running off the Portfolio in accordance with the existing terms
of the assets, or a combination.
The Company will cease to make any new investments or to undertake capital
expenditure except where, in the opinion of both the Board and the Investment
Adviser (or, where relevant, the Investment Adviser's successors):
· the investment is a follow-on investment made in connection
with an existing asset in order to comply with the Company's pre-existing
obligations; or
· failure to make the follow-on investment may result in a
breach of contract or applicable law or regulation by the Company; or
· the investment is considered necessary to protect or
enhance the value of any existing investments or to facilitate orderly
disposals,
and in these circumstances the Company will observe the following restrictions
when making any such investments:
· no more than 20 per cent. of its Gross Asset Value will be
invested in any single asset;
· no more than 20 per cent. of its Gross Asset Value will be
invested in Energy Efficiency Investments with the same Counterparty;
· no investments will be made outside of Europe; and
· no more than 7.5 per cent. of its Gross Asset Value, in
aggregate, will be invested in Equity Investments, and at all times such
investments will only be made with appropriate Shareholder protections in
place.
Any cash received by the Company as part of the realisation process prior to
its distribution to Shareholders will be held by the Company as cash on
deposit and/or as cash equivalents.
The Company will not undertake new borrowing.
As required by the UK Listing Rules, any material change to the investment
policy of the Company will be made only with the approval of Shareholders by
way of ordinary resolution.
Currency and Hedging
The Company does not use hedging or derivatives for investment purposes. The
functional currency of the Company is sterling. With many of its investment
assets in euros the Company uses a series of regular forward foreign exchange
contracts to provide protection against movements in the sterling exchange
rate. Under these arrangements the Company is required to provide £2.5million
in cash as collateral for these forward foreign exchange contracts.
Cash Management
Cash held pending investment in Energy Efficiency Investments or for working
capital purposes will either be held in cash or invested in cash, cash
equivalents, near cash instruments, bearer bonds and/or money market
instruments ("Cash and Cash Equivalents"). There is no restriction on the
amount of Cash and Cash Equivalents that the Company may hold and there may be
times when it is appropriate for the Company to have a significant Cash and
Cash Equivalents position. For the avoidance of doubt, the FCA's restriction
that not more than 15 per cent. of the Gross Asset Value at the time an
investment is made will be invested in other closed-ended investment funds
which are listed on the Official List of the London Stock Exchange, does not
apply to money market type funds.
Changes to and compliance with the Investment Policy
As required by the Listing Rules, any material changes to the Company's
Investment Policy as set out above will require the approval of Shareholders
by way of an ordinary resolution at a general meeting and the approval of the
FCA.
Compliance with the above restrictions will be measured at the time of
investment and non-compliance resulting from changes in the price or value of
assets following investment will not be considered as a breach of the
investment restrictions.
In the event of a breach of the investment guidelines and the investment
restrictions set out above, the AIFM shall inform the Board upon becoming
aware of the same and if the Board considers the breach to be material,
notification will be made to a Regulatory Information Service.
KEY PERFORMANCE INDICATORS
THE BOARD MEASURES THE COMPANY'S SUCCESS IN ACHIEVING ITS INVESTMENT OBJECTIVE
BY REFERENCE TO THE KEY PERFORMANCE INDICATORS ("KPIs") DESCRIBED BELOW:
Efficient Return of Capital
In line with the Managed Run-Off status of the Company, the Board is focussed
on the efficient return of capital to Shareholders.
On 19 April 2024, the Company launched a Tender Offer of up to 18,561,732
Ordinary Shares, representing approximately 18.6 per cent. of the Company's
Issued Ordinary Share Capital. Further to Shareholder approval at the
Company's general meeting held on 13 May 2024, 90,231,121 Ordinary Shares were
tendered and 18,561,732 Ordinary Shares were acquired at the Tender Price of
94.28 pence per Ordinary Share, equating to £17.5 million being returned to
Shareholders, and then cancelled by the Company.
As and when sufficient cash has been accumulated, the Board's intention is for
there to be further distribution of cash to Shareholders. However, if
realisations are either delayed or it takes longer to make sizeable returns of
capital, the Board will consider the payment of dividends.
The Company paid an interim dividend of 6.139p per Ordinary Share, amounting
to £5.0 million, to Shareholders on 1 November 2024.
The Company announced on 29 April 2025 the intention to return a further
£30.0(1) million by way of a special interim dividend.
Discount of share price to NAV
The Board monitors the price of the Company's shares in relation to their NAV
and the premium or discount at which they trade. The share price closed at a
39.2% discount to the NAV as at 31 December 2024. As at 25 April 2025, the
latest date prior to the publication of the Annual Report, the share price
discount to NAV was 25.4 %.
Maintenance of a reasonable level of ongoing charges
The expenses of managing the Group are carefully monitored by the Board. The
Board receives and reviews management accounts which contain an analysis of
expenditure which are reviewed at quarterly Board meetings. The Board reviews
the ongoing charges on a quarterly basis. Based on the Group's average net
assets during the year ended 31 December 2024, the Group's ongoing charges
figure calculated in accordance with the AIC methodology was 3.8% (31 December
2023: 3.5%). Following the announcement of a special interim dividend on
29 April 2025 the Board is reviewing its cost structure to reduce the costs
in absolute terms to a level more appropriate for a company of its size.
1 On 29 April 2025, the Board announced a special interim
dividend of 36.837p per share, payable on 30 May 2025, to Shareholders on the
register on 9 May 2025. The ex-dividend date is 8 May 2025.
RISK MANAGEMENT
Principal Risks and Uncertainties
During the year under review, the Company has carried out a robust assessment
of its principal and emerging risks and the procedures in place to identify
any emerging risks are described below.
Procedures to identify principal or emerging risks:
The Board regularly reviews the Company's risk matrix, with a focus on
ensuring that the appropriate controls are in place to mitigate each risk. The
experience and knowledge of the Board is important, as is advice received from
the Board's service providers, specifically the AIFM, which is responsible for
the risk and portfolio management services and outsources the portfolio
management to the Investment Adviser. Each service provider has a role with
respect to the identification of risks:
1. Investment Adviser: the Investment Adviser submits a quarterly
report on the investment portfolio to the Board which includes risks faced by
the projects in the portfolio, plus an update on hedging;
2. Alternative Investment Fund Manager: following advice from the
Investment Adviser and other service providers, the AIFM maintains a register
of identified risks including emerging risks likely to impact the Company;
3. Broker: provides advice periodically specific to the Company on
the Company's sector, competitors and the investment company market whilst
working with the Board and Investment Adviser to communicate with
Shareholders;
4. Company Secretary: briefs the Board on forthcoming
legislation/regulatory change that might impact on the Company; and
5. Association of Investment Companies (''AIC''): The Company is a
member of the AIC, which provides regular technical updates as well as drawing
members' attention to forthcoming industry and regulatory issues.
Procedure for oversight
The Audit and Risk Committee undertakes a review at least twice a year of the
Company's risk matrix and a formal review of the risk procedures and controls
in place at the AIFM and other key service providers to ensure that emerging
(as well as known) risks are adequately identified and, so far as is
practicable, mitigated.
Principal Risks
The Board considers the following to be the principal risks faced by the
Company along with the potential impact of these risks and the steps taken to
mitigate them.
Portfolio
Principal Risks Potential Impact/Description Mitigation
Counterparty / Credit The risk that the Company has allocated funds to a Counterparty that defaults The Company has sought to invest mostly, although not exclusively, in projects
on its obligations. where the counterparties have an investment grade or near investment grade
rating. The Investment Adviser uses third party credit rating service
This could impact the financial performance of the Company and its ability to providers to support its credit risk assessments.
meet dividends as well as achieving its intended goals and returns for its
investors. Continued monitoring of the investments and the associated
counterparties/service providers, including the use of credit rating data
providers, allows the Investment Adviser to identify and address these risks
early. The Investment Adviser seeks to mitigate credit risks, for example, in
the case of Solar PV investments, by the counterparty having the opportunity
to sell electricity to the grid or other customers where possible. The
Investment Adviser also seeks to structure investments whereby contracts can
be adapted/extended to accommodate periods of payment defaults.
The Board closely scrutinises, on an asset specific basis, the fair value
calculations and expected credit loss provisions proposed by the Investment
Adviser. An independent credit rating services company provides probability of
default ("PD") and loss given default ("LGD") ratios of individual
counterparties to support the calculation of ECL provisions.
Diversification of counterparties and service providers ensures any impact is
limited. In addition, a diversified portfolio provides further mitigation.
Concentration risk The risk that the concentration of investments in a limited number of The AIFM and the Investment Adviser continuously monitor the existing
countries, counterparties, geographical markets, tenure and currencies could portfolio against the Company's portfolio concentration limits and investment
expose the Company to unnecessary fluctuations in a narrow range of markets. policy. This mitigates the risk by ensuring that concentration limits and
This risk could negatively impact the Company's performance and ability to asset diversification limits are observed.
meet strategic targets.
As at 31 December 2024, the Company had no substantial geographic exposure to
any one country (with assets principally in Italy, Spain, Germany and the UK).
Environmental/ Social/ Governance ("ESG") Failure to adequately consider ESG implications when making and monitoring The Investment Adviser performs detailed due diligence on ESG for each asset
investments could lead to reputational risk: exposure to greenwashing claims prior to recommendation.
and potentially have an adverse impact on the portfolio's ability to achieve
its targeted returns. General standards including IFS Performance Standards, IFC Environmental
Health and Safety Guidelines (''EHS'') and Equator Principles as well as local
health and safety and social laws are reviewed on a regular basis for all
assets depending on the location and development status of each asset.
Economic and Markets
Principal Risks Potential Impact/Description Mitigation
Discount management Market sentiment has moved the share price to a persistent discount to NAV. The Company's Broker monitors the market for the Company's shares and reports
at quarterly Board meetings. The Company has the authority, if appropriate, to
There is a risk that the Company will not be able to find ways to bring the purchase Ordinary Shares in the market with the result of, amongst other
share price back to NAV, leading to Shareholders being unable to realise their things, enhancing the Net Asset Value per Ordinary Share.
investments through the secondary market at Net Asset Value or at market
price. The Board and Broker maintains engagement with Shareholders and ensures good
market information is available to investors.
Loss of market confidence in the Board/Investment Adviser.
Following the successful continuation and managed run-off vote in June 2023,
the Board, with its advisers, continues to consider strategic options,
including asset realisations, to maximise value for Shareholders.
Interest rates/ inflation Changes to interest rates may impact the valuation of the investment portfolio The Company's investments, which provide in many cases for fixed returns, are
by impacting the valuation discount rate. This in turn may have an adverse not significantly exposed to inflation and interest rate movements because the
impact on the attractiveness of returns. income streams from investments are not subject to significant deductions for
operating costs associated with the investments. While there may be O&M
Although energy prices have fallen from the heights, they reached in mid-2022, costs these are not a high percentage of revenues and so any inflationary
current global geopolitics could drive a return to increased energy prices and pressures on such costs are not expected to have a significant impact.
volatility, as well as prolonged higher inflation and interest rate levels. Furthermore, the Company has not taken on indebtedness to finance its
investments and so there is no risk of the costs of indebtedness negatively
impacting the revenues from investments. Were the Company to take on
indebtedness it may use derivative instruments such as futures, options and
swaps to protect the Company from fluctuations in interest rates.
The Investment Adviser manages the correlation of cash flows to inflation and
resilience to the economic environment.
The Investment Adviser has sought to incorporate RPI adjustments in investment
documentation where possible.
In addition, investing in energy efficiency assets can in some cases provide
an effective protection against inflation, as many such assets benefit from
rising electricity prices with no burden on the cost side in relation to the
use of resources.
Relations with ESCOs during managed run-off Entering a managed run-off has strained relations with some ESCOs who may have In certain investments there is risk on the ESCO to provide a continuing
expected further volume from AEET over time, giving rise to further service to enable the underlying investment, for example, to deliver energy
counterparty/ credit risk for the Company. savings or produce renewable energy. Where relationships may be strained the
ESCO may not deliver such service and/or there may be a requirement to secure
an alternative service provider, in which circumstances receivables may be at
risk and/ or the cost of delivering the necessary services may increase.
Appropriate provisions have been made within the financial statements where
necessary. Communications with the ESCOs from the Investment Adviser ("IA")
take into account these considerations and professional advice has been sought
by the Company where needed.
The Board and IA will continue to monitor relations with ESCOs as the run-off
progresses.
Service provider risk Risks that the Company's third-party service providers do not perform to the The Board continues to monitor the quality of services provided by all of its
appropriate standards. service providers, and in particular, the Investment Adviser. Where it is
deemed that work carried out by any service provider is of insufficient
Potential lack of resource, experience or depth in the Investment Adviser's quality, the Board will procure additional services from other service
team to manage the Company's investments. This may be exacerbated by the providers with a view to ensuring the required standard of portfolio
Managed Run-off status of the Company which has led, over time, to reduced management and reporting is maintained. The Board will reserve its right to
fees for the Investment Adviser. recover the cost of such additional services from the current service
providers.
Possible conflicts with other private Aquila clients and private investing
vehicles which Aquila cannot disclose to the Board or the AIFM. Additionally through the Management Engagement Committee, the Board conducts a
formal assessment of each key service provider's performance once a year. To
The Investment Adviser is dependent on key people to identify, acquire and assist its ability to properly oversee the Company's service providers, the
manage the Company's investments. Board requires each service provider to notify it as soon as reasonably
practicable following any material breach of its contract with the Company.
The Company and AIFM are made aware of and review potential conflicts of
interest at the time of each investment being made.
Conflicts of interest and investment allocation policies are in place and
agreed with the Board.
The strength and depth of the Investment Adviser's resources mitigate the risk
of a key person departure and provides the ability to draw skills from other
areas if needed.
Operational
Principal Risks Potential Impact/Description Mitigation
IT security A hacker or third party could obtain access to the Investment Adviser or any Service providers have been carefully selected for their expertise and
other service provider and destroy data or use it for malicious purposes reputation in the sector. Each service provider has provided assurances to
resulting in reputational damage and possible GDPR concern. both the AIFM and the Company on their cyber policies and business continuity
plans along with external reviews of their procedures where applicable.
Data records could be destroyed resulting in an inability to make investment
decisions and/or monitor investments. The AIFM, Administrator and Board include Cyber Risk in their reviews of
counterparties.
Financial
Principal Risks Potential Impact/Description Mitigation
Portfolio Carrying Value The principal component of the Company's balance sheet is its portfolio of The Investment Adviser has experience in undertaking valuations of renewable
energy efficiency assets. The Investment Adviser is responsible for preparing sustainability/energy transition assets. In addition, independent advice from
a fair market value of the investments where such investments have variable a professional accounting services firm has been received to ensure that the
returns. Fair value calculations rely on projections, which involve estimates Portfolio valuation adheres to the relevant accounting standards.
of the future, which are inherently judgmental.
The AIFM and the Board review and interrogate the valuations and underlying
There is a risk that these valuations and underlying assumptions such as assumptions provided by the Investment Adviser.
discount rates being applied are not a fair reflection of an open market
valuation, therefore the investment portfolio could be over or under valued. It should be noted that valuations are held at fair value and at amortised
cost and not at net realisable value.
Investments with fixed returns are measured at amortised cost and subject to
expected credit loss provisions, which are based on numerous assumptions and
judgments.
Act of War/ Sanctions As evidenced with conflict in the Ukraine and the Middle East, various The Company does not have any direct exposure in Ukraine, Russia or the Middle
sanctions and restrictions imposed. There is a possibility that there could be East, there are also no direct business relationships with counterparties from
supply delays for Operations and Maintenance ("O&M"), sanction these countries; therefore assessments have led the Company to the conclusion
considerations, volatile markets and general uncertainty. More difficult that its investments in Europe are not impacted directly at this time.
energy markets are expected along with inflationary pressures on inputs.
It has also led to short term price increases and more focus on renewable
energy infrastructure.
Possible change to the world order and globalisation.
Conflict brings uncertainty to the commodities market and how price levels of
modules and other hardware will be impacted directly or indirectly.
Capital Preservation During the run-off, there is a risk that overdistribution of cash will leave The Board, Investment Adviser and AIFM will review the ongoing liquidity
the Company short of sufficient liquidity to meet ongoing expenditure. requirements and cashflow forecasts of the Company prior to making
distributions to ensure that sufficient funds are maintained throughout the
run-off process.
Emerging Risks
Principal Risks Potential Impact/Description Mitigation
Shrinking Company size relative to cost base. As the run-off progresses there will be a significantly reduced size to the The Board will continue to monitor the services of IA and other providers
portfolio, which will in turn reduce the IA fee and potentially place a strain during run-off. Should it be considered that there is either a lack of
on available IA resourcing. As several costs are fixed, this will potentially sufficient service, this can be addressed prior to it having a detrimental
lead to a growing cost base relative to the size of the Company. effect on the Company.
Conversely, should the Board feel that costs are becoming disproportionately
high relative to the requirements of the Company, steps can be taken to scale
back providers and their associated costs where possible.
Viability Statement
In accordance with the UK Corporate Governance Code ("UK Code") and the
Listing Rules, the Directors have assessed the prospects of the Company over a
longer period than the 12 months required by the 'Going Concern' provision.
In reviewing the Company's viability, the Directors have assessed the
viability of the Company for the period to 31 December 2027 (the
"Look-forward Period").
Following the change in investment policy approved by Shareholders at the 2023
AGM, the Company entered a managed run-off, meaning that it is not making any
new investments (save for in limited circumstances as set out in the New
Investment Policy) and its investing activity is solely in respect of funding
legal commitments to existing investments (the "Managed Run-Off"). The Board
will continue to review strategic options in respect of the Company's assets
to realise the maximum value for Shareholders in the shortest possible time,
recognising the inherent difficulties in the construction of the portfolio,
including the number of investments, multiple geographies and long tenors.
While the Company is continuing to explore strategic options there remains no
certainty that any of these options will materialise and be put to
Shareholders for consideration. Accordingly, the Directors recognise that
these conditions indicate the existence of material uncertainty which may cast
significant doubt about the Group and the Company's viability over the
Look-forward Period.
Although the Company is in a Managed Run-Off, the Board believes that the
Look-forward Period, being approximately three years, is an appropriate time
horizon over which to assess the viability of the Company, particularly when
taking into account the long-term nature of the maturity of the Company's
assets, which is modelled over three years and the principal risks outlined
above. In considering the prospects of the Company, the Directors looked at
the key risks facing the Company, focusing on the likelihood and impact of
each risk as well as any key contracts, future events or timescales that may
be assigned to each key risk.
The Directors have a reasonable expectation that the Company has adequate
resources to: continue in operation; realise the Company's assets in an
orderly manner; and meet its liabilities as they fall due, over the
Look-forward Period.
Going Concern
The Directors have adopted the going concern basis in preparing the financial
statements. The following is a summary of the Directors' assessment of the
going concern status of the Group and Company.
The Group and Company continue to meet day-to-day liquidity needs through
their cash resources. The Directors have a reasonable expectation that the
Group and Company have adequate resources to continue in operational existence
for at least twelve months from the date of this document.
In reaching this conclusion, the Directors have taken into account the
following considerations:
· The Group's investment commitments, amounting to £0.04
million, and its income and expense flows;
· No new commitments have been entered into since 28
February 2023;
· The £36.4 million cash balance at 31 March 2025
(excluding £2.5 million held as collateral for FX hedging) following the
receipt of repayments up to that date; and
· The potential income from the remaining investments.
The Board has announced that a special interim dividend of 36.837 pence per
Ordinary Share will be paid on 30 May 2025. Total expenses for the year were
£3.0 million (excluding impairment losses) (2023: £3.3 million), which
represented 3.8% of average net assets during the year (2023: 3.5%). The
Board, Investment Adviser and AIFM will review the ongoing liquidity
requirements and cashflow forecasts of the Company prior to making further
distributions to ensure that sufficient funds are maintained throughout the
run-off process. At the date of approval of this document, based on the
aggregate of investments and cash held, the Group and Company have substantial
operating expenses cover. The Directors are also satisfied that the Group and
Company would continue to remain viable under downside scenarios.
As set out in the 2023 Annual Report, at the 2023 AGM, Shareholders voted in
favour of the Company's change of investment policy (the "New Investment
Policy"). Following the 2023 AGM, and in accordance with the New Investment
Policy, the Company entered a continuation and managed run-off of its
portfolio ("Managed Run-Off"), meaning that it is not making any new
investments (save for the limited circumstances as set out in the New
Investment Policy) and its investing activity is solely in respect of funding
legal commitments to existing investments.
The Continuation and Managed Run-Off Resolution was put forward as a
resolution to Shareholders in response to the outcome of the Company's
continuation vote held in February 2023, which did not pass.
As referred to above, the Company is operating currently under a Managed
Run-Off with the term of some of the Company's assets being several years.
While the Company is continuing to explore other strategic options, there
remains no certainty that any of these options will materialise and be put to
Shareholders for consideration.
Accordingly, while the Directors recognise that these conditions indicate the
existence of material uncertainty which may cast significant doubt about the
Group and Company's ability to continue as a going concern, based on the
assessment and considerations above, the Directors have concluded that the
financial statements of the Group and the Company should be prepared on a
going concern basis. Neither the Group nor the Company financial statements
include any potential costs of liquidation and the financial statements do not
include the other adjustments that would result if the Group and the Company
were unable to continue as a going concern.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL
STATEMENTS
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group and the
Company financial statements in accordance with UK-adopted international
accounting standards in conformity with the requirements of the Companies Act
2006.
Under company law, directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and Company and of the profit or loss of the Group and Company
for that period. In preparing the financial statements, the Directors are
required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable UK-adopted international
accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
· make judgements and accounting estimates that are
reasonable and prudent; and
· prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group and Company will
continue in business.
The Directors are responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records
that are sufficient to show and explain the Group's and Company's transactions
and disclose with reasonable accuracy at any time the financial position of
the Group and Company and enable them to ensure that the financial statements
and the Directors' Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' Confirmations
The Directors consider that the Annual Report and financial statements, taken
as a whole, is fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Group's and Company's position and
performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Corporate
Governance section confirm that, to the best of their knowledge:
· the Group and Company financial statements, which have
been prepared in accordance with UK-adopted international accounting standards
in conformity with the requirements of the Companies Act 2006, give a true and
fair view of the assets, liabilities, financial position and profit of the
Group and profit of the Company; and
· the Strategic Report includes a fair review of the
development and performance of the business and the position of the Group and
Company, together with a description of the principal risks and uncertainties
that it faces.
In the case of each Director in office at the date the Directors' report is
approved:
· so far as the Director is aware, there is no relevant
audit information of which the Group's and Company's auditors are unaware; and
· they have taken all the steps that they ought to have
taken as a Director in order to make themselves aware of any relevant audit
information and to establish that the Group's and Company's auditors are aware
of that information.
For and on behalf of the Board,
Miriam Greenwood OBE DL
Chair of the Board
28 April 2025
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2024
For the year ended For the year ended
31 December 2024
31 December 2023
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Losses on investments at fair value
through profit and loss 4 - (2,077) (2,077) - (2,380) (2,380)
Unrealised (loss)/gain on derivatives - (24) (24) - 122 122
Realised gain on derivatives - 3,493 3,493 - 1,713 1,713
Net foreign exchange loss - (3,241) (3,241) - (64) (64)
Investment Income 5 5,397 - 5,397 5,948 - 5,948
Investment advisory fees 6 (647) - (647) (808) - (808)
Impairment loss 4 (2,554) - (2,554) (1,735) - (1,735)
Other expenses 7 (2,374) - (2,374) (2,492) - (2,492)
(Loss)/profit on ordinary activities before taxation (178) (1,849) (2,027) 913 (609) 304
Taxation 8 - - - - - -
(Loss)/profit on ordinary activities after taxation (178) (1,849) (2,027) 913 (609) 304
(Loss)/return per Ordinary Share 9 (0.20)p (2.09)p (2.29)p 0.91p (0.61)p 0.30p
The total column of the Consolidated Statement of Profit or Loss and
Comprehensive Income is the profit and loss account of the Group.
All revenue and capital items in the above consolidated statement derive from
continuing operations. No operations were discontinued during the year.
Profit/(loss) on ordinary activities after taxation is also the "Total
comprehensive income/(expense) for the year".
The notes are an integral part of these financial statements.
COMPANY STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2024
For the year ended For the year ended
31 December 2024
31 December 2023
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments at fair value through profit or loss 4 - (1,299) (1,299) - 961 961
Net foreign exchange loss - (1,728) (1,728) - (37) (37)
Investment income 5 4,203 - 4,203 4,080 - 4,080
Investment advisory fees 6 (647) - (647) (808) - (808)
Other expenses 7 (1,939) - (1,939) (1,912) - (1,912)
Impairment loss 4 (923) - (923) (2,041) - (2,041)
Profit/(loss) on ordinary activities before taxation 694 (3,027) (2,333) (681) 924 243
Taxation 8 - - - - - -
Profit/(loss) on ordinary activities after taxation 694 (3,027) (2,333) (681) 924 243
Return/(loss) per Ordinary Share 9 0.79p (3.43)p (2.64)p (0.68)p 0.92p 0.24p
The total column of the Company Statement of Profit or Loss and Comprehensive
Income is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year.
Profit/(loss) on ordinary activities after taxation is also the "Total
comprehensive income/(expense) for the year".
The notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2024
2024 2023
Notes £'000 £'000
Fixed assets
Investments at fair value through profit or loss 4 10,022 10,492
Investments at amortised cost 4 46,309 54,990
56,331 65,482
Current assets 10
Trade and other receivables 80 652
Derivative financial instrument - 122
Cash and cash equivalents 14,417 29,082
14,497 29,856
Creditors: amounts falling due within one year 11
Payables (1,137) (1,057)
Derivative financial instrument (24) -
Net current assets 13,336 28,799
Net assets 69,667 94,281
Capital and reserves: equity
Share capital 12 814 1,000
Capital redemption reserve 13 186 -
Special reserve 13 70,913 93,500
Capital reserve 13 (2,027) (178)
Revenue reserve 13 (219) (41)
Shareholders' funds 69,667 94,281
Net asset value per Ordinary Share 14 85.55p 94.28p
No. of Ordinary Shares in issue 81,438,268 100,000,000
Approved by the Board of directors and authorised for issue on 28 April 2025.
Signed on behalf of the Board of Directors
Miriam Greenwood OBE DL
Aquila Energy Efficiency Trust PLC is incorporated in England and Wales with
Company number 13324616.
The notes are an integral part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2024
2024 2023
Notes £'000 £'000
Fixed assets
Investment in subsidiaries 4 38,399 45,654
Current assets 10
Trade and other receivables 27,348 27,548
Cash and cash equivalents 7,620 22,548
34,968 50,096
Creditors: amounts falling due within one year 11 (3,411) (874)
Net current assets 31,557 49,222
Net assets 69,956 94,876
Capital and reserves: equity
Share capital 12 814 1,000
Capital redemption reserve 13 186 -
Special reserve 13 70,913 93,500
Capital reserve 13 (104) 2,923
Revenue reserve 13 (1,853) (2,547)
Shareholders' funds 69,956 94,876
Approved by the Board of directors and authorised for issue on 28April 2025.
Signed on behalf of the Board of Directors
Miriam Greenwood OBE DL
Aquila Energy Efficiency Trust PLC is incorporated in England and Wales with
Company number 13324616.
The notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2024
Capital
Share redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
For the year ended 31 December 2024 Notes £'000 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2024 1,000 - 93,500 (178) (41) 94,281
Repurchase and cancellation of the Company's own shares following a 12 (186) 186 (17,500) - - (17,500)
Tender Offer
Expenses of Tender Offer - - (88) - - (88)
Dividend paid 15 - - (4,999) - - (4,999)
Loss for the year - - - (1,849) (178) (2,027)
Closing equity as at 31 December 2024 814 186 70,913 (2,027) (219) 69,667
Capital
Share redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
For the year ended 31 December 2023 Notes £'000 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2023 1,000 - 94,750 431 (954) 95,227
Dividend paid 15 - - (1,250) - - (1,250)
(Loss)/profit for the year - - - (609) 913 304
Closing equity as at 31 December 2023 1,000 - 93,500 (178) (41) 94,281
The notes are an integral part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2024
Capital
Share redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
For the year ended 31 December 2024 Notes £'000 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2024 1,000 - 93,500 2,923 (2,547) 94,876
Repurchase and cancellation of the Company's own
shares following a Tender Offer 12 (186) 186 (17,500) - - (17,500)
Expenses of Tender Offer - - (88) - - (88)
Dividend paid 15 - - (4,999) - - (4,999)
(Loss)/profit for the year - - - (3,027) 694 (2,333)
Closing equity as at 31 December 2024 814 186 70,913 (104) (1,853) 69,956
Capital
Share redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
For the year ended 31 December 2023 Notes £'000 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2023 1,000 - 94,750 1,999 (1,866) 95,883
Dividend paid 15 - - (1,250) - - (1,250)
Profit/(loss) for the year - - - 924 (681) 243
Closing equity as at 31 December 2023 1,000 - 93,500 2,923 (2,547) 94,876
The notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2024
For the year For the year
ended ended
31 December 31 December
2024 2023
Notes £'000 £'000
Operating activities
(Loss)/profit on ordinary activities before taxation (2,027) 304
Adjustments for:
Unrealised loss on investments 4 2,060 2,380
Unrealised loss/(gain) on derivative instruments 24 (122)
Realised loss on investments 4 17 -
Realised gains on derivative investments - (108)
Impairment loss 2,554 1,735
Net foreign exchange loss 3,241 116
Decrease/(increase) in trade and other receivables 572 (310)
Increase in creditors: amounts falling due within one year 80 968
Interest receivable from amortised cost investments 4 (4,008) (2,420)
Net cash flow from operating activities 2,513 2,543
Investing activities
Purchase of investments 4 (4,224) (21,834)
Repayment of investments 4 9,894 3,050
Net cash flow used in investing activities 5,670 (18,784)
Financing activities
Tender Offer payment (17,500) -
Expenses of Tender Offer (88) -
Dividends paid 15 (4,999) (1,250)
Net cash flow used in financing activities (22,587) (1,250)
Decrease in cash and cash equivalents (14,404) (17,491)
Cash and cash equivalents at start of year 29,082 46,625
Effect of foreign currency exchange translation (261) (52)
Cash and cash equivalents at end of year 14,417 29,082
The notes are an integral part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2024
For the year For the year
ended ended
31 December 31 December
2024 2023
Notes £'000 £'000
Operating activities
(Loss)/profit on ordinary activities before taxation (2,333) 243
Adjustments for:
Unrealised loss/(gain) on investments 4 1,299 (961)
Net foreign exchange loss/(gain) 1,728 (17)
Shareholder loan interest income (1,936) (1,912)
Adjustment for impairment loss 923 2,041
Movement in intercompany balances 2,443 (1,901)
Decrease/(increase) in trade receivables 199 (91)
Increase/(decrease) in creditors: amounts falling due within one year 94 (175)
Net cash flow generated from/(used in) operating activities* 2,417 (2,773)
Investing activities
Purchase of investments 4 (294) (4,808)
Repayment of investments 3,724 1,306
Net cash flow used in investing activities 3,430 (3,502)
Financing activities
Loan to subsidiary 1 (4,437)
Shareholder loan interest income received 1,936 1,782
Tender Offer payment (17,500) -
Expenses of Tender Offer (88) -
Dividends paid 15 (4,999) (1,250)
Net cash flow used in financing activities (20,650) (3,905)
Decrease in cash and cash equivalents (14,803) (10,180)
Cash and cash equivalents at start of year 22,548 32,714
Effect of foreign currency exchange translation (125) 14
Cash and cash equivalents at end of year 7,620 22,548
*Cash flows from operating activities were presented after the following
non-cash
transactions:
Conversion of intercompany receivables to investment in subsidiary - 11,791
Conversion of intercompany receivable to Shareholder loan - 23,076
- 34,867
The notes are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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 to
continue conducting the affairs of the Company so as to retain its status 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 4th Floor, 140 Aldersgate
Street, London, EC1A 4HY.
The Company's investment objective is to generate attractive returns,
principally in the form of income distributions, by investing in a diversified
portfolio of Energy Efficiency Investments.
FundRock Management Company (Guernsey) Limited (formerly Sanne Fund Management
(Guernsey) Limited) acts as the Company's Alternative Investment Fund Manager
(the "AIFM") for the purposes of Directive 2011/61/EU on alternative
investment fund managers ("AIFMD").
The Group's Investment Adviser is Aquila Capital Investmentgesellschaft mbH
authorised and regulated by the German Federal Financial Supervisory
Authority.
Apex Listed Companies Services (UK) Limited (the "Administrator") (formerly
Sanne Fund Services (UK) Limited) provides administrative and company
secretarial services to the Group under the terms of an administration
agreement between the Company and the Administrator. The Italian SPV is
administered by Zenith Service S.p.A.
2. BASIS OF PREPARATION
Group financial statements
The consolidated financial statements have been prepared in accordance with UK
adopted international accounting standards in conformity with the requirements
of the Companies Act 2006 as applicable to companies reporting under those
standards.
The consolidated financial statements have also been prepared as far as is
relevant and applicable to the Group in accordance with the Statement of
Recommended Practice ("SORP") issued by the Association of Investment
Companies ("AIC") in July 2022.
The consolidated financial statements are prepared on the historical cost
basis, except for the revaluation of certain financial instruments at fair
value through profit or loss. The principal accounting policies adopted are
set out below. These policies are consistently applied.
The financial statements are presented in sterling rounded to the nearest
thousand. They have been prepared in accordance with the accounting policies,
significant judgements, key assumptions and estimates set out below.
Company financial statements
The Company financial statements have been prepared in accordance with the UK
adopted international accounting standards in conformity with the requirements
of the Companies Act 2006 as applicable to companies reporting under those
standards.
The financial statements have also been prepared as far as is relevant and
applicable to the Company in accordance with the Statement of Recommended
Practice ("SORP") issued by the AIC in July 2022.
The financial statements are prepared on the historical cost basis, except for
the revaluation of certain financial instruments at fair value through profit
or loss. The principal accounting policies adopted are set out below. These
policies are consistently applied.
The functional currency of the Company is sterling. The capital of the Company
was raised in sterling and majority of its expenses are in sterling. The
liquidity of the Company is managed in sterling as the Company's performance
is evaluated in that currency. Accordingly, the financial statements are
presented in sterling rounded to the nearest thousand. They have been prepared
in accordance with the accounting policies, significant judgements, key
assumptions and estimates as set out below.
Basis of consolidation
The Company does not satisfy the definition of an investment entity in
paragraph 27(c) if IFRS 10, as it does not measure and evaluate the
performance of substantially all of its investment on a fair value basis. It
is therefore required to prepare consolidated accounts.
The Group's financial statements consolidate those of the Company and of its
subsidiaries at 31 December 2024. The subsidiaries have a reporting date of
31 December. AHL's functional currency is sterling. The Italian SPV's
functional currency is the euro. However, to align with the Group's functional
currency, the balances of Italian SPV have been converted to sterling at the
year-end rate for the Statement of Financial Position accounts and at the
average rate during the year for the Statement of Profit or Loss and
Comprehensive Income accounts.
All transactions and balances between Group companies are eliminated on
consolidation. The accounting policies adopted by the Group are consistent
with those adopted by the Company and the subsidiaries.
Accounting for wholly owned entities
AHL
The Company owns 100% of its subsidiary, AHL. The registered office address of
AHL is Leaf B, 20th Floor, Tower 42, Old Broad Street, London, England, EC2N
1HQ. The Company has acquired Energy Efficiency Investments through its
investment in the subsidiary. The Company will finance the subsidiary through
a mix of equity and debt instruments. The Company consolidates the subsidiary.
Italian SPV
The Italian SPV is a Company established under the laws of Italy to hold
securitised receivables. The Company does not hold any equity in the SPV.
However, it does own 100% of the notes issued by one compartment of the SPV
which entitles the Company to an 100% economic interest in the receivables
purchased through the proceeds of these notes. The Company does not have an
economic interest in any of the other securities receivables issuances by the
Italian SPV. The notes subscribed by the Company, issued by the Italian SPV,
and the receivables purchased from the proceeds of these notes, together with
all associated assets and liabilities and income and costs, are ring-fenced
from other assets and liabilities of the Italian SPV and thus the Company's
holdings have been deemed a silo under IFRS 10 paragraph B77. The Company
consolidates the results of the Italian SPV in respect of the performance of
the receivables in the silo.
Going concern
The Directors have adopted the going concern basis in preparing the financial
statements. The following is a summary of the Directors' assessment of the
going concern status of the Group and Company.
The Group and Company continue to meet day-to-day liquidity needs through
their cash resources. The Directors have a reasonable expectation that the
Group and Company have adequate resources to continue in operational existence
for at least twelve months from the date of this document.
In reaching this conclusion, the Directors have taken into account the
following considerations:
· The Group's investment commitments, amounting to £0.04
million, and its income and expense flows;
· No new commitments have been entered into since 28
February 2023;
· The £36.4 million cash balance at 31 March 2025
(excluding £2.5 million held as collateral for FX hedging) following the
receipt of repayments up to that date; and
· The potential income from the remaining investments.
The Board has announced that a special interim dividend of 36.837 pence per
Ordinary Share will be paid on 30 May 2025. Total expenses for the year were
£3.0 million (excluding impairment losses) (2023: £3.3 million), which
represented 3.8% of average net assets during the year (2023: 3.5%). The
Board, Investment Adviser and AIFM will review the ongoing liquidity
requirements and cashflow forecasts of the Company prior to making further
distributions to ensure that sufficient funds are maintained throughout the
run-off process. At the date of approval of this document, based on the
aggregate of investments and cash held, the Group and Company have substantial
operating expenses cover. The Directors are also satisfied that the Group and
Company would continue to remain viable under downside scenarios.
At the Annual General Meeting of the Company (the "AGM") held on 14 June 2023,
Shareholders voted in favour of the Company's change of investment policy (the
"New Investment Policy"). Following the AGM, and in accordance with the New
Investment Policy, the Company entered a continuation and managed run-off of
its portfolio ("Managed Run-Off"), meaning that it is not making any new
investments (save for the limited circumstances as set out in the New
Investment Policy) and its investing activity is solely in respect of funding
legal commitments to existing investments.
The Continuation and Managed Run-Off Resolution was put forward as a
resolution to Shareholders in response to the outcome of the Company's
continuation vote held in February 2023, which did not pass.
As referred to above, the Company is operating currently under a Managed
Run-Off with the term of some of the Company's assets being of several years.
While the Company is continuing to explore other strategic options, there
remains no certainty that any of these options will materialise and be put to
Shareholders for consideration.
Accordingly, while the Directors recognise that these conditions indicate the
existence of material uncertainty which may cast significant doubt about the
Group and Company's ability to continue as a going concern, based on the
assessment and considerations above, the Directors have concluded that the
financial statements of the Group and the Company should be prepared on a
going concern basis. Neither the Group nor the Company financial statements
include any potential costs of liquidation and the financial statements do not
include the other adjustments that would result if the Group and the Company
were unable to continue as a going concern.
Critical accounting judgements, estimates and assumptions
The preparation of the consolidated financial statements requires the
application of estimates and assumptions which may affect the results reported
in the consolidated financial statements. Estimates, by their nature, are
based on judgement and available information.
The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying value of assets and liabilities are those
used to determine the fair value of the investments and expected credit loss
as disclosed in note 4 to the financial statements.
Investment fair value
The key assumptions that have a significant impact on the value of the Group's
investments are discount rates, energy yield, power prices and capital
expenditure factors. The 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. Loan impairment provisions represent an
estimate of the losses incurred in the loan portfolios at the balance sheet
date. The calculation involves the formulation and incorporation of multiple
conditions into ECL to meet the measurement objective of IFRS 9. Further
details are given in note 4 to the financial statement below.
New Standards, Interpretations and Amendments Adopted from 1 January 2024
A number of new standards and amendments to standards are effective for the
annual periods beginning after 1 January 2024. None of these have a
significant effect on the measurement of the amounts recognised in the
financial statements of the Company.
New Standards and Amendments Issued but not yet Effective
The relevant new and amended standards and interpretations that are issued,
but not yet effective, up to the date of issuance of the Group's and Company's
financial statements are disclosed below.
Amendments to IAS 21 - Lack of Exchangeability (effective for annual periods
beginning on or after 1 January 2025)
In August 2023, the IASB amended IAS 21 to help entities to determine whether
a currency is exchangeable into another currency, and which spot exchange rate
to use when it is not. The Group does not expect these amendments to have a
material impact on its operations or financial statements.
Amendments to the Classification and Measurement of Financial Instruments -
Amendments to IFRS 9 and IFRS 7 (effective for annual periods beginning on or
after 1 January 2026)
On 30 May 2024, the IASB issued targeted amendments to IFRS 9 and IFRS 7 to
respond to recent questions arising in practice, and to include new
requirements not only for financial institutions but also for corporate
entities. These amendments:
· clarify the date of recognition and derecognition of some
financial assets and liabilities, with a new exception for some financial
liabilities settled through an electronic cash transfer system;
· clarify and add further guidance for assessing whether a
financial asset meets the solely payments of principal and interest (SPPI)
criterion;
· add new disclosures for certain instruments with
contractual terms that can change cash flows (such as some financial
instruments with features linked to the achievement of environment, social and
governance targets); and
· update the disclosures for equity instruments designated
at fair value through other comprehensive income ('FVOCI').
The Group does not expect these amendments to have a material impact on its
operations or financial statements.
IFRS 18 Presentation and Disclosure in Financial Statements (effective for
annual periods beginning on or after 1 January 2027)
IFRS 18 will replace IAS 1 Presentation of financial statements, introducing
new requirements that will help to achieve comparability of the financial
performance of similar entities and provide more relevant information and
transparency to users. Even though IFRS 18 will not impact the recognition or
measurement of items in the financial statements, its impacts on presentation
and disclosure are expected to be pervasive, in particular those related to
the statement of comprehensive income and providing management-defined
performance measures within the financial statements.
Management is currently assessing the detailed implications of applying the
new standard on the Group's and Company's financial statements. From the
high-level preliminary assessment performed, the following potential impacts
have been identified:
· Although the adoption of IFRS 18 will have no impact on
the Group's and Company's net profit, the Group and Company expects that
grouping items of income and expenses in the statement of comprehensive income
into the new categories will impact how operating profit is calculated and
reported. From the high-level impact assessment that the Group and Company has
performed, the following might potentially impact operating profit:
- Foreign exchange differences currently aggregated in the line
item 'Net foreign exchange loss/gain' in operating profit might need to be
disaggregated, with some foreign exchange gains or losses presented below
operating profit.
- The line items presented on the primary financial statements
might change as a result of the application of the concept of 'useful
structured summary' and the enhanced principles on aggregation and
disaggregation.
· The Company does not expect there to be a significant
change in the information that is currently disclosed in the notes because the
requirement to disclose material information remains unchanged; however, the
way in which the information is grouped might change as a result of the
aggregation/disaggregation principles. In addition, there will be significant
new disclosures required for:
- management-defined performance measures;
- a break-down of the nature of expenses for line items presented
by function in the operating category of the statement of comprehensive income
- this break-down is only required for certain nature expenses; and
- for the first annual period of application of IFRS 18, a
reconciliation for each line item in the statement of comprehensive income
between the restated amounts presented by applying IFRS 18 and the amounts
previously presented applying IAS 1.
· From a cash flow statement perspective, there will be
changes to how interest received and interest paid are presented. Interest
paid will be presented as financing cash flows and interest received as
investing cash flows, which is a change from current presentation as part of
operating cash flows.
The Group and Company will apply the new standard from its mandatory effective
date of 1 January 2027. Retrospective application is required, and so the
comparative information for the financial year ending 31 December 2026 will be
restated in accordance with IFRS 18.
3. MATERIAL ACCOUNTING POLICIES
Financial instruments
Financial assets
The Group's and Company's financial assets principally comprise cash and cash
equivalents, investments held at fair value through profit and loss,
investments held at amortised cost, derivative financial instruments, interest
income receivables, Shareholder loan receivables and prepayments and other
receivables.
Interest income receivables, prepayments and other receivables are initially
recognised at fair value and subsequently measured at amortised cost using the
effective interest method.
The Group's investments are debt instruments held at fair value through profit
or loss and debt instruments at amortised cost. Gains or losses resulting from
the movements in the fair value are recognised in the Group's Consolidated
Statement of Profit or Loss and Comprehensive income under the capital column.
Debt instruments at amortised cost are revalued with the functional currency
exchange rate at each valuation point and recognised in the Group's
Consolidated Statement of Profit or Loss and Comprehensive income and are
subject to ECL.
Derivatives comprise forward currency transactions used to hedge the Group's
foreign currency exposure. The fair value of the currency forward transactions
is the difference between the spot rate and the forward rate at the date of
the Consolidated Statement of Financial Position.
Investment in Subsidiaries
The Company's investment in its subsidiary AHL comprises equity shares and a
Shareholder loan. The Company's equity investment in its subsidiary AHL, is
held at cost less impairment in the Company's Statement of Financial Position.
The Company's investment in SPV is held at fair value through profit or loss.
The fair value of SPV as at 31 December 2024 has been determined through an
aggregation of the fair value of SPV's individual investments adjusted for the
cash and liabilities of SPV as at 31 December 2024. Where returns are not
fixed, the fair value of SPV's individual investments take account of forecast
power production and power price curves provided by independent research
companies. Discount rates take account of the risk profile of the counterparty
and other areas of judgment.
Financial liabilities
The Group's financial liabilities include trade and other payables and other
short-term monetary liabilities which are initially recognised at fair value
and subsequently measured at amortised cost using the effective interest
method. The Group's financial liabilities also include derivative financial
instruments.
Recognition and derecognition
Financial assets and financial liabilities are recognised in the Group's
Consolidated Statement of Financial Position when the Group becomes a party to
the contractual provisions of the instrument. Financial assets and financial
liabilities are initially measured at fair value.
At initial recognition, financial instruments classified at fair value through
profit or loss are measured at fair value which is normally the transaction
price. Other financial instruments not classified at fair value through profit
or loss are measured initially at fair value but are adjusted for incremental
and directly attributable transaction costs.
Transaction costs that are directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or
deducted from the value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable
to the acquisition of financial assets or financial liabilities at fair value
through profit or loss are recognised immediately in profit or loss.
A financial liability (in whole or in part) is derecognised when the Group has
extinguished its contractual obligations, it expires or is cancelled.
Financial assets are derecognised when the rights to receive cash flows from
the investments have expired or the Group has transferred substantially all
risks and rewards of ownership.
Classification and measurement of financial assets
IFRS 9 contains a classification and measurement approach for debt instruments
that reflects the business model in which assets are managed and their cash
flow characteristics. For debt instruments two criteria are used to determine
how financial assets should be classified and measured:
· The entity's business model (i.e. how an entity manages
its debt Instruments in order to generate cash flows by collecting contractual
cash flows, selling financial assets or both); and
· The contractual cash flow characteristics of the
financial asset (i.e. whether the contractual cash flows are solely payments
of principal and interest).
A debt instrument is measured at amortised cost if it meets both of the
following conditions and is not designated as at fair value through profit and
loss ("FVTPL"):
(a) it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
(b) its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
A debt instrument is measured at fair value through other comprehensive income
("FVOCI") if it meets both of the following conditions and is not designated
as at FVTPL:
(a) it is held within a business model whose objective is achieved by
both collecting contractual cash flows and selling financial assets; and
(b) its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
In assessing whether the contractual cash flows are solely payments of
principal and interest, the contractual terms of the instrument are
considered. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash
flows such that it would not meet this condition.
Subsequent to initial recognition, financial assets that are classified as
measured at fair value through profit or loss are measured at fair value in
the Consolidated Statement of Financial Position (with no deduction for sale
or disposal costs). Gains and losses resulting from the movement in fair value
are recognised in the Consolidated Statement of Profit or Loss and
Comprehensive Income.
Subsequent to initial recognition, financial assets that are measured at
amortised cost require the use of the effective interest method and are
subject to expected credit loss.
Taxation
The tax charge for the year is based on amounts expected to be received or
paid.
Deferred tax is provided on all timing differences that have originated but
not reversed by the accounting date.
Deferred tax liabilities are recognised for all taxable timing differences but
deferred tax assets are only recognised to the extent that it is probable that
taxable profits will be available against which those timing differences can
be utilised.
Deferred tax is measured at the tax rate which is expected to apply in the
periods in which the timing differences are expected to reverse, based on tax
rates that have been enacted or substantively enacted at the balance sheet
date and is measured on an undiscounted basis.
Segmental reporting
The Chief Operating Decision Maker ("CODM"), which is the Board, is of the
opinion that the Group is engaged in a single segment of business, being
investment in energy efficiency assets to generate investment returns whilst
preserving capital. The financial information used by the CODM to manage the
Group presents the business as a single segment.
Income
Income includes interest and dividends receiveable from investments held at
fair value and at amortised cost, and bank interest.
Investment interest income for the year is recognised in the Consolidated
Statement of Profit or Loss and Comprehensive income using effective interest
method calculation.
Interest and dividends receivable are recognised when the right to receive
them is established and is reflected in the Consolidated Statement of Profit
or Loss and Comprehensive Income as Investment Income.
Bank interest income is recognised for the year in the Consolidated Statement
of Profit or Loss and Comprehensive income on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the Consolidated
Statement of Profit or Loss and Comprehensive Income, all expenses are
presented as revenue as it is directly attributable to the operations of the
Group.
Details of the Group's fee payments to the Investment Adviser are disclosed in
note 6 to the consolidated financial statements. Details of the Group's other
expenses are disclosed in note 7 to the consolidated financial statements.
These fees are presented under the revenue column in the Consolidated
Statement of Profit or Loss and Comprehensive Income.
Foreign currency
Transactions denominated in foreign currencies are translated into sterling at
actual exchange rates as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at year-end are reported at the
rates of exchange prevailing at the year-end. Any gain or loss arising from a
change in exchange rates subsequent to the date of the transaction is included
as an exchange gain or loss to capital or revenue in the Consolidated
Statement of Profit or Loss and Comprehensive Income as appropriate. Foreign
exchange movements on investments are included in the Capital account of the
Consolidated Statement of Profit or Loss and Comprehensive Income.
Cash and cash equivalents
Cash and cash equivalents include deposits held at call with banks and other
short-term deposits with original maturities of three months or less.
Trade and other payables
Trade and other payables are initially recognised at fair value, and
subsequently re-measured at amortised cost using the effective interest method
where necessary.
Share capital and share premium
Ordinary Shares are classified as equity. Costs directly attributable to the
issue of new shares (that would have been avoided if there had not been a new
issue of new shares) are recognised against the value of the ordinary share
premium account.
Repurchase of the Company's own shares are recognised and deducted directly in
equity. No gain or loss is recognised in profit or loss on the purchase, sale,
issue or cancellation of the Company's own equity instruments.
Realised gains and losses on investments
Realised gains and losses comprise the difference between the sale proceeds of
an investment and its fair value, and are deemed to be realised when the
proceeds have settled.
ECL allowance for financial assets measured at amortised cost
Many of the Group's investments are financial assets measured at amortised
cost. These investments are structured as purchases of receivables or
purchases of notes which have the right to receivables. The purchased
receivables derive from energy services agreements for the provision of energy
efficiency and/or renewable energy solutions provided by Energy Service
Companies ("ESCOs") to their corporate clients and these receivables provide a
fixed return for the Group. ESCOs are businesses that provide energy-related
services to end-users, often focusing on energy efficiency projects. The
receivables are due to be received over a range of maturities from less than
12 months to more than fifteen years. Individual agreements provide for the
receivables to be paid mostly on a monthly or quarterly basis.
In addition to past events and current conditions, reasonable and supportable
forecasts affecting collectability are also considered when determining the
amount of impairment in accordance with IFRS 9. Under the IFRS 9 expected
credit loss model, expected credit losses are recognised at each reporting
period, even if no actual loss events have taken place. In addition to past
events and current conditions, reasonable and supportable forward-looking
information that is available without undue cost or effort is considered in
determining impairment, with the model applied to all financial instruments
subject to impairment testing.
At initial recognition, allowance is made for ECL resulting from default
events that are possible within the next 12 months (12-month expected ECL).
In the event of a significant increase in credit risk, allowance (or
provision) is made for ECL resulting from all possible default events over the
expected life of the financial instrument (lifetime ECL).
Financial assets where 12-month ECL is recognised are Stage 1; financial
assets which are considered to have experienced a significant increase in
credit risk are in Stage 2; and financial assets which have defaulted or are
otherwise considered to be credit-impaired are allocated to Stage 3. Stage 2
and Stage 3 are based on lifetime ECL.
The measurement of ECL, is primarily based on the product of the instrument's
probability of default ("PD"), loss given default ("LGD"), and exposure at
default ("EAD"), taking into account the value of any collateral held or other
mitigants of loss and including the impact of discounting using the EIR.
· The PD represents the likelihood of a borrower defaulting
on its financial obligation, either over the next 12 months ("12M PD"), or
over the remaining lifetime ("Lifetime PD") of the obligation. This has been
calculated by an external third party credit rating agency using a wide range
of parameters such as the company's financial statements and the macro
economic environment. The external credit rating company have also designed a
downside and upside scenario based on historic data. Company financials are
modified to reflect various factors leading to a deterioration in performance.
· In each of the scenarios, various macro and financial
variables are flexed and applied in the calculation. The macros variables are
GDP growth, inflation, unemployment rate and interest rate. The financial
variables are turnover, net debt, Shareholder equity, working capital,
tangible assets, interest expense, EBITDA, EBIT and net income. A base,
optimistic and pessimistic scenario is applied for each of these above
variables to calculate the corresponding expected credit loss.
The probability weighting of the scenarios was based an analysis of the level
of severity. It was determined that a weighting of 50% for the base case and
25% for each of the other scenarios was appropriate. The resulting forecasts
are thus neither overly optimistic nor unduly conservative for IFRS9 purposes.
Optimistic Base Case Mild Pessimistic
IFRS 9 Probability Weighting 25% 50% 25%
· The EAD represents the amounts the Group is owed at the
reporting date.
· LGD represents the Group's expectation of the extent of
loss on a defaulted exposure. LGD varies by type of counterparty, type and
seniority of claim and availability of collateral or other credit support. LGD
is expressed as a percentage loss per unit of EAD. LGD is calculated on a
12-month or lifetime basis, where 12-month LGD is the percentage of loss
expected to be made if the default occurs in the next 12 months and lifetime
LGD is the percentage of loss expected to be made if the default occurs over
the remaining expected lifetime of the loan ("Lifetime LGD").
The ECL is determined by estimating the PD, LGD, and EAD for each individual
exposure or collective segment. These three components are multiplied together
and adjusted for the likelihood of survival (i.e., the exposure has not
prepaid or defaulted in an earlier month). This effectively calculates an ECL.
Management is aware that there is a high level of judgement in calculating the
scenarios and the inputs given the assets are relatively recent with limited
historic data.
The main difference between Stage 1 and Stage 2 is the respective PD horizon.
Stage 1 estimates use a maximum of a 12-month PD, while Stage 2 estimates use
a lifetime PD. The main difference between Stage 2 and Stage 3 is that Stage 3
is effectively the point at which there has been a default event or the
investment can be considered to be credit-impaired.
Movements between Stage 1 and Stage 2 are based on whether an instrument's
credit risk as at the reporting date has increased significantly relative to
the date it was initially recognised. Where the credit risk subsequently
improves such that it no longer represents a significant increase in credit
risk since origination, the asset is transferred back to Stage 1.
In assessing whether a counterparty has had a significant increase in credit
risk the following indicators are considered:
1. Early signs of cashflow/liquidity problems such as an ongoing
delay in servicing of payables.
2. Significant increase in PD.
3. Actual or expected late payments or restructuring of payments
due.
4. Actual or expected significant adverse change in operating
results of the borrower, where this information is available.
5. Significant adverse changes in business, financial and/or
economic conditions in which the counterparty operates.
Movements between Stage 2 and Stage 3 are based on whether financial assets
are credit-impaired as at the reporting date. The Group uses a rebuttable
presumption that a credit deterioration (i.e. stage 1 to stage 2) occurs no
later than when a payment is 90 days past due. The Group uses this 90-day
backstop for all its assets. Assets can move in both directions through the
stages of the impairment model. The Directors do not believe that being 30
days overdue is considered a credit deterioration given the nature and payment
profile of some of its small counterparties. Payments are different from
consumer loan payments and often comprise a very large number of payments,
each of a very small amount. There is also significant evidence of catch-up
payments, where a counterparty has just past the 30 days, and very rarely have
these counterparties missed the payment completely.
We recognise that individual credit exposures, which define the Group's
investments, are different from, for example, consumer mortgage or consumer
car loan portfolios. Late payments can arise due to the corporate
counterparties refusing to utilise direct debit or standing order payment
processes with the result that payment chasing can be required for relatively
small amounts, eg lighting service contracts. Accordingly, we do expect that
in certain cases 90 days late payments may not lead to movements through the
ECL stages.
4. INVESTMENTS
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement.
Financial assets and financial liabilities are classified in their entirety
into only one of the following three levels:
Level 1
The unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable
(i.e. developed using market data) for the asset or liability, either directly
or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the
asset or liability.
The classification of the Group's investments held at fair value are detailed
in the table below:
31 December 2024 31 December 2023
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investments at fair value through profit and loss - - 10,022 10,022 - - 10,492 10,492
Derivative financial instruments - (24) - (24) - 122 - 122
(24) 10,022 9,998 - 122 10,492 10,614
There are no transfers between investment levels for the Group during the
year.
The classification of the Company's investments held is detailed in the table
below:
31 December 2024 31 December 2023
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Company £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment in SPV at fair value through profit or loss - - 29,351 29,351 - - 35,683 35,683
There are no transfers between investment levels for the Company during the
year.
The movement on the Level 3 unquoted investments of the Group during the year
is shown below:
31 December 2024 31 December 2023
Group Group
£'000 £'000
Opening balance 10,492 11,742
Additions during the year 3,683 1,675
Disposals during the year (1,564) (1,551)
Realised losses (17) -
Urealised losses (2,060) (1,374)
Net FX losses (512) -
Closing balance 10,022 10,492
The movement on investments at amortised cost of the Group during the year is
shown below:
31 December 2024
Group
£'000
Opening balance 54,990
Additions during the year 541
Receipts during the year (8,330)
Income accrued in the year 4,008
Net FX losses (2,346)
Impairment (2,554)
Closing balance 46,309
The movement on the Level 3 unquoted investments of the Company during the
year is shown below:
31 December 2024 31 December 2023
Company Company
£'000 £'000
Opening balance 35,683 31,220
Additions during the year 294 4,808
Repayments during the year (3,724) (1,306)
Net FX losses (1,603) -
Unrealised (losses)/gains (1,299) 961
Closing balance 29,351 35,683
Assets and liabilities not carried at fair value but for which are fair value
is disclosed
The following table presents the fair value of the Group's assets and
liabilities not measured at fair value through profit and loss at 31 December
2024 but for which fair value is disclosed:
31 December 2024 31 December 2023
Carrying value Fair market value Carrying value Fair market value
£'000 £'000 £'000 £'000
Assets
Investments at amortised cost 46,309 46,543 54,990 57,221
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
acquired debt instruments at fair value through profit or loss. The Investment
Adviser has determined the fair value of debt investments as at 31 December
2024. The Directors have satisfied themselves as to the fair value of the debt
instrument investments as at 31 December 2024.
Valuation Assumptions and Inputs
The determination of what qualifies as 'observable' data requires significant
judgment. Observable data is defined as market information that is readily
available, regularly updated, reliable, verifiable, non-proprietary, and
sourced from independent entities actively participating in the relevant
market.
The investments fall under Level 3 classification, as they are not publicly
traded and rely on inputs that cannot be directly observed. The discount rate,
power price and energy yield are the key unobservable inputs that
significantly influence the fair value of investments. Any increase or
decrease in these factors would have an impact on valuation as can be seen in
our sensitivities below.
Valuation assumptions and Inputs
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).
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 rates
The Discounted Cash Flow (''DCF'') valuation of the investments which are held
at fair value represents one component of the Net Asset Value of the Group and
the key sensitivities are considered to be the discount rate used in the DCF
valuation and assumptions.
The weighted average valuation discount rate applied to calculate the
investment valuation is 9.2% (2023: 7.7%). An increase or decrease in this
rate by 0.5% at investment level has the following effect on valuation.
31 December 2024 31 December 2023
+0.5% -0.5% -0.5% +0.5%
Change Change Change Change
Discount rate £'000 £'000 £'000 £'000
Valuation (59) 61 (242) 250
Power price
Long term power price forecasts are provided by leading market consultants and
are updated quarterly. The sensitivity below assumes a 10% increase or
decrease in merchant power prices relative to the base case for every year of
the asset life. The sensitivity considers a flat 10% movement in power prices
for all years, i.e. the effect of adjusting the forecast electricity price
assumptions in each of the jurisdictions applicable to the investments down by
10% and up by 10% from the base case assumptions for each year throughout the
operating life of the investment.
A change in the forecast electricity price assumptions by plus or minus 10%
has the following effect on valuation, as shown below.
31 December 2024 31 December 2023
-10.0% +10.0% -10.0% +10.0%
Change Change Change Change
Power price £'000 £'000 £'000 £'000
Valuation (48) 51 (64) 66
Energy yield
The base case assumes a (''P50'') level of output. The P50 output is the
estimated annual amount of electricity generation (in MWh) that has a 50%
probability of being exceeded both in any single year and over the long term
and a 50% probability of being under achieved. Hence the P50 is the expected
level of generation over the long term. The sensitivity illustrates the effect
of a 10% lower annual production (a downside case) and a 10% higher annual
production (upside case). The sensitivity is applied throughout the whole term
of the projects.
The table below shows the sensitivity of the project values to changes in the
energy yield applied to cash flows from project as explained above.
31 December 2024 31 December 2023
-10.0% +10.0% -10.0% +10.0%
Change Change Change Change
Energy yield £'000 £'000 £'000 £'000
Valuation (296) 297 (555) 533
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 Group has contractual protections if capex is delayed (i.e. reduce the
capex or increase receivables due) and the Group is not obliged to fund cost
overruns. Therefore, capex sensitivities are not appropriate for the Group's
type of investments.
Investments at Amortised Cost
a) Investments at amortised cost
The disclosure below presents the gross carrying value of financial
instruments to which the impairment requirements in IFRS 9 are applied and the
associated allowance for ECL. Please see Note 3 for more detail on the
allowance for ECL where the Group has classified the investment portfolio
according to stages.
The following table analyses loans by staging for the Group as at 31 December
2024:
31 December 2024 31 December 2023
Gross Net Gross Net
Carrying Allowance Carrying Carrying Allowance carrying
Amount for ECL Amount Amount for ECL amount
Group £'000 £'000 £'000 £'000 £'000 £'000
Fixed Value Investments at amortised cost
Stage 1 21,194 (118) 21,076 54,399 (259) 54,140
Stage 2 27,156 (1,923) 25,233 156 (24) 132
Stage 3 2,384 (2,384) - 2,306 (1,588) 718
Total Assets 50,734 (4,425) 46,309 56,861 (1,871) 54,990
b) Expected Credit Loss allowance for IFRS 9
Impairment Provisions are driven by changes in credit risk of instruments,
with a provision for lifetime ECL recognised where the risk of default of an
instrument has increased significantly since initial recognition.
The following table analyses Group ECL by stage.
31 December 2024 31 December 2023
Group £'000 £'000
At 1 January 1,871 136
Charge for the year - Stage 1 (141) 182
Charge for the year - Stage 2 1,899 (35)
Charge for the year - Stage 3 796 1,588
Allowance for ECL at 31 December 4,425 1,871
Stage 2 losses
The stage 2 ECL provision increased because certain investments were deemed to
be in arrears of more than 90 days as at 31 December 2024 and because the
credit risk of Superbonus investments was deemed to have changed to the ESCOs
themselves rather than the purchasers of the tax credits generated by these
investments.
Stage 3 losses
The Stage 3 losses relate to full impairments against three investments, which
were partially provided against as at 31 December 2023: a CHP investment in
the United Kingdom, the sub-metering investment in Germany and a Solar PV
investment in Spain where the prospects of significant recoveries were deemed
remote.
Measurement uncertainty and sensitivity analysis of ECL
The recognition and measurement of ECL is complex and involves the use of
judgement and estimation. This includes the formulation and incorporation of
multiple forward-looking economic conditions into ECL to meet the measurement
objective of IFRS 9.
The ECL recognised in the financial statements reflects the effect on expected
credit losses of a range of three possible outcomes, calculated on a
probability-weighted basis, based on the economic scenarios described in Note
3 to the financial statements, including management overlays where required.
The probability-weighted amount is typically a higher number than would result
from using only the base (most likely) economic scenario. ECLs typically have
a non-linear relationship to the many factors which influence credit losses,
such that more favourable macroeconomic factors do not reduce defaults as much
as less favourable macroeconomic factors increase defaults. The ECL calculated
for each of the scenarios represents three outcomes that have been evaluated
to estimate ECL. As a result, the ECL calculated for the upside and downside
scenarios should not be taken to represent the upper and lower limits of
possible actual ECL outcomes. There is a high degree of estimation uncertainty
in numbers representing tail risk scenarios when assigned a 100% weight. A
wider range of possible ECL outcomes reflects uncertainty about the
distribution of economic conditions and does not necessarily mean that credit
risk on the associated loans is higher than for loans where the distribution
of possible future economic conditions is narrower.
The PD ratios ranged from 0.02% to 8.27% for Stage 1 investments and 1.41% to
27.62% for Stage 2 investments. On a weighted basis the PD ratios for Stage 1
investments were 1.32% and for Stage 2 investments 9.03%. The PD ratios for
Stage 3 investments were 100%. The LGD ratios ranged from 12.0% to 100.0% for
Stage 1 investments and 16.9% to 82.3% for Stage 2 investments. On a weighted
basis the LGD ratios for Stage 1 investments were 31.0% and for Stage 2
investments 80.5%. The LGD ratios for Stage 3 investments were 100%.
Two downside scenarios were provided as follows: the first scenario is LGD%
assumed increased to 100%, in which event we calculate that this would result
in an ECL provision of £5,159,000. A further second, harsher scenario would
be to assume that in addition to an LGD% of 100%, the PD% is also increased by
50%. In this case the ECL provision would be £6,544,000.
Investments held by the Company
The Company holds 100% of the equity shares of its subsidiary, AHL, which are
held at cost less impairment in the Company's Statement of Financial Position.
The Company also holds the loan notes in the Italian SPV, which are held at
fair value through profit or loss in the Company's Statement of Financial
Position.
The Company's investments in subsidiaries comprise the following:
As at 31 December As at 31 December
2024 2023
Company £'000 £'000
Investment in the Italian SPV, held at fair value through profit or loss 29,351 35,683
Investment in AHL, held at cost less impairment 9,048 9,971
Total investments 38,399 45,654
The movement in the Company's investment in AHL was as follows:
For the year ended For the year ended
31 December 2024 31 December 2023
Gross carrying amount £'000 £'000
Opening balance 11,791 -
Additions during the year - 11,791
Closing balance 11,791 11,791
Accumulated impairment
Opening balance (1,820) -
Impairment loss recognised in the year (923) (1,820)
Closing carrying amount 9,048 9,971
5. INVESTMENT INCOME
For the year ended For the year ended
31 December 2024
31 December 2023
Group £'000 £'000
Investment interest income 4,679 5,027
Bank interest income 718 921
Total investment income 5,397 5,948
For the year ended For the year ended
31 December 2024
31 December 2023
Company £'000 £'000
Investment interest income 3,797 3,426
Bank interest income 406 654
Total investment income 4,203 4,080
6. INVESTMENT ADVISORY FEES
For the year ended 31 December 2024 For the year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Investment advisory fees 647 - 647 808 - 808
For the year ended 31 December 2024 For the year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Investment advisory fees 647 - 647 808 - 808
Under the Investment Advisory Agreement, the following fee is payable to the
Investment Adviser:
(i) 0.95 per cent. per annum of Committed Capital of the Company up
to and including £500 million; and
(ii) 0.75 per cent. per annum of Committed Capital of the Company
above £500 million.
7. OTHER EXPENSES
For the year ended 31 December 2024 For the year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Secretary and administrator fees 297 - 297 281 - 281
Tax compliance 37 - 37 62 - 62
Directors' fees 326 - 326 281 - 281
Broker's fees 320 - 320 182 - 182
Auditors' fees*
- Fees payable to the Company's auditors for the audit of the Company's 506 - 506 590 - 590
annual accounts
- Fees payable to the Company's auditors and its associates for other 27 - 27 26 - 26
services: audit of the accounts of subsidiaries
AIFM fees 112 - 112 91 - 91
Registrar's fees 52 - 52 23 - 23
Marketing fees 93 - 93 104 - 104
FCA and listing fees 29 - 29 26 - 26
Investment expenses 169 - 169 332 - 332
Legal fees 169 - 169 235 - 235
Other expenses 237 - 237 259 - 259
Total other expenses 2,374 - 2,374 2,492 - 2,492
For the year ended 31 December 2024 For the year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Secretary and administrator fees 219 - 219 199 - 199
Tax compliance 26 - 26 41 - 41
Directors' fees 228 - 228 203 - 203
Broker's fees 320 - 320 182 - 182
Auditor's fees*
- Fees payable to the Company's auditors for the audit of the Company's 479 - 479 590 - 590
annual accounts
- Fees payable to the Company's auditors and its associates for other 27 - 27 26 - 26
services:
AIFM fees 112 - 112 91 - 91
Registrar's fees 52 - 52 23 - 23
Marketing fees 93 - 93 104 - 104
FCA and listing fees 29 - 29 26 - 26
Legal fees 169 - 169 235 - 235
Other expenses 158 - 158 192 - 192
Total other expenses 1,939 - 1,939 1,912 - 1,912
* For the year to 31 December 2024, the statutory audit fees
payable to the Company's auditors and its associates for the audit of the
Company and consolidated financial statements were £325k (2023: £309k),
excluding VAT. Further fees of £97k were also included in the year in
relation to the statutory audit of the Company and consolidated financial
statements for the year to 31 December 2023, excluding VAT (2023: £178k in
relation to the statutory audit of the Company and consolidated financial
statements for the year to 31 December 2022, excluding VAT). The audit fees
payable to the Company's auditors and its associates for the audit of the
Company's subsidiaries are £23k (2023: £22k) excluding VAT, which was paid
by the Parent entity.
8. TAXATION
(a) Analysis of charge in the year
For the year ended 31 December 2024 For the year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Corporation tax - - - - - -
Taxation - - - - - -
For the year ended 31 December 2024 For the year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Corporation tax - - - - - -
Taxation - - - - - -
(b) Factors affecting total tax charge for the year
The tax assessed for the year is higher (2023: lower) than the Company's
applicable rate of corporation tax for the year of 25% (2023: 23.5%).
The factors affecting the current tax charge for the year are as follows
The effective UK corporation tax rate applicable to the Company for the period
is 25% (2023: 23.5%). The tax charge differs from the charge resulting from
applying the standard rate of UK corporation tax for an investment trust
company.
The differences are explained below:
For the year ended 31 December 2024 For the year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
(Loss)/profit on ordinary activities before taxation (178) (1,849) (2,027) 913 (609) 304
Corporation tax at 25% (2023: 23.5%) (45) (462) (507) 215 (143) 72
Effects of:
Excess management expenses brought forward (30) - (30) (320) (35) (355)
Deemed interest payment under income streaming rules (52) - (52) - - -
Non deductible expenses 162 - 162 415 - 415
Movements on investments not allowable/taxable (35) 462 427 (310) 178 (132)
Tax charge for the year - - - - - -
For the year ended 31 December 2024 For the year ended 31 December 2023
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Profit/(loss) on ordinary activities before taxation 694 (3,027) (2,333) (681) 924 243
Corporation tax at 25% (2023: 23.5%) 174 (757) (583) (160) 217 57
Effects of:
Excess management expenses brought forward (30) - (30) (320) - (320)
Group relief (460) - (460)
Deemed interest payment under income streaming rules (77) - (77) - - -
Non deductible expenses 393 - 393 480 - 480
Movements on investments not allowable/taxable - 757 757 - (217) (217)
Tax charge for the year - - - - - -
The Company has an unrecognised deferred tax asset of £nil (2023: £89,000)
based on a main rate of corporation tax of 25% (2023: 25%). In its 2021
budget, the UK government announced that the main rate of corporation tax
would increase to 25% for the fiscal year beginning on 1 April 2023. The
deferred tax asset has arisen due to the cumulative excess of deductible
expenses over taxable income. Given the composition of the Company's
portfolio, it is not likely that this asset will be utilised in the
foreseeable future and therefore no asset has been recognised in the financial
statements.
Given the Company's intention to meet the conditions required to retain its
status as an Investment Trust Company, no provision has been made for deferred
UK capital gains tax on any capital gains or losses arising on the revaluation
or disposal of investments.
9. RETURN/(LOSS) PER ORDINARY SHARE
Group
Return per share is based on the consolidated loss for the year of £2,027,000
(2023: profit of £304,000) and the weighted average number of Ordinary Shares
in issue of 88,335,524 (2023: 100,000,000) during the year. Consolidated
revenue loss amounts to £178,000 (2023: profit of £913,000) and consolidated
capital loss amounts to £1,849,000 (2023: loss of £609,000).
Company
Return per share is based on the Company loss for the year of £2,333,000
(2023: profit of £243,000) and the weighted average number of Ordinary Shares
in issue of 88,335,524 (2023: 100,000,000) during the year. Company revenue
profit amounts to £694,000 (2023: loss of £681,000) and Company capital loss
amounts to £3,027,000 (2023: profit of £924,000).
10. CURRENT ASSETS
As at 31 December 2024 As at 31 December 2023
Group Company Group Company
Trade and other receivables £'000 £'000 £'000 £'000
Trade receivables 80 56 652 255
Shareholder loan receivable - 27,292 - 27,293
Total 80 27,348 652 27,548
At 31 December 2024, the Company had a Shareholder loan receivable from AHL in
the amount of £27,292,000 (2023: £27,293,000). The interest rate is 7.90%
per annum which is then being adjusted every fourth quarter of the financial
year in order for AHL to earn a gross margin of at least 50bps from its
financing activities. The loan is repayable in full on 31 December 2046.
Derivative financial instruments
As at 31 December 2024 As at 31 December 2023
Group Company Group Company
£'000 £'000 £'000 £'000
Forward currency contracts - - 122 -
The forward currency contracts outstanding at 31 December 2023 comprised the
following:
Sale of euro 37,198,000 for £32,431,000 for settlement on 9 January 2024; and
Sale of euro 34,834,000 for £30,362,000 for settlement on 23 February 2024.
Cash and cash equivalents
Cash and cash equivalents comprises bank balances held by the Group and
Company, including short-term deposits.
The carrying amount of these represents their fair value. Cash balances in
excess of a predetermined amount are placed on short-term deposit at market
rates of interest.
11. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Payables
As at 31 December 2024 As at 31 December 2023
Group Company Group Company
£'000 £'000 £'000 £'000
Intercompany balance with Attika Holdings Limited - 2,443 - -
Accrued expenses 1,094 968 1,016 874
Unsettled trades 43 - 41 -
Total 1,137 3,411 1,057 874
Derivative financial instruments
As at 31 December 2024 As at 31 December 2023
Group Company Group Company
£'000 £'000 £'000 £'000
Forward currency contracts 24 - - -
The forward currency contracts outstanding at the year end comprised the
following:
Sale of euro 38,000,000 for £31,411,000 for settlement on 21 January 2025;
and Sale of euro 28,900,000 for £24,212,000 for settlement on 28 February
2025.
12. SHARE CAPITAL
As at As at
31 December 31 December
2024 2023
£'000 £'000
Allotted, issued and fully paid:
Ordinary Shares of 1p each
Opening balance of 100,000,000 Ordinary Shares 1,000 1,000
Repurchase and cancellation of 18,561,732 (2023: nil) Ordinary Shares (186) -
following a Tender Offer
Closing balance of 81,438,268 (2023: 100,000,000) Ordinary Shares 814 1,000
The Ordinary Shares rank pari passu and each share carries one vote in the
event of a poll at a general meeting.
Following a Tender Offer during the year, the Company repurchased and
cancelled 18,561,732 of its own Ordinary Shares, nominal value £185,617 for a
total consideration of £17,500,000, representing 18.6% of the Ordinary Shares
outstanding at the beginning of the year.
13. RESERVES
Capital
redemption Special Capital Revenue
reserve reserve reserve reserve
Group £'000 £'000 £'000 £'000
At 1 January 2024 - 93,500 (178) (41)
Repurchase and cancellation of Ordinary Shares following a Tender Offer 186 (17,500) - -
Expenses of Tender Offer - (88) - -
Dividends paid - (4,999) - -
(Loss)/profit on ordinary activities after taxation - - (1,849) (178)
At 31 December 2024 186 70,913 (2,027) (219)
Capital
redemption Special Capital Revenue
reserve(1) reserve(2) reserve(3) reserve(4)
Company £'000 £'000 £'000 £'000
At 1 January 2024 - 93,500 2,923 (2,547)
Repurchase and cancellation of Ordinary Shares following a Tender Offer 186 (17,500) - -
Expenses of Tender Offer - (88) - -
Dividends paid - (4,999) - -
Loss on ordinary activities after taxation - - (3,027) 694
At 31 December 2024 186 70,913 (104) (1,853)
The Company's Articles of Association permit dividend distributions out of
realised capital profits.
1 The capital redemption reserve represents the accumulated
nominal value of shares repurchased for cancellation. This reserve is not
distributable.
2 The special reserve arose following the cancellation of the
share premium account in 2021. As a result, this became a distributable
reserve and may be used to repurchase the Company's own Ordinary Shares or
distributed as dividends.
3 The capital reserve comprises realised and unrealised gains
and losses on investments and foreign currency. An analysis has not been made
between those that are realised (and may be distributed as dividends or used
to repurchase the Company's own Ordinary Shares) and those that are
unrealised.
4 The revenue reserve may be distributed as dividends or used
to repurchase the Company's own Ordinary Shares. The balance on the Company's
revenue reserve is currently negative and therefore no distribution can be
made.
14. NET ASSET VALUE PER ORDINARY SHARE
The Group's net asset value per Ordinary Share as at 31 December 2024 is based
on the £69,667,000 (2023: £94,281,000) net assets of the Group attributable
to the 81,438,268 (2023: 100,000,000) Ordinary Shares in issue as at 31
December 2024.
The Company's net asset value per Ordinary Share as at 31 December 2024 is
based on the £69,956,000 (2023: £94,876,000) net assets of the Company
attributable to the 81,438,268 (2023: 100,000,000) Ordinary Shares in issue as
at 31 December 2024.
15. DIVIDENDS
The Company has paid the following interim dividend in respect of the year
under review:
For the year ended For the year ended
31 December 2024 31 December 2023
Pence per Total Pence per Total
Dividend paid in the year Ordinary Share £'000 Ordinary Share £'000
Interim - paid 1 November 2024 6.139p 4,999 - -
Total 6.139p 4,999 - -
The Company is not required to pay a dividend in respect of the current or
prior year in order to satisfy the requirements of Section 1159 of the
Corporation Tax Act 2010, as it has a negative balance on its revenue reserve.
The above dividend was paid out of the special reserve.
The Company paid an of 1.25p per share, amounting to £1,250,000 on 20 March
2023, in respect of the year ended 31 December 2022.
16. FINANCIAL RISK MANAGEMENT
The Investment Adviser, AIFM and the Administrator report to the Board on a
quarterly basis and provide information to the Board which allows it to
monitor and manage financial risks relating to the Group's operations. The
Group's activities expose it to a variety of financial risks: market risk
(including price risk, interest rate risk and foreign currency risk), credit
risk and liquidity risk. These risks are monitored by the AIFM. Each risk and
its management are summarised below.
(i) Currency risk
Foreign currency risk is defined as the risk that the fair values of future
cashflows will fluctuate because of changes in foreign exchange rates. The
Group's and the Company's financial assets and liabilities are denominated in
sterling and the euro and substantially all of its revenues and expenses are
in sterling and the euro. The Group and the Company are therefore exposed to
foreign currency risk.
For any non-base currency assets, the Investment Adviser can use forward
foreign exchange contracts to seek to hedge up to 100% of non-sterling
exposure.
The Company does not intend to use hedging or derivatives for investment
purposes but may use derivative instruments such as forwards, options, future
contracts and swaps to hedge currency, inflation, interest rates, commodity
prices and/or electricity prices.
With many of its investment assets denominated in the euro, the Group uses a
series of regular forward foreign exchange contracts to provide a level of
protection against movement in the sterling exchange rate. Under these
arrangements the Group is required to provide £2.5 million in cash as
collateral for these forward foreign exchange contracts. Following the failure
of the Continuation vote, the Group is currently reviewing the strategic
options for realising value for Shareholders. The Board will consider the
appropriateness of the current hedging arrangements and the cash collateral as
part of the review of strategic options and in light of the cash requirements
of the Group.
The currency profile of the Group as at 31 December 2024 is as follows:
31 December 2024 31 December 2023
GBP EUR Total GBP EUR Total
Assets £'000 £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 7,358 7,059 14,417 23,547 5,535 29,082
Trade and other receivables 56 24 80 159 493 652
Derivative financial instruments - - - 122 - 122
Investments 3,021 53,310 56,331 3,566 61,916 65,482
Total assets 10,435 60,393 70,828 27,394 67,944 95,338
Liabilities
Creditors (986) (151) (1,137) (901) (156) (1,057)
Derivative financial instruments (24) - (24) - - -
Total liabilities (1,010) (151) (1,161) (901) (156) (1,057)
If the value of sterling against euro increased or decreased by 10% (2023:
10%), if all other variables remained constant, the NAV of the Group would
increase or decrease by £6,039,000 (2023: £6,794,000) without taking account
of the Group's forward foreign exchange contracts.
The currency profile of the Company as at 31 December 2024 is as follows:
31 December 2024 31 December 2023
GBP EUR Total GBP EUR Total
Assets £'000 £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 3,957 3,663 7,620 19,884 2,664 22,548
Shareholder loan receivable 27,292 - 27,292 27,293 - 27,293
Trade and other receivables 56 - 56 255 - 255
Investments in subsidiaries 9,048 29,351 38,399 9,971 35,683 45,654
Total assets 40,353 33,014 73,367 57,403 38,347 95,750
Liabilities
Intercompany balance with Attika Holdings Limited (2,443) - (2,443) - - -
Accrued expenses (968) - (968) (874) - (874)
Total liabilities (3,411) - (3,411) (874) - (874)
If the value of the sterling against euro increased or decreased by 10% (2023:
10%), if all other variables remained constant, the NAV of the Group would
increase or decrease by £3,301,000 (2023: £3,835,000).
(ii) Interest rate risk
The Group's interest rate risk on interest bearing financial assets is limited
to interest earned on cash and investments. The interest rates of investments
held at amortised cost are fixed therefore the interest rate risk is minimal.
Investments held at fair value through profit or loss have variable returns
based on e.g. power production levels and not on variability in interest
rates.
The Group's interest and non-interest bearing assets and liabilities as at 31
December 2024 are summarised below:
31 December 2024 31 December 2023
Interest Non-interest Interest Non-interest
bearing bearing Total bearing bearing Total
Assets £'000 £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 9,121 5,296 14,417 27,817 1,265 29,082
Trade and other receivables - 80 80 - 652 652
Derivative financial instruments - - - - 122 122
Investments 46,309 10,022 56,331 54,990 10,492 65,482
Total assets 55,430 15,398 70,828 82,807 12,531 95,338
Liabilities
Creditors - (1,137) (1,137) - (1,057) (1,057)
Derivative financial instruments - (24) (24) - - -
Total liabilities - (1,161) (1,161) - (1,057) (1,057)
The Company's interest and non-interest-bearing assets and liabilities as at
31 December in each reporting year are summarised below:
31 December 2024 31 December 2023
Interest Non-interest Interest Non-interest
bearing bearing Total bearing bearing Total
Assets £'000 £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 3,971 3,649 7,620 21,606 942 22,548
Trade and other receivables - 56 56 - 255 255
Shareholder loan receivable 27,292 - 27,292 27,293 - 27,293
Investments in subsidiaries 29,351 9,048 38,399 35,683 9,971 45,654
Total assets 60,614 12,753 73,367 84,582 11,168 95,750
Liabilities
Intercompany balance with Attika Holdings Limited - (2,443) (2,443) - - -
Accrued expenses - (968) (968) - (874) (874)
Total liabilities - (3,411) (3,411) - (874) (874)
(iii) Price risk
Price risk is defined as the risk that the fair value of a financial
instrument held by the Group will fluctuate. As of 31 December 2024 the Group
held investments at fair value through profit or loss with an aggregate fair
value of £10,022,000 (2023: £10,492,000). All other things being equal, the
effect of a 10% increase or decrease in the prices of the investments held at
the year-end would have been an increase or decrease of £1,002,000 (2023:
£1,049,000) in the profit after taxation for the year ended 31 December 2024
and the Group's net assets at 31 December 2024. The sensitivity of the
investment valuation due to price risk is shown further in note 4.
As of 31 December 2024 the Company held investments at fair value through
profit or loss with an aggregate fair value of £29,351,000 (2023:
£35,683,000). All other things being equal, the effect of a 10% increase or
decrease in the prices of the investments held at the year-end would have been
an increase or decrease of £2,935,000 (2023: £3,568,000) in the profit after
taxation for the year ended 31 December 2024 and the Company's net assets at
31 December 2024.
(iv) Credit risk
Credit risk is the risk of loss due to the failure of a borrower or
counterparty to fulfil its contractual obligations. The Group and the Company
is exposed to credit risk in respect of the investments valued at amortised
cost, interest income receivable and other receivables and cash at bank. The
Group and the Company's credit risk exposure is minimised by dealing with
financial institutions with investment grade credit ratings.
Continued monitoring of the investments and the counterparties/service
providers, including the use of credit rating data providers, allows the
Investment Adviser to identify and address these risks early. Where possible,
the Investment Adviser seeks to mitigate credit risks by the counterparty
having the opportunity to sell electricity to the grid or other customers. The
Investment Adviser also seeks to structure investments whereby contracts can
be adapted/extended to accommodate periods of payment defaults.
Diversification of counterparties and service providers ensures any impact is
limited. In addition, a diversified portfolio provides further mitigation.
The table below shows the cash balances of the Group and the Company as well
as the credit rating for each counterparty:
As at 31 December 2024 As at 31 December 2023
Company Group Company Group
Rating £'000 £'000 £'000 £'000
Goldman Sachs-Liquid Reserves Fund AAAmmf (Fitch Rating) 249 249 6,632 6,632
EFG Deposit account A (Fitch Rating) 7,333 9,000 15,858 19,248
Royal Bank of Scotland International A+ (Fitch Rating) 38 5,013 58 2,998
Bank of New York Mellon AA (Fitch Rating) - 155 - 204
7,620 14,417 22,548 29,082
The table below shows the amortised cost investment balances of the Group as
well as the credit rating for each counterparty:
As at As at
31 December 31 December
Group 2024 2023
£'000 £'000
A 4,346 5,871
B 33,865 31,890
C 8,098 16,509
D - 720
46,309 54,990
The Group and the Company classified each project using a certain credit risk
band. Listed below are the conversion methodology used:
Corresponding
Credit risk band S&P rating range
A AAA to A-
B BBB+ to BBB-
C BB to CC-
D Default
(v) Liquidity risks
Liquidity risk is the risk that the Company may not be able to meet a demand
for cash or fund an obligation when due. The Investment Adviser, AIFM and the
Board continuously monitor forecast and actual cashflows from operating,
financing and investing activities to consider payment of dividends or further
investing activities.
The financial liabilities by maturity of the Group at the year-end are shown
below:
31 December 31 December
2024 2023
Less than Less than
1 year
1 year
£'000 £'000
Liabilities
Payables (1,137) (1,057)
Derivative financial instruments (24) -
(1,161) (1,057)
The financial liabilities by maturity of the Company at the year-end are shown
below:
31 December 31 December
2024 2023
Less than Less than
1 year
1 year
£'000 £'000
Liabilities
Payables (3,411) (874)
(3,411) (874)
As at 31 December 2024, the Group has total commitments of £0.04 million (31
December 2023: £5.26 million) to its investments which are unfunded.
Capital management
The Company considers its capital to comprise ordinary share capital,
distributable reserves and retained earnings. The Company is not subject to
any externally imposed capital requirements.
The Company's primary capital management objectives are to ensure the
sustainability of its capital to support continuing operations, meet its
financial obligations and allow for growth opportunities. Generally,
acquisitions are anticipated to be funded by a combination of current cash and
equity.
17. TRANSACTIONS WITH THE INVESTMENT ADVISER
Aquila Capital Investmentgesellchaft has been appointed as the Investment
Adviser to the Company and full details of the Investment Advisory Agreement
can be found in the Annual Report under Directors' Report. Investment advisory
fees payable in respect of the year ended 31 December 2024 amounted to
£647,000 (2023: £808,000), of which £319,000 (2023: £361,000) was
outstanding at the year end.
18. RELATED PARTY TRANSACTIONS
Directors
Details of the remuneration payable to Directors and details of Directors'
shareholdings are given in the Directors' Remuneration Report in the Annual
Report.
Subsidiary and wholly owned entity
The following table includes details of the subsidiary and other wholly owned
entity of the Company. Further details of these are given in notes 1 and 2 to
the accounts. Transactions with these entities have been carried out at arm's
length. The Company has prepared consolidated accounts, which incorporate
these two entities.
Entity name and registered address Effective ownership Investment Country of incorporation
Attika Holdings Limited 100% HoldCo Subsidiary entity, which owns underlying investments United Kingdom
Leaf B, 20th Floor, Tower 42,
Old Broad Street, London,
England, EC2N 1HQ
Compartment 2 of SPV Project 2013 S.r.l. 100% of the notes of one compartment Special purpose entity, which owns underlying investments. Italy
Via Vittorio Betteloni, 2 20131,
Milan, Italy
Transaction with the subsidiary
At 31 December 2024, the Company had a Shareholder loan receiveble from its
subsidiary, Attika Holdings Limited ("AHL"), amounting to £27,292,000 (2023:
£27,293,000). Under the terms of the loan agreement, the initial interest
rate is is 7.9% per annum, which is then adjusted every fourth quarter of the
financial year in order for AHL to earn a gross margin of at least 50 basis
points from its financing activities. The loan is repayable in full
on 31 December 2046.
At 31 December 2024, the Company had an intercompany balance payable to AHL,
amounting to £2,443,000 (2023: nil).
19. EVENTS AFTER THE ACCOUNTING DATE
The following events occurred after the accounting date, and for which no
adjustments have been made in the financial statements:
On 28 February 2025, the Group received £7.0 million from the disposal of its
investment in Bio-LNG, in addition to a quarterly receipt of £0.5 million in
January 2025.
In February and March 2025, the Board entered agreements for the repayment of
three of the Group's five Superbonus investments, for a total consideration of
£19.3 million, of which £16.3 million had been received by 31 March 2025.
OTHER INFORMATION
ALTERNATIVE PERFORMANCE MEASURES OF THE GROUP
OTHER INFORMATION (UNAUDITED)
In reporting financial information, the Company presents alternative
performance measures, "APMs", which are not defined or specified under the
requirements of IFRS. These APM's are commonly used by investment companies to
assess values, investment performance and operating costs. There have been no
changes in these APMs from the prior year. The APMs presented in this report
are shown below, together with supporting numerical calculations.
(Discount)/premium
The amount by which the share price of an investment trust is lower (discount)
or higher (premium) than the NAV per share. The discount or premium is
expressed as a percentage of the NAV per share.
As at As at
31 December 31 December
2024 2023
NAV per Ordinary Share (pence) a 85.55 94.28
Share price (pence) b 52.00 57.25
Discount (%) (b÷a)-1 (39.2) (39.3)
Ongoing charges
A measure, expressed as a percentage of average net assets, of the regular,
recurring annual costs of running an investment company. The average net
assets has been computed as the average of the published NAV for 31 December
2023, 30 June 2024 and 31 December 2024.
As at As at
31 December 31 December
2024 2023
Average NAV (£'000) a 80,459 94,349
Annualised expenses (£'000) b 3,021(1) 3,300(1)
Ongoing charges (%) (b÷a) 3.8 3.5
1 Figure includes Investment Advisory fees and Other expenses as
disclosed in the Consolidated Statement of Profit or Loss and Comprehensive
Income.
Total return
A measure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company into the Ordinary Shares of the Company on the ex-dividend date.
Year ended 31 December 2024 NAV per share Share price
Opening at 1 January 2024 (pence) a 94.28 57.25
Dividend adjustment (pence) b 6.14 6.14
Closing at 31 December 2024 (pence) c 85.55 52.00
Total (loss)/return (%) ((c+b)÷a)-1 (2.7) 1.6
Year ended 31 December 2023 NAV per share Share price
Opening at 1 January 2023 (pence) a 95.23 71.00
Dividend adjustment (pence) b 1.25 1.25
Closing at 31 December 2023 (pence) c 94.28 57.25
Total return/(loss) (%) ((c+b)÷a)-1 0.3 (17.6)
FINANCIAL INFORMATION
Year ended 31 December 2024
The figures and financial information for the year ended 2024 do not
constitute the statutory financial statements for that year. Those financial
statements have not yet been delivered to the registrar and include the
auditors' report which, whilst unmodified, contains reference to the material
uncertainty disclosed in note 2 above. The auditors' report does not contain a
statement under either section 498(2) or section 498(3) of the Companies Act
2006.
ANNUAL REPORT
The Annual Report for the year ended 31 December 2024 was approved on 28 April
2025. It will shortly be made available on the Company's website at:
https://www.aquila-energy-efficiency-trust.com/
(https://www.aquila-energy-efficiency-trust.com/) and via the National Storage
Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . The Company's AGM
will be held at
2.00 p.m. on 28 May 2025 at the offices of CMS Cameron McKenna Nabarro Olswang
LLP located at Cannon Place, 78 Cannon Street, London EC4N 6AF. The Company
will publish an announcement to confirm when the AGM notice is available to
access via the Company's website
at: https://www.aquila-energy-efficiency-trust.com/
(https://www.aquila-energy-efficiency-trust.com/) and via the National Storage
Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
This announcement contains regulated information under the Disclosure Guidance
and Transparency Rules of the FCA.
29 April 2025
For further information contact:
Company Secretary and registered office:
Apex Listed Companies Services (UK) Limited
4th Floor, 140 Aldersgate Street, London, EC1A 4HY
END
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