REG - Aquila Energy Effcn. - Half-year Report
15/09/2022 07:00
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RNS Number : 5144Z Aquila Energy Efficiency Trust PLC 15 September 2022
LEI No: 213800AJ3TY3OJCQQC53
AQUILA ENERGY EFFICIENCY TRUST PLC
HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2022
INVESTMENT OBJECTIVE
AQUILA ENERGY EFFICIENCY TRUST PLC (THE "COMPANY" OR "AEET") SEEKS TO GENERATE
ATTRACTIVE RETURNS, PRINCIPALLY IN THE FORM OF INCOME DISTRIBUTIONS BY
INVESTING IN A DIVERSIFIED PORTFOLIO OF ENERGY EFFICIENCY INVESTMENTS.
Financial Highlights
Financial information At 30 June 2022 At 31 Dec 2021
Net asset value ("NAV") per Ordinary Share (pence)(1) 97.90 97.38
Ordinary Share price (pence) 79.00 95.75
Ordinary Share price discount to NAV(1) (19.3%) (1.7%)
Net assets in £ million 97.90 97.38
Ongoing charges(1) 1.44% 0.9%
Performance summary % change(2)
For the six months ended 30 June 2022
NAV total return per Ordinary Share(1) 0.5%
Share price total return per Ordinary Share(1) (17.5%)
Alternative Performance Measures ("APMs")
The disclosures as indicated in footnote 1 below are considered to represent
the Company's APMs. Definitions of these APMs and other performance measures
used by the Company, together with how these measures have been calculated,
can be found further below in this Half-Yearly Report.
1 These are alternative performance measures.
2 Total returns in sterling for the six months to 30 June
2022.
STRATEGIC REPORT
CHAIR'S STATEMENT
I am pleased to present my Chair's Statement for the Company's Half-yearly
Financial Report ("Half-yearly Report") which covers the six months to 30 June
2022 (the "Period"). The Company's inaugural Annual Report for the period
9 April 2021 to 31 December 2021 was published on 24 June 2022 (the "2021
Annual Report"). Accordingly, there is some overlap in contents of the 2021
Annual Report and this Half-Yearly Report.
Investment Performance
The Company's NAV as at 30 June 2022 was £97.9m (£97.4m as at 31 December
2021), reflecting a small increase of +0.5%. However, the Company's share
price has recorded total returns in sterling terms of -17.5%. The
disappointing share price performance has yet to reflect the increasing level
of commitments that the Company has achieved post Period end.
Commitments and Deployment
The Board is pleased to report that commitments had increased to £32.3m as at
30 June 2022 and to £54.6m as at 31 August 2022. However, deployment
frequently takes place some time after a contractual commitment has been made
and requires the fulfilment of conditions subsequent. The Board maintains
close communication with the Investment Adviser and monitors progress through
monthly reporting, with those reports reviewed independently by Complete
Strategy Ltd. The Board has welcomed the addition of two origination
specialists to the investment advisory team, and value their contribution to
the increase to the speed of origination and execution for new investments.
Dividend
In light of slower than anticipated deployment, the Company does not expect
that its stated dividend target of 3.5 pence per Ordinary Share for the
financial year ending 31 December 2022 will be fully covered by earnings.
However, the Board has decided that it will retain this dividend target for
the current financial year and meet any earnings shortfall through paying out
of distributable reserves.
The Board has therefore declared an interim dividend for the quarter ended 30
June 2022 of 1.00 pence per Ordinary Share, in-line with this target. This
dividend will be paid to shareholders on 31 October 2022.
Board
The Board is actively continuing the recruitment process for an additional
non-executive director, mindful of our commitment to diversity and inclusion.
Nick Bliss was appointed as Chair of the Management Engagement Committee on
11 August 2022.
General Meeting
Shareholders will have the opportunity to vote on an ordinary resolution on
the continuation of the Company at a General Meeting to be held in February
2023. More details of the February 2023 General Meeting will be announced
closer to the time.
Outlook
The Board firmly believes that AEET has a differentiated pan-European
investment strategy that offers attractive opportunities now and in the
future, and has the potential to provide Shareholders with an attractive
risk-return profile, while achieving a positive environmental impact for the
real economy and society. The pace of commitments is increasing, and your
Board will be actively engaged with the Investment Adviser to support them to
reach deployment targets and grow the Company.
Miriam Greenwood OBE DL
Chair of the Board
14 September 2022
INVESTMENT ADVISER`S REPORT
DEPLOYMENT UPDATE
The Company published its first annual report for the period since
incorporation (9 April 2021 to 31 December 2021) on 24 June 2022. After a slow
start, there has been positive momentum in commitments and deployment. As of
31 December 2021, total commitments were at £14.1m with total deployment at
£9.3m. As of 31 August 2022, total commitments were at £54.6m and total
income generating deployed capital was at £32.1m, with an average project
yield of 8.1% over all investments.
PORTFOLIO OVERVIEW
As of 31 August 2022, AEET has a portfolio of 19 investments that deliver
reduced primary energy consumption (PEC) and other economic savings and
benefits, such as improved air quality. These investments include:
Residential Energy Efficiency in Italy
AEET has committed a further £6.1m of which £1.8m has been deployed in a
project that invests in a cluster of 32 energy efficiency projects for small
residential buildings and condominiums (including insulation, energy efficient
heating systems and other measures). These projects are supported by an income
tax (IRPEF) deduction incentive of up to 110% ("Superbonus"), which allows
those doing restructuring and upgrading work to enjoy deductions that will
substantially reduce the costs incurred for such work qualifying for the
Superbonus incentive scheme.
Solar PV Investments in Spain
In line with its pan-European investment strategy, AEET has successfully
committed £18.7m to its first four energy efficiency projects in Spain
including:
· an investment of £2.8m in a 3.83MWp roof mounted solar PV
plant for self-consumption located near Tarragona,
· an investment in a cluster of three solar PV plants for
self-consumption located in Zaragoza, Aragon, totalling 0.4MWp and comprising
two ground mounted and one roof mounted plants,
· £9.4m has been committed to a cluster of up to 11 solar PV
plants totalling 13 MWp for industrial and commercial companies originated by
Solarnub, a fast-growing trading management platform for solar companies.
Since the Company's trading update on 25 July 2022, AEET has made a further
investment of £6.1m to finance an 8MWp ground-mounted solar PV project, with
revenues generated through off-site Power Purchase Agreements to commercial
clients around Borja (Zaragoza).
UK CHP Investments
The Company has invested in CHP projects in the UK for a total investment
value of £1.9m - developed by three separate energy service companies (ESCOs)
with whom additional investments are expected to be made. One investment is
for a project to be installed at the manufacturing facility of food producer,
Vale of Mowbray, which has entered into a 15-year energy supply agreement.
This project has an investment tenure of 7 years.
OUTLOOK FOR FURTHER INVESTMENT COMMITMENTS
The Investment Adviser remains confident that the Company will be able to
commit substantially all the capital raised at its IPO before the end of this
calendar year and target full deployment in Q1 2023. There remains a
substantial pipeline of investment opportunities, many of which are with ESCOs
with whom the Company has made investment commitments.
Market conditions remain supportive for investment in energy efficiency
measures as EU energy prices have surged from January 2021 until April 2022 by
260% on average. This has accelerated and will continue to accelerate the
adoption and implementation of energy efficiency measures and decentralized
energy generation. Rising energy prices increase the potential savings of such
energy efficiency projects, resulting in shorter payback periods and
attractive returns for investors in line with target returns of 7.5%-9.5%.
Furthermore, increasing interest rates and economic uncertainty also increases
reliance on third-party financing for energy efficiency projects, which are
quite often considered non-core investments.
Energy efficiency is a main pillar of the energy transition. With the recent
need to increase European energy independence, energy efficiency is now a
recognised mechanism to achieve this. The European Commission's "Fit for 55"
package (July 2021) is aimed at making the green deal a reality by reducing
GHG (Green House Gas) emissions by 55% by 2030. With the war in Ukraine, a new
package "RePower EU" (March 2022) adds to this, with the ambitious target of
becoming completely independent from Russian Gas imports by 2027. In the
period from 2010 to 2019 EU imports of Russian gas increased by almost 40%*.
Energy efficiency measures yield immediate results by reducing or replacing
the demand for Russian fuel completely, for example, through heat pumps or
biomass. In this environment, synergies between the private sector and
government subsidy programmes are of central importance. One example is the
Italian "Superbonus 110", which has already given a strong boost to the
implementation of efficiency measures in the residential segment in Italy in
recent years.
*Source: Eurostat; EU Commission (2022)
ENVIRONMENTAL AND SOCIAL GOVERNANCE
Investment Approach and ESG Approach
AEET's goal is to generate attractive returns for investors by reducing
Primary Energy Consumption ("PEC"). AEET'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
generated by the reduction of PEC and simultaneously using renewable energy
sources further decrease CO(2) emissions.
This is reflected across the investment philosophy and approach, including the
Company's investment adviser, Aquila Capital Investmentgesellschaft mbH
("Investment Adviser" or "Aquila"), who is dedicated to the green energy
transition. The Company is committed to be 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.
AEET's investment approach is focused on investments in energy efficiency
projects located primarily in Europe. These investments are predominantly into
proven technologies that deliver energy savings for commercial, industrial,
and public sector buildings. AEET seeks to invest in projects for the long
term with a focus on optimising and improving the assets' PEC.
Technologies typically include:
· LED Lighting System
· LED Street Lighting System
· Solar PV
· Biomass Boilers
· HVAC/Buildings
· Smart Metering/Submetering
· Electrification of transportation vehicles (batteries)
Environmental Impact
The Company's investment approach is focused on reducing PEC, which should
lead to significant reductions in carbon dioxide emissions. In addition, local
production of energy (CHP, Biomass Boilers, Solar PV) reduces transportation
energy losses and grid over-utilisation. Smart Meters and other control
technologies enable a better visibility and management of energy and therefore
represent a basis for energy savings.
All projects are managed within the guidelines of local, regional, and
national environmental laws to adhere to the DNSH ("do no significant harm")
principles. Aquila Capital ensures all required regulations and corresponding
approvals are completed prior to the acquisition of the assets (planning
permission).
Social Impact
Energy efficiency measures not only reduce PEC but typically also increase the
life quality and health aspects for different stakeholders, such as employees,
users of public facilities and/or private individuals. This is mainly achieved
through advanced solutions for lighting, heating, cooling and ventilation and
the associated control units.
All project developers are required to adhere to local, regional, and national
health & safety laws, to train and educate employees accordingly in order
to make sure casualties and injuries are avoided.
The Company incorporates Aquila Capital's ESG policy, which excludes suppliers
and manufacturers that do not meet Aquila Capital's criteria (exclusion of
sectors/subsectors, companies that use unfavourable labour conditions etc.).
For all counterparties a rating is performed (in collaboration with a
third-party rating agency) assessing creditworthiness of the client as well as
a 'Know Your Client' check for the relevant parties involved to increase
transparency of the counterparties' activities.
Governmental Impact
All our business partners are required to adhere to the requirements of the
relevant social security and tax authorities.
Where required by local, regional and/or national authorities our business
partner need to provide evidence that they adhere to anti bribery and
corruption laws.
Due Diligence
The Investment Advisor performs detailed ESG due diligence for each asset
prior to investment. The investment management team follows a structured
screening, due diligence and investment process which is designed to ensure
that investments are reviewed and compared on a consistent basis. Execution of
this process is facilitated by the team's deep experience in energy efficiency
project investing. As part of this process, the Investment Adviser will, as
relevant for each investment, consider:
· Total PEC reduction, and implied greenhouse gas emissions
reduced and/or avoided; and/or
· Total energy production from renewable and non-renewable
sources.
Governance Framework
AEET benefits from an independent Board of Directors, as well as Sanne Fund
Management (Guernsey) Limited (part of Sanne Group) functioning as the
Alternative Investment Fund Manager ("AIFM"). The Board of Directors supervise
the AIFM, which is responsible for making recommendations in relation to any
investment proposals put forward by the Investment Adviser. The Investment
Adviser is fully regulated and supervised by BaFin in Germany.
The Company 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 who are
counterparties to the Company. 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 highest ESG standards is
monitored on a continuous basis throughout the lifecycle of investments,
including:
· 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
· Annual reporting, including ESG aspects, to relevant
stakeholders including ad-hoc reporting of any material and urgent issues
identified in the monitoring process.
· Semi-annual ESG risk reporting to the Board.
AEET has been awarded the Green Economy Mark from the London Stock Exchange.
The Green Economy Mark identifies London-listed companies and funds that
generate between 50% and 100% of total annual revenues from products and
services that contribute to the global green economy.
Aquila Capital Investmentgesellschaft mbH
Investment Adviser
14 September 2022
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance
and Transparency Rules ("DTR"). The Directors consider that the Chair's
Statement and the Investment Adviser's Report in this Half-yearly Report,
provide details of the important events which have occurred during the six
months ended 30 June 2022 ("Period") and their impact on the financial
statements. The statement on related party transactions and the Directors'
Statement of Responsibility (below), the Chair's Statement and the Investment
Adviser's Report together constitute the Interim Management Report of the
Company for the Period. The outlook for the Company for the remaining six
months of the year ending 31 December 2022 is discussed in the Chair's
Statement and the Investment Adviser's Report.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Company are summarised below:
(i) Counterparty /Credit
(ii) Concentration Risk
(iii) Environmental /Social /Governance (ESG)
(iv) Premium/Discount Management
(v) Interest Rates/ Inflation
(vi) Exchange Rates
(vii) Supply chain and inflation
(viii) Equity Market Volatility
(ix) Investment Performance
(x) Pipeline, Investment Deployment and Cash Drag
(xi) Competition for Assets
(xii) Changes to subsidies or other support mechanisms for the Company's
investments
(xiii) Inappropriate Investment Advice
(xiv) IT Security
(xv) Portfolio Valuation
(xvi) Regulatory Risk
The Board also identified 'Act of War /Sanctions' as an emerging risk to the
Company.
The Company's Annual Report for the period ended 31 December 2021 contains
more detail on the Company's principal risks and uncertainties, including the
Board's ongoing process to identify, and where possible mitigate, the risks.
The Annual Report can be found on the Company's website.
Related Party Transactions
Details of the investment advisory arrangements were provided in the Annual
Report. There have been no changes to the related party transactions described
in the Annual Report that could have a material effect on the financial
position or performance of the Company. Amounts payable to the Investment
Adviser in the period are detailed in the unaudited Statement of Profit or
Loss and Comprehensive Income in this Half-Yearly Report.
Going Concern
The Company continues to meet day-to-day liquidity needs through its cash
resources. The Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for at least twelve
months from the date of this document.
In reaching this conclusion, the Directors have considered the Company's cash
position, income and expense flows. The Company's net assets at 30 June 2022
were £97.9million. As at 30 June 2022, the Company held £77.0million in cash
and cash equivalents. The total expenses for the period ended 30 June 2022 was
£0.38million, which represented approximately 0.39% of average net assets
during the period. At the date of approval of this document, based on the
aggregate of investments and cash held, the Company has substantial operating
expenses cover.
The major cash outflows of the Company are the payment of dividends and costs
relating to the acquisition of new investments. The Directors are confident
that the Company has sufficient cash balances to fund commitments to
acquisitions should they become payable.
In light of the secondary effects of the COVID-19 pandemic and the war in
Ukraine, the Directors have considered each of the Company's investments. The
Directors do not foresee any immediate material risk to the Company's
investment portfolio. A prolonged and deep market decline could lead to
falling values to the underlying business or interruptions to cashflow,
however, the Company currently has more than sufficient liquidity available to
meet any future obligations.
Following the slower than anticipated investment deployment and the
consequential appointment of an independent consultant to review the Company's
investment strategy, the results of this review were announced on 21 April
2022. The review concluded that the market opportunity for the Company remains
attractive and that the actions to be taken in relation to the execution of
the investment strategy and other changes provided an improved basis for the
Company to execute its investment objective, with full deployment targeted by
the end of December 2022 or early 2023. In reaching this conclusion, the
Directors consulted with shareholders who, overall, were supportive of the
continuation of the Company with these changes. An element of the consultation
process was the Directors' proposal to bring forward the Initial Continuation
Resolution to February 2023, or earlier if appropriate. A further resolution
will be put at the February 2023 General Meeting, conditional upon the
Continuation resolution being passed, to amend the Articles of Association of
the Company so that a Continuation vote will be put at the AGM of the Company
to be held in 2026 and every four years thereafter, as envisaged in the May
2021 IPO Prospectus. If any Continuation resolution put to shareholders is not
passed, then the Directors shall, within six months of such Continuation
resolution not being passed, put proposals to shareholders for the
reconstruction, reorganisation or liquidation of the Company. Taking into
account the factors above, the Directors have assessed that the Initial
Continuation Resolution will pass, however, the Directors recognize that the
outcome of this is not yet known and therefore creates material uncertainty
around going concern, due to the event falling within 12-month period from the
approval of this Interim Report. The Directors note that these conditions
indicate the existence of material uncertainty which may cast significant
doubt about the 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 Company should be prepared on a going
concern basis.
Directors' Statement of Responsibility
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within
the Interim Financial Report has been prepared in accordance with IAS 34
Interim Financial Reporting and gives a true and fair view of the assets,
liabilities, financial position and return of the Company;
· the Interim Management Report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.7R; and
· the Interim Financial Report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.8R.
Miriam Greenwood OBE DL
Chair of the Board of Directors
14 September 2022
FINANCIAL STATEMENTS
STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS TO 30 JUNE 2022
Six months to
30 June 2022
(Unaudited)
Revenue Capital Total
Notes £'000 £'000 £'000
Unrealised gains on investments 3 - 946 946
Net foreign exchange gains - 61 61
Investment Income 4 314 - 314
Investment Advisory fees 5 (112) - (112)
Other expenses (581) - (581)
Gain on ordinary activities before taxation (379) 1,007 628
Taxation - - -
Gain on ordinary activities after taxation (379) 1,007 628
Return per Ordinary Share 6 (0.38p) 1.00p 0.63p
The total column of the Statement of Profit or loss and Comprehensive Income
is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the period.
Return on ordinary activities after taxation is also the ''Total profit or
loss and comprehensive income for the period''.
The accompanying notes form part of these financial statements.
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
As at
As at 31 December
30 June 2022 2021
(Unaudited) (Audited)
Notes £'000 £'000
Assets
Fixed assets
Investments held at fair value through profit or loss 3 13,314 12,307
Current assets
Trade and other receivables 8,134 5,274
Cash and cash equivalents 76,953 80,129
85,087 85,403
Creditors: amounts falling due within one year (505) (329)
Net current assets 84,582 85,074
Net assets 97,896 97,381
Capital and reserves: equity
Share capital 8 1,000 1,000
Share premium - -
Special reserve 96,887 97,000
Capital reserve 961 (46)
Revenue reserve (952) (573)
Shareholders' funds 97,896 97,381
Net asset value per Ordinary Share 9 97.90p 97.38p
No. of ordinary shares in issue 100,000,000 100,000,000
Approved by the Board of Directors on and authorised for issue on 14 September
2022 and signed on their behalf by:
Miriam Greenwood OBE DL
Chair of the Board of Directors
Aquila Energy Efficiency Trust PLC is registered in England and Wales with
number 13324616.
The accompanying notes form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS TO 30 JUNE 2022 (UNAUDITED)
Share
Share premium Special Capital Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2022 1,000 - 97,000 (46) (573) 97,381
Shares issued in period - - - - - -
Share issue costs - - (113) - - (113)
Profit/(Loss) for the period - - - 1,007 (379) 628
Closing equity as at 30 June 2022 1,000 - 96,887 961 (952) 97,896
The accompanying notes form part of these financial statements.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS TO 30 JUNE 2022
Six months to
30 June 2022
(Unaudited)
Notes £'000
Operating activities
Profit on ordinary activities before taxation 628
Adjustment for unrealised gains on investments (946)
Increase in trade and other receivables (2,860)
Increase in creditors 176
Net cash flow used in operating activities (3,002)
Investing activities
Purchase of investments 3 (61)
Net cash flow used in investing activities (61)
Financing activities
Share issue costs (113)
Net cash flow used in financing activities (113)
Increase in cash and cash equivalents (3,176)
Cash and cash equivalents at start of period 80,129
Cash and cash equivalents at end of period 76,953
The accompanying notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD TO 30 JUNE 2022
1. GENERAL INFORMATION
Company information
Aquila Energy Efficiency Trust Plc (the "Company") is a public Company limited
by shares incorporated in England and Wales on 9 April 2021 with registered
number 13324616. The Company is domiciled in England and Wales. The Company is
a closed-ended investment company with an indefinite life. The Company
commenced its operations on 2 June 2021 when the Company's Ordinary Shares
were admitted to trading on the London Stock Exchange. The Directors intend,
at all times, to conduct the affairs of the Company as to enable it to qualify
as an investment trust for the purposes of section 1158 of the Corporation Tax
Act 2010, as amended.
The registered office address of the Company is 6th Floor, 125 London Wall,
London, EC2Y 5AS.
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.
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 Company's Investment Adviser is Aquila Capital Investmentgesellschaft mbH
authorised and regulated by the German Federal Financial Supervisory
Authority.
Sanne Fund Services (UK) Limited (the "Administrator") provides administrative
and company secretarial services to the Company under the terms of an
administration agreement between the Company and the Administrator.
2. BASIS OF PREPARATION
The financial statements included in this Interim Report have been prepared in
accordance with IAS 34 "Interim Financial Reporting". The accounting policies,
critical accounting judgements, estimates and assumptions are consistent with
those used in the latest audited financial statements to 31 December 2021 and
should be read in conjunction with the Company's annual audited financial
statements for the period ended 31 December 2021. The financial statements for
the period ended 31 December 2021 have been prepared in accordance with the UK
adopted international accounting standards in conformity with the requirements
of the Companies Act 2006. The financial statements have been prepared on the
historical cost basis, as modified for the measurement of certain financial
instruments at fair value through profit or loss.
The interim 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 Association of Investment Companies ("AIC")
issued in July 2022.
These financial statements do not include all information and disclosures
required in the annual financial statements and should be read in conjunction
with the Company's annual financial statements as of 31 December 2021. The
audited annual accounts for the period ended 31 December 2021 have been
delivered to the Companies House. The audit report thereon was unmodified.
The functional currency of the Company is Sterling. Accordingly, the financial
statements are presented in Sterling rounded to the nearest thousand, unless
otherwise stated. As at period end, the rate of Euro against Sterling is
at 0.86.
Accounting for Subsidiary
The Company owns 100% of its subsidiary Attika Holdings Limited ("HoldCo"),
the registered office address of the HoldCo is Leaf B, 20th Floor, Tower 42,
Old Broad Street, London, England, EC2N 1HQ. The Company has acquired certain
Energy Efficiency Investments through its investment in the HoldCo. The
Company finances the HoldCo through a mix of SPV investments, equity and
direct investments. The Company meets the definition of an investment entity
as described by IFRS 10. Under IFRS 10 an investment entity is required to
hold subsidiaries at fair value through profit or loss and therefore does not
consolidate the subsidiary.
The HoldCo is an investment entity and as described under IFRS 10 values its
SPVs investments at fair value through profit or loss.
Going concern
The Directors have adopted the going concern basis in preparing the financial
statements. Details of the Directors' assessment of the going concern status
of the Company, which considered the adequacy of the Company's resources and
the impacts of the COVID-19 pandemic and the Ukraine war, are given within
this Half-Yearly Report.
Segmental reporting
The Chief Operating Decision Maker, which is the Board, is of the opinion that
the Company is engaged in a single segment of business, being a Company
investing in a diversified portfolio of Energy Efficiency Investments to
generate investment returns. The financial information used by the Chief
Operating Decision Maker to manage the Company presents the business as a
single segment.
Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires the application of
estimates and assumptions which may affect the results reported in the
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 as disclosed in note 3 to
the financial statements.
The Directors have concluded that the Company meets the definition of an
investment entity as defined in IFRS 10.
The key assumptions that have a significant impact on the carrying value of
the Company's investments and underlying investments in SPVs are the
contractual period of the assets, the discount factors, the rate of inflation,
the price at which the power and associated benefits can be sold and the
amount of electricity the assets are expected to produce.
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 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.
Energy Efficiency investments are not sensitive to fluctuations in future
revenues if a fixed indexation clause is applied to its cashflow schedule.
Comparatives
As the Company began trading on 2 June 2021, there are no comparatives for the
six months to 30 June 2022. The financial information for the period ended 31
December 2021 has been extracted from the audited Annual Report and Accounts
for the period ended 31 December 2021.
3. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
As at 30 June 2022 (Unaudited) As at 31 December 2021 (Audited)
SPV Equity SPV Equity
investments investments Total investments investments Total
£'000 £'000 £'000 £'000 £'000 £'000
(a) Summary of valuation
Investments at fair value through profit or loss 12,878 436 13,314 12,154 153 12,307
12,878 436 13,314 12,154 153 12,307
(b) Movements during the period
Opening balance of investments, at cost 12,324 - 12,324 - - -
Additions, at cost 61 - 61 12,324 - 12,324
Cost of investments 12,385 - 12,385 12,324 153 12,324
Revaluation of investments to fair value:
Unrealised movement in fair value of investments 493 436 929 (170) 153 (17)
Balance of capital reserve - investments held 493 436 929 (170) 153 (17)
Fair value of investments 12,878 436 13,314 12,154 153 12,307
(c) Gains/(loss) on investments in period (per Statement of Comprehensive
Income)
Movement during the period on unrealised valuation of investments held 663 283 946 (170) 153 (17)
Gains/(losses) on investments 663 283 946 (170) 153 (17)
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following 3 levels:
Level 1
The unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable
(i.e. developed using market data) for the asset or liability, either directly
or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the
asset or liability.
The classification of the Company's investments held at fair value is detailed
in the table below:
As at 30 June 2022 (Unaudited)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments at fair value through profit or loss - - 13,314 13,314
- - 13,314 13,314
As at 31 December 2021 (Audited)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments at fair value through profit or loss - - 12,307 12,307
- - 12,307 12,307
Due to the nature of the investments, they are always expected to be
classified as level 3. There have been no transfers between levels during the
period ended 30 June 2022 (31 December 2021: none).
The movement on the Level 3 unquoted investments during the period is shown
below:
As at
As at 31 December
30 June 2022 2021
(Unaudited) (Audited)
(£'000) (£'000)
Opening balance 12,307 -
Additions during the period 61 12,324
Unrealised gains/(losses) on investments adjustments 946 (17)
Closing balance 13,314 12,307
Valuation Methodology
SPV investments
The Investment Adviser has carried out fair market valuations of the SPV
investments as at 30 June 2022 and the Directors have satisfied themselves as
to the methodology used, key assumptions applied, and the valuation. SPV
investments are measured at fair value through profit or loss and are valued
using the IFRS 13 framework for fair value measurement. The valuation
methodology used is based on the International Private Equity and Venture
Capital Valuation Guidelines (IPEV).
The fair value for the SPV investments is derived from the present value of
the investment's expected future cash flows, using reasonable assumptions
(market knowledge, risk free rate and country risk) and forecasts for revenues
and operating costs, and an appropriate discount rate. The discount rate used
is based on the project IRR.
Equity investments
The Company owns 100% of its subsidiary Attika Holdings Limited ("HoldCo").
The Company meets the definition of an investment entity as described by IFRS
10, as such the Company's investment in the HoldCo is valued at fair value.
HoldCo's working capital balances and fair value of investments are included
in calculating fair value of the HoldCo.
4. INVESTMENT INCOME
Six months
ended
30 June 2022
(Unaudited)
Income from investments (£'000)
Investment interest income 186
Bank interest income 128
Total Income 314
5. INVESTMENT ADVISORY FEES
Six months ended 30 June 2022
(Unaudited)
Revenue Capital Total
£'000 £'000 £'000
Investment Advisory fees 112 - 112
Under the Investment Advisory Agreement, the following fee is payable to the
Investment Adviser:
(i) 0.95 per cent. per annum of Committed Capital of the Company up to and
including £500 million; and
(ii) 0.75 per cent. per annum of Committed Capital of the Company above £500
million.
6. RETURN PER ORDINARY SHARE
Return per Ordinary Share is based on the net gains for the period of
£628,000 attributable to the weighted average number of Ordinary Shares in
issue of 100,000,000 in the period. Revenue loss and capital gains are
(£379,000) and £1,007,000, respectively.
7. TAXATION
Six months ended 30 June 2022
(Unaudited)
Revenue Capital Total
£'000 £'000 £'000
Corporation tax - - -
Total tax charge for the period - - -
Investment companies which have been approved by the HM Revenue & Customs
under section 1158 of the Corporation Tax Act 2010 are exempt from tax on
capital gains. Due to the Company's status as an investment trust, and the
intention to continue meeting the conditions required to obtain approval in
the foreseeable future, the Company has not provided for deferred tax on any
capital gains or losses arising on the revaluation of investments.
8. SHARE CAPITAL
As at 30 June 2022 As at 31 December 2021
(Unaudited) (Audited)
No. of shares £'000 No. of shares £'000
Allotted, issued and fully paid:
Ordinary Shares of 1p each ('Ordinary Shares') 100,000,000 1,000 100,000,000 1,000
Total 100,000,000 1,000 100,000,000 1,000
On incorporation, the issued share capital of the Company was 1 ordinary share
of £0.01 issued to the subscriber to the Company's memorandum. The Company's
issued share capital was increased by £50,000 represented by 50,000
Management Shares of nominal value £1.00 each, which were subscribed for by
the Investment Adviser. Following admission, the Management Shares were
redeemed by the holder.
On admission 2 June 2021, 99,999,999 Ordinary Shares were allotted and issued
to shareholders as part of the placing and offer for subscription in
accordance with the Company's prospectus dated 10 May 2021.
9. NET ASSETS PER ORDINARY SHARE
Net assets per Ordinary Share as at 30 June 2022 is based on £97,896,000 (31
December 2021: £97,381,000) of net assets of the Company attributable to the
100,000,000 Ordinary Shares in issue as at 30 June 2022 (31 December 2021:
100,000,000).
10. RELATED PARTY TRANSACTIONS
Fees payable to the Investment Advisor are shown in the Income Statement. As
at 30 June 2022, the fee outstanding to the Investment Adviser was £112,000.
The Company owns 100% of Attika Holdings Limited, as disclosed in note 2. As
at 30 June 2022, the Company has a receivable balance of £7,721,000 with
Attika Holdings Limited.
Fees payable to the directors during the period were based on an annual rate
of £55,000 to the Chairman, £42,000 to the Chairman of the Audit and Risk
Committee and £37,000 to the other directors, at the same rate paid for the
period ended 31 December 2021. On 28 January 2022 two directors resigned and
on 29 April 2022 one director was appointed.
The directors had the following shareholdings in the Company, all of which
were beneficially owned.
Ordinary shares Ordinary shares
at 30 June at 31 December
2022 2021
Miriam Greenwood OBE DL 24,000 24,000
Nicholas Bliss 20,000 20,000
David Fletcher 40,506 -
11. POST BALANCE SHEET EVENTS
Subsequent to 30 June 2022, a further £11.6 million was deployed.
12. STATUS OF THIS REPORT
These Half-yearly financial statements are not the Company's statutory
accounts for the purposes of section 434 of the Companies Act 2006. They are
unaudited. The unaudited Half-yearly Financial Report will be made available
to the public at the registered office of the Company. The report will also be
available in electronic format on the Company's website,
www.aquila-energy-efficiency-trust.com.
The information for the period ended 31 December 2021 has been extracted from
the last published audited financial statements, unless otherwise stated. The
audited financial statements have been delivered to the Registrar of
Companies. PricewaterhouseCoopers LLP reported on those accounts and their
report was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under sections 498(2) or 498(3) of
the Companies Act 2006.
The Half-yearly Financial Report was approved by the Board on 14 September
2022.
OTHER INFORMATION
ALTERNATIVE PERFORMANCE MEASURES ("APM")
APMs are often used to describe the performance of investment companies
although they are not specifically defined under IFRS. APM calculations for
the Company are shown below.
Discount
The amount, expressed as a percentage, by which the share price is less than
the Net Asset Value per Ordinary Share.
30 June 31 December
2022 2021
NAV per Ordinary Share (pence) a 97.90 97.38
Share price (pence) b 79.00 95.75
Discount (b÷a)-1 (19.3%) (1.7%)
Ongoing charges
A measure, expressed as a percentage of average net assets during the period,
of the regular, recurring annual costs of running the Company, based on the
numbers for the six months ended 30 June 2022.
Six months to 30 June 2022
Average NAV a 97,522
Annualised expenses b 1,405
Ongoing charges (b÷a) 1.44%
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.
Six months to 30 June 2022 Share price NAV
Opening at 1 January 2022 (p) a 95.75 97.38
Closing at 30 June 2022 (p) b 79.00 97.90
Total return (b÷a)-1 (17.5%) 0.5%
Note: There were no dividends paid during the period end 30 June 2022 (31
December 2021: none).
For further information contact:
Secretary and registered office:
Sanne Fund Services (UK) Limited
6th Floor, 125 London Wall, London, EC2Y 5AS
The Half-yearly financial report will be submitted to the National Storage
Mechanism and will shortly be available for inspection
at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
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