REG - Aquila Energy Effcn. - Half-year Report
27/09/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240927:nRSa8877Fa&default-theme=true
RNS Number : 8877F Aquila Energy Efficiency Trust PLC 27 September 2024
AQUILA ENERGY EFFICIENCY TRUST PLC
LEI: 213800AJ3TY3OJCQQC53
HALF-YEARLY FINANCIAL REPORT ANNOUNCEMENT
FOR THE SIX MONTHS TO 30 JUNE 2024
Consolidated Financial Highlights
Financial information At 30 June 2024 At 31 Dec 2023
Net asset value ("NAV") per Ordinary Share (pence) 95.08 94.28
Ordinary Share price (pence) 59.00 57.25
Ordinary Share price discount to NAV(1) (37.9%) (39.3%)
Net assets (in £ million) 77.43 94.28
Dividend declared for the Period 6.139p -
Ongoing charges(1) 3.2% 3.5%
Performance summary % change % change
NAV total return per Ordinary Share(1) 0.9 0.3
Share price total return per Ordinary Share(1) 3.1 (17.6)
1 These are Alternative Performance Measures ("APMs") for
the period ended 30 June 2024. 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 Interim Report.
STRATEGIC REPORT
CHAIR'S STATEMENT
ON BEHALF OF THE BOARD I HEREBY ENCLOSE THE INTERIM REPORT ("INTERIM REPORT")
FOR AQUILA ENERGY EFFICIENCY TRUST PLC FOR THE 6 MONTH PERIOD TO 30 JUNE 2024.
My Chair's statement for the Company's Interim Report covers the six month
period to 30 June 2024 (the "Period"). The Company's Annual Report and
Accounts was published on 30 April 2024 and, therefore, there is some
duplication with the content of the 2023 Chair's Statement and this Statement.
I would like to preface my Statement by saying this has been a busy and
challenging period for the Board, as work on maximising value for shareholders
under the Managed Run-Off continues. We will provide further updates and
announcements in a timely manner and as soon as permitted.
Investment Performance
As we continue to make progress, the Company's unaudited NAV as at 30 June
2024 on a cum-income basis was 95.08 pence per ordinary share (94.28p at 31
December 2023) representing an increase of 0.9%. However, the Company's shares
continued to trade at a significant discount to NAV over the period, following
the failure of the February 2023 Continuation Vote, which was then followed by
a successful combined Continuation Managed Run-Off Resolution in June 2023.
As discussed in previous Statements, the focus has been on maximising value
for the return of capital to shareholders. This has meant focusing 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. This activity is set out in
the Investment Adviser's Report.
The Company's investments continue to produce income. In the Period, total
investment income was £3.27 million, an increase of £0.69 million over the
comparable period the previous year and net revenue profit was £1.32 million.
In the Period, investment income was £2.75 million compared to £2.19 million
in the same period the previous year, an increase of £0.57 million due,
principally, to the higher level of capital deployed, on average, over the
Period. In the Period, interest income from cash deposits was £0.52 million
compared to £0.40 million in the same period the previous year, an increase
of £0.12 million because of the higher level of interest rates prevailing in
the Period prior to the return of capital referred to below.
In line with the Company's investment policy, on 30 June 2024, £61.0 million
of the Company's investments of £64.8 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
in the Investment Adviser's report.
Following the extensive asset sale process run on behalf of the Company, by
its financial advisors, and which ended in February 2024, the Board continues
to seek and assess opportunities to realise capital through the sale of
assets. This remains challenging as 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.
In addition, due to the Managed Run-Off status of the Company, further
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
may potentially be placing us at a disadvantage in negotiations. 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 value-enhancing solutions for 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, following a scaling back.
The Board intends to continue with future Tender Offers as soon as sufficient
realisation proceeds are received. We have engaged with some of our major
shareholders who have expressed a preference for returns of capital to occur
in sizeable tranches, and we will continue with that strategy. However, if
realisations are either delayed or it takes longer to make sizeable returns of
capital, the Board will consider the payment of dividends and we intend to
implement this immediately by declaring a dividend of 6.139p per share.
The next significant return of capital to shareholders is, based on
information provided by the Investment Adviser, expected to arise from the
repayment of Superbonus investment capital. These investments, originally
intended to be short term, have taken substantially longer to complete and be
repaid than originally expected. This was discussed in the Investment
Adviser's Report in the 2023 Annual Report. It is important to note that under
the terms of the Superbonus investments, interest is accruing for the period
of delay in receiving the receipts at the statutory late payment interest rate
in Italy of 8% p.a. over the refinancing rate of the European Central Bank, an
effective rate of 12.5% p.a. in the first half of 2024 and 12.25% p.a in the
second half of 2024.
Following the 2023 year-end audit and the continuing delays in repayment of
many Superbonus investments, the Board asked the Investment Adviser to carry
out a detailed investigation of the position in relation to those investments.
After further work and discussions with the Superbonus ESCOs, the Investment
Adviser has confirmed that, of the balance of £28.8 million relating to
Superbonus at 30 June 2024, £25.1 million will be met by the contractual
obligation between the ESCO and the end purchaser of the tax credits, in many
cases an Italian bank. However, the remaining balance of £3.7 million
represents an amount for which the ESCOs are the contractual counterparty,
where there is no related bank tax credit. Accordingly, the credit risk
associated with this element of the Superbonus receivables, is the credit risk
of the ESCOs. Of this £3.7 million, £2.9 million represents the accrual of
delay payment interest and £0.8 million the amount calculated as ESCO credit
risk for construction and tax credit exposure.
The ESCOs have confirmed to the Investment Adviser that they expect to receive
repayment from the end purchasers of the tax credits for all projects by early
2025, which will enable all amounts due to the Company to be repaid including
delay payment interest. As highlighted in previous reports, in the view of the
Board, there remains a high degree of uncertainty around the timing of these
Superbonus payments. More information on the mechanics of these contracts and
the associated credit risk provisions can be found in the Investment Adviser's
Report.
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.
Dividends
In my Chair's Statement in the 2023 Annual Report, I stated future dividends
will only be paid from net income in respect of six month periods and after
reviewing cash flow forecasts. However, having reviewed the position and as a
consequence of the delays to a significant and anticipated return of the
Superbonus receipts, such that there is not a sufficiently material amount of
cash available now to warrant a return of capital to shareholders via a Tender
Offer, we have decided to pay an Interim Dividend of 6.139p per share on 1
November 2024 to all shareholders on the record as at 11 October 2024, a total
distribution of just under £5.0 million.
Miriam Greenwood OBE DL
Chair of the Board
26 September 2024
INVESTMENT ADVISER'S REPORT
In the Period the Investment Adviser continued to support the Managed Run-Off
of the Company's Portfolio, (i) focusing new investment activity on the
completion of existing projects, (ii) the withdrawal from pre-existing legally
binding commitments, (iii) negotiations to achieve the realisation of
individual investments 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.
In the Period, 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. During this Period, the Company was able to negotiate the withdrawal
from an existing commitment to invest £0.5 million in a solar PV project in
Spain which was part of a transaction, completed in July 2024; this also
resulted in a realisation of £0.1 million of a small solar PV project
developed by the same ESCO. As at 30 June 2024, the Company has outstanding
commitments to invest £0.8 million which principally relate to the completion
of a building refurbishment project in Spain. This project is scheduled to
complete in October 2024 and will involve a second tranche investment of £0.6
million. In September 2024 the Company realised another Solar PV project in
Spain. This transaction resulted in cash proceeds of £1.0 million, which were
at a small discount in local currency to the valuations as at 30 June 2024.
In the Period, the Company received £3 million of cash from the Superbonus
investments in Italy as a result of which the capital balance of these
projects, net of expected credit loss ("ECL") provisions, was £28.8 million,
as at 30 June 2024. The cash received was later than expected; this was caused
by a combination of factors including (i) the construction works of six
projects with a value of £9.2 million being largely but not yet wholly
completed; (ii) tax credit certification being outstanding for the six
projects in (i) and a further £1 million value of projects where construction
is complete but, that notwithstanding, tax credit certification remains
outstanding; (iii) payments for the purchase of certified tax credits
remaining outstanding because of continued administrative delays processing
the tax credits. The position was further impacted by the uncertainty about
potential implications of changes to the Superbonus tax credit regime
introduced in May 2024 by the Italian Government. These changes do not have a
significant impact on the Company as most of the tax credits were accredited
before the effective date of the change in regulations and the effects are
expected to ease in the second half of 2024.
While there are delays in receiving payment for the tax credits, the Company
continues to earn interest for the period following the contractually agreed
expected date of repayment until the actual date of repayment. The interest
rate is the statutory rate of interest in Italy, which as from 1 January 2024
until 30 June 2024 was 12.5% p.a. and from 1 July 2024 is 12.25% p.a. The
obligation on the ESCOs to pay interest is a contractual term of the
Superbonus agreements, designed to protect the Company's returns. There is,
though, a higher credit risk associated with this delay payment interest
accrual, which is due to be paid to the Company by the ESCOs, compared to the
credit risk associated with the purchasers of the tax credits. As at 30 June
2024, the ECL provisions were increased by £0.1 million from the position at
31 December 2023. This increase is due to the increased exposure to ESCO
credit risk. This has been calculated by considering the proportion of the
investments, ranging from 10% to 12%, having credit risk exposure to the ESCOs
for the delay payment interest element of the Superbonus investment values. In
absolute terms, the delay payment interest accrual represents £2.9 million of
the total Superbonus investment values of £28.8m as at 30 June 2024. A
further £0.8 million exposure to the ESCOs has been included in the ECL
provisions to reflect the ESCO credit risk associated with the exposure to
repayments for as yet uncompleted projects from a construction and tax credit
certification perspective. The Investment Adviser believes that the Superbonus
investments are likely to be substantially redeemed by the 2024 year end with
full redemption in early 2025 although timing remains uncertain.
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 the Period, 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 are problematic:
· Three Solar PV investments in Spain, which had a value of
£1.5 million as at 31 December 2023, have been written down as at 30 June
2024 to £1 million because of operational difficulties with individual
projects and the failure of the ESCOs which developed the projects to remedy
these difficulties. As referred to in the second paragraph of this report
above, one of these investments was realised for £0.1 million in July 2024.
This also enabled the Company to exit from a pre-existing commitment to invest
£0.5 million in another project with the same ESCO.
· The two wind investments in the UK, which had a value of
£1.9 million as at 31 December 2023, have been written down to a value of
£1.5 million as at 30 June 2024, 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 to increase provisions against the German
sub-metering investment and the EGA Energy investments:
· There is now a full provision against the German
sub-metering investment, which had been written down to a value of £0.3
million as at 31 December 2023. It now appears that any proceeds from the sale
of the sub‑metering contracts are unlikely to exceed tax and other
liabilities of the SPV into which the original investment was made.
· EGA Energy has made limited progress with completing its
CHP project or securing a new customer for the CHP equipment and, therefore,
it has been deemed necessary to make a further provision of £0.2 million
against this investment, which had a value of £0.5 million as at 31 December
2023.
As at 30 June 2024 £61.0 million of the Company's total investments of £64.8
million were denominated in Euros. During the Period, the Company continued to
use forward foreign exchange agreements to hedge the value of the Euro
denominated investments. In the six months ended 30 June 2024 the Company
reported realised foreign exchange gains of £1.9 million and an unrealised
foreign loss of £0.03 million, receiving £2.1 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. £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 30 June 2024, the Company's cash position, including cash held as
collateral for foreign exchange hedging, was £13.7 million. The cash position
is forecast to increase significantly because of the expected realisations of
Superbonus investments, which were valued at £28.8 million as at 30 June
2024. However, there remain significant timing uncertainties as to actual
receipt of Superbonus returns.
PORTFOLIO OVERVIEW
As at 30 June 2024, the Company's portfolio of 34 Energy Efficiency
Investments was diversified across geographies (Italy, Spain, Germany and the
United Kingdom), technologies, counterparties and ESCO partnerships. The
Company's portfolio is characterised by projects with (i) a low technology
risk through the use of proven technologies; (ii) medium to long-term
contracts providing for predictable cash flows; and (iii) counterparties with
good creditworthiness.
Approximately 72% of the Company's investments by value as at 30 June 2024 had
investment grade counterparties, as assessed using either the Investment
Adviser's credit analysis or external agencies. For projects which are
non‑investment grade, there are typically additional protections. These
protections include the ability to export power to the grid, and to extend the
maturity of a contract with the ESCO and the underlying counterparty to
recover missed payments. The latter is possible because the Company's
financing agreements are of a shorter duration than the useful life of
equipment installed and, in many cases, of a shorter duration than the
contract between the ESCO and the counterparty. The credit quality and
performance of the Company's portfolio is discussed further below in respect
of valuations and ECL provisions.
The Company's portfolio also comprises a combination of fixed and variable
return cash flows. Whilst approximately 80% of the total investment value
provides a fixed rate of return from contracted cash flows, approximately 20%
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
unlevered average return of 8.1% per annum, an increase from the yield of 8.0%
per annum reported in the audited Annual Report and Accounts for the year
ended 31 December 2023.
Investments in Italy (£32.9 million value as at 30 June 2024)
In the Period, the Company invested £0.4 million to complete a rooftop Solar
PV project developed by Noleggio Energia, with which the Company has made
seven investments. As at 30 June 2024, total investment value in Italy was
£32.9 million across a total of 13 investments and there were no outstanding
investment commitments.
1) Investments in Italian "Superbonus" projects (£28.8 million value as at 30
June 2024)
In the Period the Company received £3.0 million from the Superbonus
investments while no further capital was required to be deployed. As at 30
June 2024, there remained works outstanding on a small number of individual
projects. Tax credits need to be certified on these and a small number of
other projects. The ESCOs continued to experience delays with final payments
from the buyers of the tax credits. Given the delays, and as discussed above
and in the Chair's statement, the Investment Adviser has increased the ECL
provisions on these investments by £0.1 million to reflect an increased
level of risk on the ESCOs as opposed to the buyers of the tax credits.
"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%(1) of the cost of the measures. These tax credits
can then be sold to banks, insurance companies and other corporations and,
thus, projects can be financed without the need for a financial contribution
from landlords. The projects which the Company committed to finance are being
managed by three ESCOs: Enerstreet, Enerqos Energy Solutions and Sol Lucet.
The projects involve a range of energy efficiency measures including
insulation, the replacement of heating systems with more efficient solutions
and energy efficient windows.
2) Solar PV investments for self-consumption in Italy (£4.1 million value as
at 30 June 2024)
As at 30 June 2024, the Company had invested £4.6 million in eight rooftop
Solar PV projects with an aggregate capacity of 5.1 MWp. Following completion
of the final project in January 2024 with an investment of £0.4 million, all
of these projects are operational and cash generative and at 30 June 2024,
£0.6 million of capital had been redeemed. 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 seven
or ten years, with a weighted average maturity of seven years and ten months
outstanding, and all use very similar documentation. Noleggio 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 7.8% per
annum.
The projects with Noleggio Energia as at 30 June 2024 are summarised below:
Investment Value Capacity Credit Initial Term
Counterparty Description £k kWp Rating Yrs
Acetificio Galletti Producer of vinegars, dressings, pickles, and other food products 191 238 BB- 7
Enofrigo Manufacturer of wine cabinets and hot and cold food display units 80 127 BBB+ - BBB- 7
Tecnocryo Manufacturer of machines for handling cryogenic fluids 1,072 1,000 BB+ - BB 10
Ali Group Manufacturer of food service equipment 268 443 BBB+ - BBB- 7
Orlandi Manufacturer of non-woven products for a range of applications 745 876 BB+ - BB 10
Marangoni Manufacturer of tyre retreading systems & products 766 1,000 BB+ - BB 10
Carpigiani Manufacturer of machinery to produce ice cream 368 479 BBB+ - BBB- 5
Total 3,490 4,163
1 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.ii) Project with CO-VER Power Technologies
In January 2022, the Company refinanced the acquisition of an existing rooftop
Solar PV plant in Ascoli Piceno (Central Italy) with a generating capacity of
902 kWp. The investment, with an original cost of £0.7 million, is based on
the purchase of receivables generated by an energy service contract between
the leading Italian engineering firm CO‑VER Power Technologies ("CO-VER")
and its subsidiary Futura APV S.r.l. ("Futura"). The contract governs the
management of an operating roof-mounted Solar PV plant until April 2028.
Thereafter, the investment is based on a feed-in tariff for an additional six
years, aggregating to a twelve-year tenor. The investment, which generated
total cash receipts of £0.2 million in the period from inception of the
investment until 30 June 2024, is forecast to generate a return of 7.5% per
annum based on the valuation as at 30 June 2024 of £0.6 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 (£8.0 million value as at 30 June 2024)
In the Period the Company deployed no further capital into investments in
Spain, other than a small amount for investment costs. As at 30 June 2024,
there remained a commitment to invest £0.6 million in order to complete a
building energy efficiency investment programme, which received investment of
£2.1 million in the year ended 31 December 2023. This investment is expected
to be completed in October 2024.
1) Solar PV investments in Spain (£5.7 million value as at 30 June 2024)
As at 30 June 2024, the Company had capital invested in eight Solar PV
installation projects throughout Spain with eight project developers. Two of
the projects have been structured to provide fixed rates of return, including
the single largest project with a value of £3.0 million as at 30 June 2024.
The other six 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.
In July 2024, the Company completed the sale of a small Solar PV project for
£0.1 million to the ESCO which developed the project as part of the
negotiation to withdraw from a commitment of £0.5 million to complete the
financing of additional Solar PV projects with the same ESCO. In September
2024, the Company realised another Solar PV project. This transition resulted
in cash proceeds of £1.0 million, which were at a small discount in local
currency to the valuation as at 30 June 2024.
There are operational issues with three of the Solar PV projects, two of which
were developed by ESCOs which have entered into administration. These issues
resulted in negative fair value adjustments of £0.4 million as at 30 June
2024. In all these cases, the Investment Adviser is 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
30 June 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
committed £2.8 million to fund the refurbishment of condominiums, which is
being managed by a leading ESCO specialised in designing and implementing
energy efficiency and renewable energy projects in Spain. The investment cash
flows are based on the purchase of receivables generated by the underlying
energy saving contracts between the ESCO and the "Comunidad de Proprietarios";
the legal entities which represent each of the owners of the apartments in a
residential building. The receivables have been rated with the S&P
equivalent of A+/A. £2.2 million has been deployed as at 30 June 2024 and the
balance is forecast to be deployed in full by the end of October 2024, which
is four months later than expected at the date of publication of the 2023
Annual Report.
Investments in Germany (£20.0 million value as at 30 June 2024)
In the Period 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 where the Company has four investments, across four
distinct technologies including water management solutions, Bio-LNG, heat
pumps and sub-metering technologies.
Three of the investments in Germany provide for fixed rates of return while
the other, a Bio-LNG investment, has a variable return above a fixed rate of
5% per annum. The variable element of the return has the right to receive 8%
of revenue generated by the project, capped at £1.1 million across eight
years. This arrangement results in an overall forecast return, from this
Bio-LNG project of 8.4% per annum based on the valuation as at 30 June 2024 of
£8.3 million. Three of the investments are performing in line with their
contracts. However, the sub-metering investment, which had a book value of
£0.2 million as at 31 December 2023, incurred a significant provision of
£1.1 million following the insolvency of the service provider in October
2023, and has required a further impairment provision so that its carrying
value was zero as at 30 June 2024. 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.
Investments in the United Kingdom (£3.9 million value as at 30 June 2024)
In the Period, the Company deployed no further capital into investments in the
United Kingdom. There remains, however, a small commitment outstanding of
£0.1 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. Eight investments remain
in the United Kingdom of which four are lighting, two are CHP and two are wind
investments.
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, with the exception of the CHP investment with
EGA Energy, performed in line with expectations. 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 £1.5 million as at 30 June 2024 due primarily
to operational problems at individual sites, which have resulted in lower than
expected electricity production and higher operation and maintenance costs.
The CHP investment for the former food producer, Vale of Mowbray, to which
£0.9 million had been deployed, remains on hold as Vale of Mowbray was placed
into administration. Discussions continue between Ega Energy, the developer of
the original project, and the new owner of the site, a cold store logistics
business. However, the new owner of the site has not yet decided whether or
how to proceed with the CHP investment. Due to the continued delays in finding
a solution for this project the Company has increased the provision against
this investment from £0.5 million as at 31 December 2023 to £0.7 million as
at 30 June 2024.
Valuations and Expected Credit Loss Provisions as at 30 June 2024
As at 30 June 2024, the Company's investments had a book value of £64.8
million, with investments held at amortised cost valued at £51.8 million and
investments held at fair value through profit or loss valued at £13.0 million
(see Note 3 to the Accounts). The investments held at amortised cost are net
of ECL provisions of £2.4 million, which increased by £0.5 million from
£1.9 million as at 31 December 2023. The principal reasons for the increase
were the additional provisions of £0.4 million made against the sub-metering
investment in Germany and the CHP investment in the United Kingdom and an
increase of £0.1 million in the ECL provisions of the Superbonus investments
due to part of the credit risk exposure being attributed to the ESCOs
developing the projects.
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 the Period.
As at 30 June 2024, the Company's ten fair value investments comprised:
· the Bio-LNG investment in Germany with a value of £8.3
million;
· six Solar PV projects in Spain with an aggregate value of
£2.6 million;
· two wind projects in the United Kingdom with an aggregate
value of £1.5 million; and
· a Solar PV project in Italy with a value of £0.6
million.
The performance of these ten fair value investments with a value as at year
end of £13.0 million resulted in a decrease in fair value of 6.0%.
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
£1.5 million as at 30 June 2024 due primarily to operational problems at
individual sites, which have resulted in lower than expected electricity
production and higher operation and maintenance costs.
· Three Solar PV investments in Spain, which had a value of
£1.5 million as at 31 December 2023, have been marked down to a value of
£1.0 million as at 30 June 2024 due to operational difficulties with
individual projects and the failure of the ESCOs who developed the projects to
remedy these difficulties.
As referred to in the section above regarding the investments in Spain, one of
these investments was realised for £0.1 million in July 2024 and this
transaction also enabled the Company to exit from a pre-existing commitment to
invest £0.5 million in another project with this ESCO.
These operational issues have resulted in negative changes to the forecast
cash flows and resulted in a negative change of -3.2%. Other negative impacts
on valuation were:
· An overall increase in the discount rates applied to the
valuations, which had a negative effect of -2.4%
· FX effects, -1.9%;
· Distributions from these investments, -2.1%; 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 +3.6%.
Summary of Investments as at 30 June 2024
Description Receivables Weighted Avg. Credit Rating Term Technology Status Country Value Commitment o/s £k
Years £k
Receivables (fixed) from a 238 kWp rooftop Solar PV project installed on the BB- 7.0 Solar PV Operational Italy 191 -
production facilities of a food manufacturer in Lombardy.
Receivables (fixed) from a 127 kWp Solar PV project installed on the BBB+ - BBB- 7.0 Solar PV Operational Italy 80 -
production facilities of a manufacturer in Veneto.
Receivables (fixed) from sales of tax credits generated under the Italian BB+ - BB 1.5 Building Retrofit Construction Italy 4,977 -
Superbonus, which supports energy efficiency retrofits (insulation, more
efficient heating etc) of residential buildings.
Receivables (fixed) from sales of tax credits generated under the Italian BBB+ - BBB- 1.5 Building Retrofit Construction Italy 8,317 -
Superbonus, which supports energy efficiency retrofits (insulation, more
efficient heating etc) of residential buildings.
Receivables (fixed with RPI) from lighting as a service contracts with six UK BBB+ - BBB- 5.0 Lighting Operational United Kingdom 217 -
companies.
Receivables (fixed/variable) from a 901.6 kWp rooftop Solar PV project at a BBB+ - BBB- 12.0 Solar PV Operational Italy 639 -
site in Ascoli Piceno (Central Italy).
Receivables (fixed) from sales of tax credits generated under the Italian A+ - A 1.5 Building Retrofit Construction Italy 1,175 -
Superbonus, which supports energy efficiency retrofits (insulation, more
efficient heating etc) of residential buildings.
Receivables (fixed) from a 1,000 kWp rooftop Solar PV project to be installed BB+ - BB 10.0 Solar PV Operational Italy 1,072 -
at a production facility In Lombardy.
Receivables (fixed) from sub-metering hardware and services contracts with Default 9.0 Sub-meters Default Germany - 102
landlords of multi-occupancy buildings.
Receivables (fixed) from CHP Energy Services Agreement with a food Default 7.0 CHP Default United Kingdom 238 -
manufacturer in North East England.
Receivables (fixed) from sales of tax credits generated under the Italian BB+ - BB 1.5 Building Retrofit Construction Italy 7,670 -
Superbonus, which supports energy efficiency retrofits (insulation, more
efficient heating etc) of residential buildings.
Receivables from a PPA with a poultry producer for three Solar PV Plants BB+ - BB 15.0 Solar PV Operational Spain 306 5
around Zaragoza, Northern Spain, with a total capacity of c. 400 kWp.
Receivables (fixed) from CHP Energy Services Agreement with a hotel near BB+ - BB 8.0 CHP Operational United Kingdom 420 -
Birmingham.
Receivables (fixed) from sales of tax credits generated under the Italian BBB+ - BBB- 1.5 Building Retrofit Construction Italy 6,647 -
Superbonus, which supports energy efficiency retrofits (insulation, more
efficient heating etc) of residential buildings.
Receivables from PPAs with a manufacturer of irrigation products and a BBB+ - BBB- 18.0 Solar PV Operational Spain 359 -
manufacturer of doors and kitchen cabinets for 3 solar PV plants with a total
capacity of c.950 kWp in Valladolid and Toledo.
Receivables (fixed) from two solar PV plants around Barcelona, Spain, with a B 12.0 Solar PV Operational Spain 129 -
total capacity of c.210 kWp, between a Spanish developer and a manufacturer of
bread and pastry products and a provider of IT services to universities.
Receivables (fixed) from a 443 kWp rooftop Solar PV project installed on the BBB+ - BBB- 7.0 Solar PV Operational Italy 268 -
production facilities of a food service equipment manufacturer in Veneto,
Northern Italy.
Purchase of receivables generated by PPA form a Solar PV plant with a capacity BBB+ - BBB- 15.0 Solar PV Operational Spain 959 -
of c.1,600 kWp between a Spanish developer and a Spanish ceramic tiles
manufacturer near Valencia.
Receivables of FiTs and export tariffs generated from three operating wind BBB+ - BBB- 11.9 Wind Operational United Kingdom 304 -
turbines in the UK with a total capacity of 166 kWp, of which the generated
energy is used for self-consumption and for export to the grid.
Subscription for a Note for the refinancing of an operating biogas plant in A- 8.3 Biogas / BioLNG Operational Germany 8,246 -
north-eastern Germany and an upgrade to a Bio-LNG facility. The Note provides
for a fixed return plus an agreed share of revenues from the facility.
Receivables (PPA with fixed price) from a rooftop Solar PV project with a BB- 15.0 Solar PV Operational Spain 321 -
capacity of c.350 kWp for an agricultural cooperative specialised in the
production and marketing of extra virgin olive oils in Granada.
Receivables (fixed) from Solar PV plant in self-consumption for a total BB+ - BB 10.0 Solar PV Operational Italy 745 -
installed capacity of 875.6 kWp located at the site of a non-wovens
manufacturer in Lombardy, Northern Italy.
Receivables from service agreements related to the water management between BBB+ - BBB- 10.0 Water management Operational Germany 9,777 -
the developer and condominiums and multi-family homes, mainly managed by large
property managers via a Note structure.
Receivables generated by two energy saving contracts between the developer and A+ - A 15.0 Building Retrofit Construction Spain 2,352 563
five Spanish condominiums located in the proximity of Madrid, Guadalajara and
Gerona, as well as subsidies generated under the incentive scheme.
Acquisition of receivables of FiTs and export tariffs generated from 4 A- 14.0 Wind Operational United Kingdom 1,234 -
operating wind turbines in Scotland, with a total capacity of c.250 kWp.
Subscription for a Junior Note issued by the largest heating installer in AAA - AA- 15.0 Heating Operational Germany 2,020 26
Germany, entitling the Note holder to receivables generated through service
and maintenance contracts for heat pump systems for the residential sector
throughout Germany.
Receivables (fixed) from Solar PV installations for a leading agricultural BBB+ - BBB- 10.0 Solar PV Operational Spain 2,973 -
business engaged in the cultivation of grapevines, cereals, onions, olives,
almonds and peas with a total capacity of c.4,000 kWp near Valencia.
Receivables from PPAs with a manufacturer of acoustical insulation products BB+ - BB 15.0 Solar PV Operational Spain 529 -
and a manufacturer of textiles for two Solar PV plants in self-consumption for
a total installed capacity of c.870 kWp located around Alicante.
Purchase of receivables generated from PPA and grid sales agreement for a BB+ - BB 18.0 Solar PV Operational Spain 76 -
Solar PV plant with a capacity of c.200 kWp for a perfume retailer in Malaga.
Receivables (fixed) generated from the installation and operation of metering BB+ - BB 7.0 Lighting Operational United Kingdom 685 41
and LED projects with eleven different counterparties in the UK.
Receivables (fixed payments indexed to CPI) from a roof-mounted Solar PV plant BB+ - BB 10.0 Solar PV Operational Italy 766 7
with a total capacity of c.1,000 kWp for a developer and distributor of
materials and technologies for tyre re-treading in Central Italy.
Receivables (fixed) from a roof mounted Solar PV plant with a total capacity BBB+ - BBB- 5.0 Solar PV Operational Italy 368 7
of c.480 kWp for an ice cream machine manufacturer in Northern Italy.
Receivables (fixed) generated from refinancing the installation of LED BBB+ - BBB- 10.0 Lighting Operational United Kingdom 390 -
lighting projects for 17 different clients in the UK. The various operating
lease agreements range from five to ten years.
Receivables (fixed) generated from refinancing the installation of a LED BBB+ - BBB- 5.0 Lighting Operational United Kingdom 374 -
lighting project for a UK logistics business. The lease agreement has a
five-year maturity.
Notes:
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(1) generated by the reduction of PEC and simultaneously using
renewable energy sources further decrease CO(2) emissions.
This is reflected across the investment philosophy and approach of both the
Company and its Investment Adviser, Aquila Capital, who are 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 the Period, the portfolio performed as follows:
· 2,505 tonnes of avoided CO(2) emissions ("tCO(2)e"); and
· 9,439 MWh of energy saved,
· for total emission savings equivalent to 1,096 passenger flights around
the world(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.
· Metering: Metering solutions are being applied to a large
portfolio of individual households. Annual average household consumption is
estimated, and a developer's specific savings estimate is applied to the
average household consumption.
1 International Renewable Energy Agency (Irena), "Synergies
between renewable energy and energy efficiency" (2017), available at:
https://www.irena.org/publications/2017/
Aug/Synergies-between-renewable-energy-and-energy-efficiency#:~:text=Renewables%20would%20account%20for%20about,country%2C%20sector%20and%20
technology%20levels
2 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).
ESG Approach
The Company has adopted Aquila Capital's ESG Integration Policy(3), 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 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 (as defined in the Interim Management Report), the
Company sought to invest in projects for the long term with a focus on
optimising and improving the assets' PEC (and, of course, the Company's
investments continue to meet this initial objective). Technologies include:
· LED Lighting Systems;
· Solar PV;
· HVAC/Buildings;
· Smart Metering/Sub-metering; and
· Bio LNG.
Environmental Contribution
The Company's investments are focused on reducing PEC, which should lead to
significant reductions in greenhouse gas emissions. In addition, local
production of energy (CHP, biomass boilers, Solar PV) reduces transportation
energy losses and grid over-utilisation. Smart meters and other control
technologies enable a better visibility and management of energy and therefore
represent a basis for energy savings.
Social Contribution
Energy efficiency measures not only reduce PEC, but typically also have a
positive impact on health and quality of life for different stakeholders, such
as employees and users of public facilities. This is largely achieved through
the installation of advanced solutions for lighting, heating, cooling,
ventilation and the associated control units. All project developers are
required to adhere to local, regional and national health and safety laws, to
train and educate employees accordingly, to make sure casualties and injuries
are avoided. Aquila Capital's ESG Integration Policy, as adopted by the
Company, has sought to exclude suppliers and manufacturers that do not meet
Aquila Capital's criteria (exclusion of certain sectors/subsectors, or
companies that, for example, use unfavourable labour conditions). For all
counterparties, a rating has been performed (in collaboration with a
third-party rating agency) assessing the creditworthiness of the relevant
counterparty as well as a "Know Your Client" check for the relevant parties
involved to increase transparency of the counterparties' activities.
Governmental Contribution
The Company's business partners are required to adhere to the requirements of
the relevant social security and tax authorities. The Company's business
partners are required to provide evidence that they adhere to anti-bribery and
corruption laws.
Due Diligence
The Investment Adviser performed detailed ESG due diligence for each asset
prior to investment. The investment management team followed a structured
screening, due diligence and investment process designed to ensure that
investments are reviewed and compared on a consistent basis. Execution of this
process 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 (formerly Sanne Fund Management (Guernsey) Limited)
as the AIFM. The Board of Directors supervises the AIFM, which is responsible
for making recommendations in relation to any investment proposals put forward
by the Investment Adviser. The Investment Adviser is fully regulated and
supervised by BaFin in Germany. The Company maintains a comprehensive risk
register which is regularly updated and reviewed by the AIFM and the Board of
Directors. The Company has established procedures to deal with any potential
conflicts of interest in circumstances where Aquila Capital (or any affiliate)
is advising both the AIFM (for the Company) and other Aquila Capital managed
funds. In the context of an investment decision, these procedures may include
a fairness opinion in relation to the valuation of an investment, which is
obtained from an independent expert.
3 For details please refer to:
https://www.aquila-capital.de/fileadmin/user_upload/ESG_report/Aquila_Group_ESG_Integration_Policy.pdf
(https://www.aquila-capital.de/fileadmin/user_upload/ESG_report/Aquila_Group_ESG_Integration_Policy.pdf)
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
26 September 2024
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority's ("FCA") Disclosure Guidance
and Transparency Rules ("DTR"). The Directors consider that the Chair's
Statement and the Investment Adviser's Report provide details of the important
events which have occurred during the six months ended 30 June 2024 (the
"Period") and their impact on the financial statements. The statement on
related party transactions and the Directors' Statement of Responsibility
(below), the Chair's Statement and the Investment Adviser's Report together
constitute the Interim Management Report of the Company for the Period. The
outlook for the Company for the remaining six months of the year ending 31
December 2024 is discussed in the Chair's Statement and the Investment
Adviser's Report.
A breakdown of the investments held at the Period end can be found in the
Investment Adviser's Report.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Company are summarised below:
(i) Service provider risk
(ii) Counterparty / credit risk
(iii) Concentration risk
(iv) Discount management
(v) Portfolio valuation
(vi) Interest rates / inflation
(vii) Liquidity / discount risk
(viii) Political risk
(ix) IT security
(x) Act of war / sanctions
(xi) ESG
There has been no change in the reporting period to the emerging risks
(Capital Preservation and Relationship with ESCOs during the run-off period).
Since the decision by shareholders on 28 February 2023 not to continue the
Company and the subsequent approval at the Annual General Meeting on 14 June
2023 of the Continuation and Managed Run-Off Resolution, the Board has paid
and continues to pay particular attention on a regular basis to the
performance of its service providers, specifically in terms of level of
resource deployed in delivering services to the Company and the standard of
performance of those services.
The Company's Annual Report for the period ended 31 December 2023 contains
more detail on the Company's principal risks and uncertainties and emerging
risks, including the Board's ongoing process to identify, and where possible
mitigate, the risks (pages 25 to 29). The Annual Report can be found on the
Company's website.
Related Party Transactions
Details of the investment advisory arrangements were provided in the Annual
Report. There have been no changes to the related party transactions described
in the Annual Report that could have a material effect on the financial
position or performance of the Company. Amounts payable to the Investment
Adviser in the Period are detailed in the unaudited Statement of Profit or
Loss and Comprehensive Income.
Going Concern
The Directors have adopted the going concern basis in preparing the financial
statements. The following is a summary of the Directors' assessment of the
going concern status of the Group and Company.
The Group and Company continue to meet day-to-day liquidity needs through
their cash resources. The Directors have a reasonable expectation that the
Group and Company have adequate resources to continue in operational existence
for at least twelve months from the date of this document.
In reaching this conclusion, the Directors have considered the Group's
investment commitments, cash position, income and expense flows. As at 31
August 2024, the latest practicable date before publication of this report,
the total commitments were £0.8 million. The value of investments at 30 June
2024 was £64.8 million and has not changed materially since that date. The
investments are mostly fully operational and income producing. As at 31 August
2024, the Group had cash of £14.9 million (including the £2.5 million held
as collateral for FX hedging). The Directors reviewed downside scenarios which
assumed some delay in cash receipts and are satisfied that the Group and the
Company would continue to meet its obligations as they fall due. They are also
satisfied that the Group and Company would continue to remain viable under
downside scenarios. Total expenses for the Period were £1.43 million
(excluding impairment losses) (30 June 2023: £1.65 million), which, when
annualised, represented approximately 3.2% of average net assets during the
Period (30 June 2023: 3.5%). At the date of approval of this document, based
on the aggregate of investments and cash held, the Group and Company have
substantial operating expenses cover.
At the Annual General Meeting of the Company (the "AGM") held on 14 June 2023,
Shareholders voted in favour of the Company's change of investment policy (the
"New Investment Policy"). Following the AGM, and in accordance with the New
Investment Policy, the Company entered a continuation and managed run-off of
its portfolio ("Managed Run-Off"), meaning that it is not making any new
investments (save for the limited circumstances as set out in the New
Investment Policy) and its investing activity is solely in respect of funding
legal commitments to existing investments.
The continuation and managed run-off resolution was put forward as a
resolution to Shareholders in response to the outcome of the Company's
Continuation Vote held in February 2023, which did not pass.
At the General Meeting of the Company held on 13 May 2024, Shareholders voted
in favour of a return of capital to Shareholders by way of a tender offer of
up to £17.5 million. Funds were returned in May 2024 to Shareholders who
applied to take part in the tender offer.
As referred to above, the Group is operating currently under a Managed Run-Off
with the term of some of the Group's assets being several years. While the
Company is continuing to explore other strategic options, such as an asset
sale or structural solution, there remains no certainty that any of these
options will materialize and be put to Shareholders for consideration, or on
the potential timing of other strategic options.
Accordingly, the Directors recognise that these conditions indicate the
existence of material uncertainty which may cast significant doubt about the
Group and Company's ability to continue as a going concern.
Based on the assessment and considerations above, the Directors have concluded
that the financial statements of the Group and the Company should be prepared
on a going concern basis. The financial statements do not include the
adjustments that would result if the Group and the Company were unable to
continue on a going concern basis.
Directors' Statement of Responsibility
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within
the Interim Financial Report has been prepared in accordance with IAS 34
Interim Financial Reporting and gives a true and fair view of the assets,
liabilities, financial position and return of the Company;
· the Interim Management Report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.7R; and
· the Interim Financial Report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.8R.
Miriam Greenwood OBE DL
Chair of the Board of Directors
26 September 2024
David Fletcher
Chair of the Audit & Risk Committee
26 September 2024
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS TO 30 JUNE 2024
For the six months to 30 June 2024 For the six months to 30 June 2023
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Unrealised loss on investments - (2,176) (2,176) - (3,277) (3,277)
Unrealised loss on derivatives - (29) (29) - (300) (300)
Realised gains on derivatives - 1,932 1,932 - 2,515 2,515
Net foreign exchange loss - (237) (237) - (87) (87)
Investment Income 4 3,270 - 3,270 2,584 - 2,584
Investment Advisory fees 5 (328) - (328) (447) - (447)
Impairment loss 3 (515) - (515) (224) - (224)
Other expenses (1,103) - (1,103) (1,202) - (1,202)
Profit/(loss) on ordinary activities before taxation 1,324 (510) 814 711 (1,149) (438)
Taxation 6 - - - - - -
Profit/(loss) on ordinary activities after taxation 1,324 (510) 814 711 (1,149) (438)
Return per Ordinary Share 7 1.39p (0.54p) 0.85p 0.71p (1.15p) (0.44p)
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 Period.
Profit/(loss) on ordinary activities after taxation is also the "Total
comprehensive income/(expense) for the Period".
The accompanying notes form part of these financial statements.
COMPANY STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS TO 30 JUNE 2024
For the six months to 30 June 2024 For the six months to 30 June 2023
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Unrealised loss on investments - (15) (15) - (800) (800)
Net foreign exchange losses - (81) (81) - (549) (549)
Investment income 4 2,368 - 2,368 2,082 - 2,082
Investment Advisory fees 5 (328) - (328) (447) - (447)
Other expenses (829) - (829) (953) - (953)
Profit/(loss) on ordinary activities before taxation 1,211 (96) 1,115 682 (1,349) (667)
Taxation 6 - - - - - -
Profit/(loss) on ordinary activities after taxation 1,211 (96) 1,115 682 (1,349) (667)
Return per Ordinary Share 7 1.27p (0.10p) 1.17p 0.68p (1.35p) (0.67p)
The total column of the Company Statement of Profit or Loss and Comprehensive
Income is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the Period.
Profit/(loss) on ordinary activities after taxation is also the "Total
comprehensive (expense)/income for the Period".
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
As at As at
30 June 31 December
2024 2023
Notes £'000 £'000
Fixed assets
Investments at fair value through profit or loss 3 12,974 10,492
Investments at amortised cost 3 51,852 54,990
64,826 65,482
Current assets
Trade and other receivables 37 652
Derivative financial instrument - 122
Cash and cash equivalents 13,663 29,082
13,700 29,856
Creditors: amounts falling due within one year (1,069) (1,057)
Derivative financial instrument 3 (28) -
Net current assets 12,603 28,799
Net assets 77,429 94,281
Capital and reserves: equity
Share capital 8 814 1,000
Special reserve 9 76,020 93,500
Capital reserve (688) (178)
Revenue reserve 1,283 (41)
Shareholders' funds 77,429 94,281
Net assets per Ordinary Share 10 95.08 94.28
No. of ordinary shares in issue 81,438,268 100,000,000
Approved by the Board of directors and authorised for issue on 26 September
2024.
Signed on behalf of the Board of Directors
Miriam Greenwood OBE
DL
David Fletcher
Chair of the Board of
Directors
Chair of the Audit & Risk Committee
Aquila Energy Efficiency Trust Plc is incorporated in England and Wales with
Company number 13324616.
The accompanying notes form part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
As at As at
30 June 31 December
2024 2023
Notes £'000 £'000
Fixed assets
Investment in subsidiaries 3 44,060 45,654
Current assets
Cash and cash equivalents 3,899 22,548
Intercompany receivable 2,705 -
Shareholder loan receivable 27,293 27,293
Trade and other receivables 1,225 255
35,122 50,096
Creditors: amounts falling due within one year (857) (874)
Net current assets 34,265 49,222
Net assets 78,325 94,876
Capital and reserves: equity
Share capital 8 814 1,000
Special reserve 9 76,020 93,500
Capital reserve 2,827 2,923
Revenue reserve (1,336) (2,547)
Shareholders' funds 78,325 94,876
Approved by the Board of directors and authorised for issue on 26 September
2024.
Signed on behalf of the Board of Directors
Miriam Greenwood OBE
DL
David Fletcher
Chair of the Board of
Directors
Chair of the Audit & Risk Committee
Aquila Energy Efficiency Trust Plc is incorporated in England and Wales with
Company number 13324616.
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS TO 30 JUNE 2024
Share Special Capital Revenue
capital reserve reserve reserve Total
For the six months to 30 June 2024 Notes £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2024 1,000 93,500 (178) (41) 94,281
Tender offer return of capital 8 (186) (17,314) - - (17,500)
Tender offer cost 8 - (166) - - (166)
Profit for the Period - - (510) 1,324 814
Closing equity as at 30 June 2024 814 76,020 (688) 1,283 77,429
Share Special Capital Revenue
capital reserve reserve reserve Total
For the six months to 30 June 2023 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2023 1,000 94,750 431 (954) 95,227
Dividends paid 11 - (1,250) - - (1,250)
Loss for the Period - - (1,149) 711 (438)
Closing equity as at 30 June 2023 1,000 93,500 (718) (243) 93,539
The accompanying notes form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS TO 30 JUNE 2024
Share Special Capital Revenue
capital reserve reserve reserve Total
For the six months to 30 June 2024 Notes £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2024 1,000 93,500 2,923 (2,547) 94,876
Tender offer return of capital 8 (186) (17,314) - - (17,500)
Tender offer cost 8 - (166) - - (166)
Profit for the Period - - (96) 1,211 1,115
Closing equity as at 30 June 2024 814 76,020 2,827 (1,336) 78,325
Share Special Capital Revenue
capital reserve reserve reserve Total
For the six months to 30 June 2023 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2023 1,000 94,750 1,999 (1,866) 95,883
Dividends paid 11 - (1,250) - - (1,250)
Loss for the Period - - (1,349) 682 (667)
Closing equity as at 30 June 2023 1,000 93,500 650 (1,184) 93,966
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS TO 30 JUNE 2024
For the For the
six months to six months to
30 June 2024 30 June 2023
Notes £'000 £'000
Operating activities
Profit/(loss) on ordinary activities before taxation 814 (438)
Adjustments for:
Unrealised loss on investments 2,176 3,277
Unrealised loss on derivative instruments 29 300
Impairment loss 515 224
Net foreign exchange loss/(gain) 87 (718)
Decrease/(increase) in trade and other receivables 615 (536)
Increase in creditors: amounts falling due within one year 12 223
Movement in interest receivable from amortised cost investments (529) -
Net cash flow from operating activities 3,719 2,332
Investing activities
Purchase of investments (4,202) (19,658)
Repayment of investments 2,579 638
Net cash flow used in investing activities (1,623) (19,020)
Financing activities
Dividends paid 11 - (1,250)
Tender offer return of capital 8 (17,666) -
Net cash flow used in financing activities (17,666) (1,250)
Decrease in cash and cash equivalents (15,570) (17,938)
Cash and cash equivalents at start of Period 29,082 46,625
Effect of foreign currency exchange translation 151 -
Cash and Cash equivalents at end of Period 13,663 28,687
The accompanying notes form part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS TO 30 JUNE 2024
For the For the
six months to six months to
30 June 2024 30 June 2023
Notes £'000 £'000
Operating activities
Profit/(loss) on ordinary activities before taxation 1,115 (667)
Adjustments for:
Unrealised loss on investments 15 800
Net foreign exchange loss/(gain) 81 (88)
(Increase)/decrease in intercompany receivables (2,705) 21,175
Increase in interest income receivable from a subsidiary (1,080) (967)
Increase in trade and other receivables (970) (77)
Increase in creditors: amounts falling due within one year 17 44
Net cash flow (used in)/from operating activities (3,561) 20,220
Investing activities
Purchase of investments (294) (3,851)
Repayment of investments 1,843 611
Net cash flow from/(used in) investing activities 1,549 (3,240)
Financing activities
Loan to subsidiary - (27,514)
Shareholder loan interest income received 1,080 -
Tender offer return of capital 8 (17,666) -
Dividends paid 11 - (1,250)
Net cash flow used in financing activities (16,586) (28,764)
Decrease in cash and cash equivalents (18,598) (11,784)
Cash and cash equivalents at start of Period 22,548 32,714
Effect of foreign currency exchange translation (51) -
Cash and cash equivalents at end of Period 3,899 20,930
The accompanying notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS TO 30 JUNE 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,
at all times, to conduct the affairs of the Company so as to enable it to
qualify as an investment trust for the purposes of section 1158 of the
Corporation Tax Act 2010, as amended.
The Company owns 100% of its subsidiary, Attika Holdings Limited (the "HoldCo"
or ''AHL'') and 100% of the notes issued by one compartment of SPV Project
2013 S.r.l. (the ''SPV'' or ''Italian SPV'') issued to the Company, which
entitles the Company to a 100% economic interest in the receivables purchased
through the proceeds of these notes, together the ''Group''.
The registered office address of the Company is 6th Floor, 125 London Wall,
London, EC2Y 5AS.
The Company's New Investment Policy objective is to realise all the remaining
assets in the Portfolio in a prudent manner consistent with the principles of
good investment management with a view to returning cash to Shareholders in an
orderly manner.
The Company will pursue its investment objective by effecting an orderly
realisation of its assets in a manner that seeks to achieve the best balance
for Shareholders between maximising the value received from those assets and
making timely returns of capital to Shareholders. This process might include
sales of individual assets, mainly structured as loans/receivables, or groups
of assets, or running off the Portfolio in accordance with the existing terms
of the assets, or a combination.
FundRock Management Company (Guernsey) Limited acts as the Company's
Alternative Investment Fund Manager (the "AIFM") for the purposes of Directive
2011/61/EU on alternative investment fund managers ("AIFMD").
The Group's Investment Adviser is Aquila Capital Investmentgesellschaft mbH,
authorised and regulated by the German Federal Financial Supervisory
Authority.
Apex Listed Companies Services (UK) Limited (the "Administrator") provides
administrative and company secretarial services to the Group under the terms
of an administration agreement between the Company and the Administrator. The
Italian SPV is administered by Zenith Service S.p.A.
2. BASIS OF PREPARATION
Group Financial Statements
The consolidated financial statements included in this Interim Report have
been prepared in accordance with IAS 34 "Interim Financial Reporting". The
accounting policies, critical accounting judgements, estimates and assumptions
are consistent with those used in the latest audited consolidated financial
statements to 31 December 2023 and should be read in conjunction with the
Group's annual audited consolidated financial statements for the year ended
31 December 2023. The consolidated financial statements are prepared on the
historical cost basis, except for the revaluation of certain financial
instruments at fair value through profit or loss. The consolidated financial
statements for the year ended 31 December 2023 have been prepared in
accordance with the UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006.
The interim consolidated financial statements have also been prepared as far
as is relevant and applicable to the Group in accordance with the Statement of
Recommended Practice ("SORP") issued by the Association of Investment
Companies ("AIC") issued in July 2022.
These consolidated financial statements do not include all information and
disclosures required in the annual consolidated financial statements and
should be read in conjunction with the Group's annual consolidated financial
statements as of 31 December 2023. The audited consolidated annual accounts
for the year ended 31 December 2023 have been delivered to Companies House.
The audit report thereon was unmodified.
The financial statements are presented in Sterling rounded to the nearest
thousand.
Company Financial Statements
The financial statements included in this Interim Report have been prepared in
accordance with IAS 34 "Interim Financial Reporting". The accounting policies,
critical accounting judgements, estimates and assumptions are consistent with
those used in the latest audited financial statements to 31 December 2023 and
should be read in conjunction with the Company's annual audited financial
statements for the year ended 31 December 2023. The financial statements are
prepared on the historical cost basis, except for the revaluation of certain
financial instruments at fair value through profit or loss. The financial
statements for the year ended 31 December 2023 have been prepared in
accordance with the UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006.
The interim financial statements have also been prepared as far as is relevant
and applicable to the Company in accordance with the SORP issued by the AIC in
July 2022.
These financial statements do not include all information and disclosures
required in the annual financial statements and should be read in conjunction
with the Company's annual financial statements as of 31 December 2023.
The audited annual accounts for the year ended 31 December 2023 have been
delivered to the Companies House. The audit report thereon was unmodified.
The functional currency of the Company is Sterling. The capital of the Company
was raised in Sterling and the majority of its expenses are in Sterling. The
liquidity of the Company is managed in Sterling as the Company's performance
is evaluated in that currency. Accordingly, the financial statements are
presented in Sterling rounded to the nearest thousand.
Basis of consolidation
The Group's financial statements consolidate those of the Company and of its
subsidiaries at 30 June 2024. AHL's functional currency is Sterling. The
Italian SPV's functional currency is Euro. However, to align with the Group's
functional currency, the balances of the Italian SPV have been converted to
Sterling at a Period-end rate for the Statement of Financial Position accounts
and at an average rate during the Period for the Statement of Profit or Loss
and Comprehensive Income accounts.
All transactions and balances between Group companies are eliminated on
consolidation. The accounting policies adopted by the Group are consistent
with those adopted by the Company and the subsidiaries.
Accounting for wholly owned entities
AHL
The Company owns 100% of its subsidiary, AHL. The registered office address of
AHL is Leaf B, 20th Floor, Tower 42, Old Broad Street, London, England, EC2N
1HQ. The Company has acquired Energy Efficiency Investments through its
investment in the subsidiary. The Company finances its subsidiary, AHL, under
the terms of an intercompany loan agreement effective as of 1 January 2024 and
AHL finances Energy Efficiency Investments through a mix of equity and debt
instruments. The Company consolidates the subsidiary.
Italian SPV
The Italian SPV is a Company established under the laws of Italy to hold
securitised receivables. The Company does not hold any equity in the SPV.
However, it does own 100% of the notes issued by one compartment of the SPV
which entitles the Company to a 100% economic interest in the receivables
purchased through the proceeds of the notes. The Company does not have an
economic interest in any of the other securities receivables issuances by
other compartments of the Italian SPV. The notes subscribed by the Company,
issued by the Italian SPV, and the receivables purchased from the proceeds of
these notes, together with all associated assets and liabilities and income
and costs, are ring-fenced from other assets and liabilities of the Italian
SPV and thus the Company's holdings have been deemed a silo under IFRS 10
paragraph b 77. The Company consolidates the results of the Italian SPV in
respect of the performance of the receivables in the silo.
Going concern
The Directors have adopted the going concern basis in preparing the financial
statements. The Group and Company continue to meet day-to-day liquidity needs
through their cash resources. The Directors have a reasonable expectation that
the Group and Company have adequate resources to continue in operational
existence for at least twelve months from the date of this document.
Critical accounting judgements, estimates and assumptions
The preparation of the consolidated financial statements requires the
application of estimates and assumptions which may affect the results reported
in the consolidated financial statements. Estimates, by their nature, are
based on judgement and available information.
The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying value of assets and liabilities are those
used to determine the fair value of the investments and expected credit loss
as disclosed in Note 3 to the consolidated financial statements for the
Period.
Investment fair value
The key assumptions that have a significant impact on the value of the Group's
investments are discount rates, capital expenditure factors, the energy yield
expected to be produced and the price at which the power and associated
benefits can be sold. The impact of risks associated with climate change is
assessed on an investment by investment basis and factored into the underlying
cash flows where relevant.
The discount factors are subjective and therefore it is feasible that a
reasonable alternative assumption may be used resulting in a different value.
The discount factors applied to the cashflows are reviewed semi-annually by
the Investment Adviser to ensure they are at the appropriate level. The
Investment Adviser will take into consideration market transactions, where
they are of similar nature, when considering changes to the discount factors
used.
The operating costs of the operating companies are frequently partly or wholly
subject to indexation and an assumption is made that inflation will increase
at a long-term rate.
The values of energy efficiency investments are not significantly sensitive to
fluctuations in future revenues if a fixed indexation clause is applied to its
cash flow schedule.
Expected Credit Loss (''ECL'') allowance for financial assets measured at
amortised cost
The calculation of the Group's ECL allowances and provisions against
receivable purchase agreements under IFRS 9 is complex and involves the use of
significant judgement and estimation. Fixed interest investment provisions
represent an estimate of the losses incurred in the loan portfolios at the
balance sheet date. Individual impairment losses are determined as the
difference between the carrying value and the present value of estimated
future cash flows, discounted at the loans' original effective interest rate.
The calculation involves the formulation and incorporation of multiple
conditions into ECL to meet the measurement objective of IFRS 9. Refer to Note
3 to the consolidated financial statements for the Period for more details.
3. INVESTMENTS
Investments at fair value through profit and loss
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following 3 levels:
Level 1
The unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable
(i.e. developed using market data) for the asset or liability, either directly
or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the
asset or liability.
The classification of the Group's investments held is detailed in the table
below:
30 June 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 - - 12,974 12,974 - - 10,492 10,492
Derivative financial instrument - (28) - (28) - 122 - 122
- (28) 12,974 12,946 - 122 10,492 10,614
There are no transfers between investment levels for the Group during the
Period.
The classification of the Company's investments held is detailed in the table
below:
30 June 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
Investments in SPV, at fair value through profit or loss - - 34,089 34,089 - - 35,683 35,683
- - 34,089 34,089 - - 35,683 35,683
There were no transfers between investment levels for the Company during the
Period.
The movement on the Level 3 unquoted investments of the Group during the
Period is shown below:
30 June 31 December
2024 2023
Group £'000 £'000
Opening balance 10,492 11,742
Additions during the Period 3,662 1,675
Disposals during the Period (127) (1,551)
Unrealised loss on investments (1,053) (1,374)
Closing balance 12,974 10,492
The movement on the Level 3 unquoted investments of the Company during the
Period is shown below:
30 June 31 December
2024 2023
Company Company
Company £'000 £'000
Opening balance 35,683 31,220
Additions for investment in subsidiaries during the Period 294 4,808
Disposals for investment in subsidiaries during the Period (1,873) (1,306)
Unrealised (loss)/gain on investments in subsidiaries (15) 961
Closing balance 34,089 35,683
Assets and liabilities not carried at fair value but for which fair value is
disclosed
The following table presents the fair value of the Group's assets and
liabilities not measured at fair value through profit and loss at 30 June 2024
but for which fair value is disclosed:
30 June 30 June 31 December 31 December
2024 2024 2023 2023
Carrying Fair Carrying Fair
Value Market Value Value Market Value
£'000 £'000 £'000 £'000
Assets
Investments at amortised cost 51,852 53,238 54,990 57,221
Total 51,852 53,238 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
continued to acquire debt instruments at fair value through profit or loss.
The Investment Adviser has determined the fair value of debt investments as at
30 June 2024. The Directors have satisfied themselves as to the fair value of
the debt instrument investments as at 30 June 2024.
Valuation Assumptions
The Investment Adviser has carried out fair market valuations on some of the
debt instruments held by the subsidiaries as at 30 June 2024 and the Directors
have satisfied themselves as to the methodology used, the discount rates and
key assumptions applied, and the valuation. Investments that are valued at
fair value through profit or loss are valued using the IFRS 13 framework for
fair value measurement. The following economic assumptions were used in the
valuation of the investments.
Valuation Assumptions
Discount rates The discount rate used in the valuations is derived according to
internationally recognised methods. Typical components of the discount rate
are risk free rates, country-specific and asset-specific risk premia.
The latter comprise the risks inherent to the respective asset class as well
as specific premia for other risks such as development and construction.
Power price Power prices are based on power price forecasts from leading market analysts.
The forecasts are independently sourced from a provider with coverage in
almost all European markets as well as providers with regional expertise.
Energy yield Estimated based on third party energy yield assessments as well as operational
performance data (where applicable) by taking into account regional expertise
of a second analyst.
Inflation rates Long-term inflation is based on central bank targets for the respective
jurisdiction.
Capital expenditure Based on the contractual position (e.g. engineering, procurement and
construction agreement), where applicable.
Valuation Sensitivities
For each of the sensitivities, it is assumed that potential changes occur
independently of each other with no effect on any other base case assumption,
and that the number of investments remains static throughout the modelled
life.
The Net Asset Value impacts from each sensitivity is shown below.
Discount rate:
30 June 2024 31 December 2023
-0.5% +0.5% -0.5% +0.5%
Change Change Change Change
Discount rate (£'000) (£'000) (£'000) (£'000)
Net Asset Value (206) 213 (242) 250
The weighted average valuation discount rate applied to calculate the
investment valuation is 8.44% as at 30 June 2024 (31 December 2023: 7.7%).
Power price:
30 June 2024 31 December 2023
-10.0% +10.0% -10.0% +10.0%
Change Change Change Change
Power price (£'000) (£'000) (£'000) (£'000)
Valuation (54) 54 (64) 66
Energy yield:
30 June 2024 31 December 2023
-10.0% +10.0% -10.0% +10.0%
Change Change Change Change
Energy yield (£'000) (£'000) (£'000) (£'000)
Valuation (466) 465 (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 Company has contractual protections if capex is delayed (i.e. reduce the
capex or increase receivables due) and the Company is not obliged to fund the
overrun costs. Therefore, capex sensitivities are not appropriate for the
Company's type of investments.
Investments at Amortised Cost
a) Investments at amortised cost
The disclosure below presents the gross carrying value of financial
instruments to which the impairment requirements in IFRS 9 are applied and the
associated allowance for ECL.
The following table analyses loans by Stages for the Group as at 30 June 2024:
30 June 2024 31 December 2023
Gross Gross
Carrying Allowance Net Carrying Carrying Allowance Net Carrying
Amount for ECL Amount Amount for ECL Amount
Group £'000 £'000 £'000 £'000 £'000 £'000
Fixed Value Investments at amortised
cost
Stage 1 51,805 (320) 51,484 54,399 (259) 54,140
Stage 2 153 (23) 130 156 (24) 132
Stage 3 2,276 (2,039) 238 2,306 (1,588) 718
Total Assets 54,234 (2,382) 51,852 56,861 (1,871) 54,990
b) Expected Credit Loss allowance for IFRS 9
Impairment provisions are driven by changes in the credit risk of instruments,
with a provision for lifetime expected credit losses recognised where the risk
of default of an instrument has increased significantly since initial
recognition.
The following table analyses Group ECL by Stage.
30 June 31 December
2024 2023
Group £'000 £'000
Opening Balance 1,871 136
Charge for the Period - Stage 1 58 182
Charge for the Period - Stage 2 - (35)
Charge for the Period - Stage 3 453 1,588
Allowance for ECL, ending balance 2,382 1,871
Measurement uncertainty and sensitivity analysis of ECL
The recognition and measurement of ECL is complex and involves the use of
judgement and estimation. This includes the formulation and incorporation of
multiple forward-looking economic conditions into ECL to meet the measurement
objective of IFRS 9.
The ECL recognised in the financial statements reflect the effect on expected
credit losses of a range of two possible outcomes, calculated on a
probability-weighted basis, based on the economic scenarios described in Note
4 of the 2023 annual financial statements, including management overlays where
required. The probability-weighted amount is typically a higher number than
would result from using only the Base (most likely) economic scenario. ECLs
typically have a non-linear relationship to the many factors which influence
credit losses, such that more favourable macroeconomic factors do not reduce
defaults as much as less favourable macroeconomic factors increase defaults.
The ECL calculated for each of the scenarios represents two outcomes that have
been evaluated to estimate the ECL. As a result, the ECL calculated for the
upside and downside scenarios should not be taken to represent the upper and
lower limits of possible actual ECL outcomes. There is a high degree of
estimation uncertainty in numbers representing tail risk scenarios when
assigned a 100% weight. A wider range of possible ECL outcomes reflects
uncertainty about the distribution of economic conditions and does not
necessarily mean that credit risk on the associated loans is higher than for
loans where the distribution of possible future economic conditions is
narrower.
In addition to the scenario analysis outlined above, two further extreme
downside scenarios were provided as follows: the first scenario is LGD%
assumed increased to 100%, in which event we calculate that this would result
in an ECL of £2,705,000. 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 would be £3,062,000.
Investment in Subsidiaries (Company level)
The Company has two subsidiaries, AHL and in the SPV. The Company's investment
in its subsidiary, AHL, is composed of equity shares. The Company's
investments in AHL is held at cost less impairment in the Company's Statement
of Financial Position. The Company's investment in its subsidiary, SPV, is
composed of loan notes receivables. The Company's investments in the SPV is
held at fair value through profit or loss.
The composition of the Company's investment in subsidiaries is as follows:
30 June 31 December
2024 2023
Company £'000 £'000
Investment in SPV, at fair value through profit or loss 34,089 35,683
Investment in AHL, held at cost less impairment 9,971 9,971
Investment in subsidiaries 44,060 45,654
The movement of the Company's investments in AHL are as follows:
30 June 31 December
2024 2023
Gross carrying amount £'000 £'000
Opening balance 11,791 -
Additions during the Period - 11,791
Ending balance 11,791 11,791
Accumulated impairment loss
Opening balance 9,971 -
Impairment loss recognised - (1,820)
Ending balance 9,971 (1,820)
Carrying amount at Period end 9,971 9,971
4. INVESTMENT INCOME
Six months Six months
ended ended
30 June 2024 30 June 2023
Group £'000 £'000
Investment interest income 2,755 2,186
Bank interest income 515 398
Total Investment Income 3,270 2,584
Six months Six months
ended ended
30 June 2024 30 June 2023
Company £'000 £'000
Investment interest income 939 851
Bank interest income 349 264
Loans to subsidiary interest income 1,080 967
Total Investment Income 2,368 2,082
5. INVESTMENT ADVISORY FEES
Six months ended 30 June 2024 Six months ended 30 June 2023
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Investment Advisory fees 328 - 328 447 - 447
Six months ended 30 June 2024 Six months ended 30 June 2023
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Investment Advisory fees 328 - 328 447 - 447
Under the Investment Advisory Agreement, the following fee is payable to the
Investment Adviser:
(i) 0.95 per cent. per annum of Committed Capital of the Company up to and
including £500 million; and
(ii) 0.75 per cent. per annum of Committed Capital of the Company above £500
million.
6. TAXATION
Six months ended 30 June 2024 Six months ended 30 June 2023
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Corporation tax - - - - - -
Taxation - - - - - -
Six months ended 30 June 2024 Six months ended 30 June 2023
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Corporation tax - - - - - -
Taxation - - - - - -
Investment companies which have been approved by HM Revenue & Customs
under section 1158 of the Corporation Tax Act 2010 are exempt from tax on
capital gains. Due to the Company's status as an investment trust, and the
intention to continue meeting the conditions required to maintain such
approval for the foreseeable future, the Company has not provided for deferred
tax on any capital gains or losses arising on the revaluation of investments.
7. RETURN PER ORDINARY SHARE
Group
Return per share is based on the consolidated profit for the Period of
£814,000 attributable to the weighted average number of Ordinary Shares in
issue of 95,308,573 in the Period (30 June 2023: loss of £438,000; weighted
average number of Ordinary Shares in issue 100,000,000). Consolidated revenue
profit and capital loss are £1,324,000 (30 June 2023: revenue profit of
£711,000) and £510,000 (30 June 2023: capital loss of £1,149,000)
respectively.
Company
Return per share is based on the loss for the Period of £1,115,000
attributable to the weighted average number of Ordinary Shares in issue of
95,308,573 in the Period (30 June 2023: loss of £667,000; weighted average
number of Ordinary Shares in issue of 100,000,000). Company revenue profit and
capital loss are £1,211,000 (30 June 2023: Company revenue profit of
£682,000) and £96,000 (2023: Company capital loss of £1,349,000)
respectively.
8. SHARE CAPITAL
As at 30 June 2024 As at 31 December 2023
No. of shares £'000 No. of shares £'000
Allotted, issued and fully paid:
Ordinary Shares of 1p each ('Ordinary Shares') 81,438,268 814 100,000,000 1,000
Total 81,438,268 814 100,000,000 1,000
On incorporation, the issued share capital of the Company was 1 ordinary share
of nominal value £0.01 and £50,000 represented by 50,000 Management Shares
of nominal value £1.00 each, which were subscribed for by the Investment
Adviser. Following admission, the Management Shares were redeemed by the
holder.
On admission of the Ordinary Shares to trading on the London Stock Exchange on
2 June 2021, 99,999,999 Ordinary Shares were allotted and issued to
Shareholders as part of the placing and offer for subscription in accordance
with the Company's prospectus dated 10 May 2021.
On 6 March 2024, the Company announced that it intended to return value to
Shareholders by way of a Tender Offer pursuant to which Qualifying
Shareholders were invited to tender some of their Ordinary Shares. The Company
published a circular in respect of proposals that up to 18,561,732 Ordinary
Shares may be purchased under the Tender Offer for a maximum aggregate cash
consideration of £17.5 million and Qualifying Shareholders who participate in
the Tender Offer would have a Basic Entitlement to tender approximately 18.6%.
On 13 May 2024, the Company purchased, in aggregate, 18,561,732 Ordinary
Shares under the Tender Offer. All successfully tendered Ordinary Shares have
been acquired at the Tender Price of 94.28 pence per Ordinary Share. The cost
relating to the Tender Offer were £166,000.
Shares is
issue at the Shares in
beginning issue at the
of the Shares end of the
For the period ended 30 June 2024 period £'000 tendered £'000 year £'000
Ordinary shares 100,000,000 1,000 18,561,732 186 81,438,268 814
Shares is
issue at the Shares in
beginning issue at the
of the Shares end of the
For the period ended 31 December 2023 period £'000 tendered £'000 period £'000
Ordinary shares 100,000,000 1,000 - - 100,000,000 1,000
9. SPECIAL RESERVE
As indicated in the Company's prospectus dated 10 May 2021, following
admission of the Company's Ordinary Shares to trading on the London Stock
Exchange, the Directors applied to the Court and obtained a judgement on 12
August 2021 to cancel the amount standing to the credit of the share premium
account of the Company. The amount of the share premium account cancelled and
credited to a special reserve was £97,000,000. As at 30 June 2024 the total
special reserves were £76,020,000 (31 December 2023: £93,500,000).
10. NET ASSETS PER ORDINARY SHARE
The Group's net assets per ordinary share as at 30 June 2024 is based on
£77,429,000 (31 December 2023: £93,539,000) of net assets of the Group
attributable to the 81,438,268 Ordinary Shares in issue as at 30 June 2024 (31
December 2023: 100,000,000).
The Company's net assets per ordinary share as at 30 June 2024 is based on
£77,640,000 (31 December 2023: £93,966,000) of net assets of the Company
attributable to the 81,438,268 Ordinary Shares in issue as at 30 June 2024 (31
December 2023: 100,000,000).
11. DIVIDEND
The Company has paid the following interim dividends in respect of the periods
under review:
For the period ended 30 June 2024 For the period ended 30 June 2023
Pence per Total Pence per Total
Total dividends paid in the Period Ordinary Share £'000 Ordinary Share £'000
Period end 30 June 2024 - Nil (31 December 2022 interim - Paid 20 March 2023) N/A N/A 1.25p 1,250
Total N/A N/A 1.25p 1,250
The dividend relating to the period ended 30 June 2024, which is the basis on
which the requirements of section 1159 of the Corporation Tax Act 2010 are
considered, is detailed below:
For the period ended 30 June 2024 For the period ended 30 June 2023
Pence per Total Pence per Total
Total dividends declared in the Period Ordinary Share £'000 Ordinary Share £'000
30 June 2024: Payable on 1 November 2024 (30 June 2023 interim - Nil) 6.139p 5,000 N/A N/A
Total 6.139p 5,000 N/A N/A
The Company declared an interim dividend in respect of the period from 1
January 2024 to 30 June 2024 of 6.139 pence per Ordinary Share, to be paid on
1 November 2024 to Shareholders on the register at 11 October 2024. The
dividend has not been included as a liability at 30 June 2024.
12. RELATED PARTY TRANSACTIONS
Fees payable to the Investment Adviser are shown in the Consolidated Statement
of Profit or Loss and Comprehensive Income. As at 30 June 2024, the fee
outstanding to the Investment Adviser was £328,028 (30 June 2023: £447,000;
31 December 2023: £361,000).
The Company owns 100% of AHL and 100% of the notes issued by one compartment
of Italian SPV, as disclosed in note 1. All intercompany transactions between
the subsidiaries and the Company are eliminated at the consolidation level.
Fees payable to the Directors during the Period were based on an annual rate
of £70,318 to the Chair, £54,973 to the Chair of the Audit & Risk
Committee and Senior Independent Director, £49,578 to the Chair of the
Management Engagement Committee and to the remaining Director. As set out in
the 2023 Annual Report, the decision by Shareholders to vote against
continuation of the Company at the end of February 2023 means that the duties
of the Directors are beyond those normally expected as part of their
appointment. Therefore, in accordance with the AIC Code, additional fees of
£17,580 and £13,743 have been paid in the period from 1 January 2024 to 30
June 2024 to the Chair of the Board and the Chair of Audit and Risk
respectively and £7,437 in the same period to the Chair of the Management
Engagement Committee and the other Director. These additional fees are paid on
a monthly basis and subject to regular review.
Directors' holdings
At 30 June 2024 and at the date of this report the Directors had the following
holdings in the Company. There is no requirement for Directors to hold shares
in the Company. All holdings were beneficially owned.
As at 30 June 2024 As at 31 December 2023
Connected Connected
Shares Person Total Shares Person Total
Miriam Greenwood 19,181 - 19,181 24,000 - 24,000
David Fletcher 34,534 11,544 46,078 42,425 14,181 56,606
Nicholas Bliss 16,280 - 16,280 20,000 - 20,000
Janine Freeman - - - - - -
The following table shows the subsidiaries of the Company. Please refer to
note 2; these subsidiaries have been consolidated in the preparation of the
financial statements.
Subsidiary entity name and registered address Effective ownership Investment Country of incorporation
Attika Holdings Limited 100% HoldCo subsidiary entity, owns underlying investments United Kingdom
Leaf B, 20th Floor, Tower 42, Old Broad Street, London, England, EC2N 1HQ
SPV Project 2013 S.r.l. 100% of the notes of Special purpose vehicle, owns underlying investments Italy
Via Vittorio Betteloni, 2 20131, Milan, Italy one compartment
Company related party transactions
As at 30 June 2024 the Company has an intercompany receivable from AHL in the
amount of £2,705,000 (31 December 2023: £nil). The amount is non-interest
bearing and payable on demand.
As at 30 June 2024, the Company has a shareholder loan receivable from AHL in
the amount of £27,293,000 (31 December 2023: £27,293,000). The initial
interest rate was 7.90% per annum which is then being adjusted every fourth
quarter of the financial year in order for the Company not to have a gross
margin of less than 50bps from its financing activities. The loan is repayable
in full on 31 December 2046.
As at 30 June 2024, the Company has a total of £33,404,000 (31 December 2023:
£35,683,000) notes at fair value through profit or loss in the Italian SPV.
As at 30 June 2024, the Company has a total of £9,971,000 (31 December 2023:
£9,971,000) equity investment held at cost less impairment in AHL.
13. DISTRIBUTABLE RESERVES
The Company's distributable reserves consist of the special reserve and
revenue reserve. Capital reserve represents unrealised gains and losses on
investments and as such is not distributable.
The revenue reserve is distributable. The amount of the revenue reserve that
is distributable is not necessarily the full amount of the reserve as
disclosed within these financial statements. As at 30 June 2024, the Company
has no distributable revenue reserves as the Company is in a loss position of
£1,336,000 (31 December 2023: loss of £2,547,000).
The Company's special reserve, which is also distributable, was £76,020,000
as at 30 June 2024 (31 December 2023: £93,500,000).
14. SUBSEQUENT EVENTS
There are no post balance sheet events other than as disclosed in this Interim
Report.
ALTERNATIVE PERFORMANCE MEASURES OF THE GROUP
In reporting financial information, the Company presents alternative
performance measures, "APMs", which are not defined or specified under the
requirements of IFRS. The Company believes that these APMs, which are not
considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance of the
Company. The APMs presented in this report are shown below:
Discount
The amount, expressed as a percentage, by which the share price is more than
the Net Asset Value per Ordinary Share.
As at
30 June 2024
NAV per Ordinary Share (pence) a 95.08
Share price (pence) b 59.00
Discount (b÷a)-1 (37.9%)
Ongoing charges
A measure, expressed as a percentage of average net assets, of the regular,
recurring annual costs of running an investment company.
As at
30 June 2024
Average NAV a 88,416,000
Annualised expenses b 2,862,000
Ongoing charges (b÷a) 3.2%
Total return
A measure of performance that includes both income and capital returns. This
takes into account capital distributions of dividends paid out by the Company
to the Ordinary Shares of the Company on the ex-dividend date. It does not
take into account the effect, if any, of the tender offer in May 2024.
30 June 2024 Share price NAV
Opening at 1 January 2024 (pence) a 57.25 94.28
Closing at 30 June 2024 (pence) b 59.00 95.08
Total return (b÷a)-1 3.1% 0.9%
n/a = not applicable
GLOSSARY
AIC Association of Investment Companies.
Alternative Investment Fund or "AIF" An investment vehicle under AIFMD. Under AIFMD (see below) Aquila Energy
Efficiency Trust Plc is classified as an AIF.
Alternative Investment Fund Managers Directive or "AIFMD" A European Union directive which came into force on 22 July 2013 and has been
implemented in the UK.
Annual General Meeting or "AGM" A meeting held once a year which Shareholders can attend and where they can
vote on resolutions to be put forward at the meeting and ask directors
questions about the company in which they are invested.
the Company Aquila Energy Efficiency Trust Plc.
Discount The amount, expressed as a percentage, by which the share price is less than
the net asset value per share.
Dividend Income receivable from an investment in shares.
Ex-dividend date The date from which you are not entitled to receive a dividend which has been
declared and is due to be paid to Shareholders.
ESCO Energy Service Company.
EU European Union.
Financial Conduct Authority or "FCA" The independent body that regulates the financial services industry in the UK.
General Meeting ''GM'' A meeting which Shareholders can attend and where they can vote on resolutions
to be put forward at the meeting and ask directors questions about the company
in which they are invested.
GWh Gigawatt hour.
Group The Company, Holdco and Italian SPV.
the HoldCo Attika Holdings Limited ("AHL" or "Attika").
Investment company A company formed to invest in a diversified portfolio of assets.
Investment Trust An investment company which is based in the UK and which meets certain tax
conditions which enables it to be exempt from UK corporation tax on its
capital gains. The Company is an investment trust.
IPO Initial Public Offering.
Italian SPV or "SPV" SPV Project 2013 S.r.l.
Liquidity The extent to which investments can be sold at short notice.
Net assets or net asset value ('NAV') An investment company's assets less its liabilities.
NAV per Ordinary Share Net assets divided by the number of Ordinary Shares in issue (excluding any
shares held in treasury).
Ongoing charges A measure of the regular, recurring annual costs of running an investment
company, expressed as a percentage of average net assets.
Ordinary Shares The Company's ordinary shares in issue.
Period The six months to 30 June 2024.
Portfolio A collection of different investments held in order to deliver returns to
Shareholders and to spread risk.
Share price The price of a share as determined by a relevant stock market.
Tender offer A bid or offer to buy back shares in the Company and subsequently cancel them.
Total return A measure of performance that takes into account both income and capital
returns. This may take into account capital gains, dividends, interests and
other realised variables over a given period of time.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR FZGZLVVKGDZMRecent news on Aquila Energy Efficiency Trust
See all newsREG - Aquila Energy Effcn. - Notice of AGM
AnnouncementREG - Aquila Energy Effcn. - Special Interim Dividend Declaration
AnnouncementREG - Aquila Energy Effcn. - Annual Financial Report
AnnouncementREG - Aquila Energy Effcn. Morgan Stanley - Holding(s) in Company
AnnouncementREG - Aquila Energy Effcn. - Holding(s) in Company
Announcement