REG - Aquila Eur Renwables Aquila Euro Rnw-AERI - Half-year Report
27/09/2023 07:00
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RNS Number : 7476N Aquila European Renewables PLC 27 September 2023
AQUILA EUROPEAN RENEWABLES PLC
LEI No: 213800UKH1TZIC9ZRP41
HALF YEARLY FINANCIAL REPORT
For the six months ended 30 June 2023
INVESTMENT OBJECTIVE
Aquila European Renewables plc ("AER", the "Company") seeks to generate stable
returns, principally in the form of income distributions, by investing in a
diversified portfolio of renewable energy infrastructure investments.
Financial Information
as at 30 June 2023
30 June 2023 31 December 2022
Ordinary Share price (cents) 89.5 92.3
NAV per Ordinary Share (cents)(1) 104.1 110.6
Ordinary Share price discount to NAV(1) (14.0%) (16.6%)
Net assets (EUR million) 403.3 451.7
30 June 2023 30 June 2022
Dividends per Ordinary Share (cents)(3) 2.8 2.6
Ongoing charges(1,5) 1.0% 1.1%
Total NAV per Ordinary Share(1,2) (3.5%) 5.3%
Total Shareholder return(1,6) (0.1%) 2.0%
Dividend cover(1,4) 1.2x 1.4x
1. This disclosure is considered to represent the Company's alternative
performance measures ("APMs"). Definitions of these APMs and other performance
measures used, together with how these measures have been calculated, can be
found below. All references to cents are in euros, unless stated otherwise.
2. Calculation based on NAV per Ordinary Share in euros, includes
dividends and assumes no reinvestment of dividends.
3. Dividends paid/payable and declared relating to the period.
4. Calculation based on the operational result at special purpose
vehicle ("SPV") level. Please see below for further details.
5. Calculation based on average NAV over the period and regular
recurring annual operating costs of the Company.
6. Calculation based on Ordinary Share price in euros, includes
dividends.
Highlights
- Dividend cover of 1.2x (1.7x before debt amortisation). Robust
dividend cover of 1.5x expected over the next five years(1).
- Unchanged 2023 target dividend guidance of 5.51 cents (5.0%
increase on 2022)(2).
- EUR 30.7 million of capital returned to Shareholders in the form
of dividends and share buybacks during the first half of 2023.
- Active portfolio management delivered 3.2 cents per Ordinary Share
in valuation uplift following completion of asset life extensions across
56.6%(3) of the portfolio.
- Completion of 50.0 MW in construction projects, resulting in a
fully operational portfolio.
- EUR 4.9 million of project level debt repaid from operating cash
flow, resulting in modest gearing of 32.7%(4) of Gross Asset Value ("GAV").
- In April 2023, the Company extended the maturity date of the
Revolving Credit Facility ("RCF") by twelve months to April 2025.
- Members of the Board of Directors and Investment Adviser acquired
AER Ordinary Shares.
- In June 2023, 81.0% of the Company's shares in circulation voted
in favour of continuation at the Annual General Meeting ("AGM").
(- ) Attractive yield of 6.6%.(5)
Subsequent Events
- Extension of the share buyback programme in July 2023. The
Company has acquired further shares equating to EUR 5.1 million at an average
share price of 85.0 cents.(6)
- On 1 September 2023, Myrtle Dawes was appointed as an additional
Board Member of the Company. Myrtle has over 30 years of experience in the
energy sector.
1. Dividend cover presented is net of project debt repayments, excludes
the impact of any future share buybacks and assumes the 2023 target dividend
is paid in 2023 to 2027. No re-investment of surplus cash flow or interest
received is assumed. There can be no assurance that these targets can or will
be met and it should not be seen as an indication of the Company's expected or
actual results or returns.
2. Subject to the portfolio performing in line with expectations. These
are targets only and not forecasts. There can be no assurance that these
targets can or will be met and it should not be seen as an indication of the
Company's expected or actual results or returns.
3. Based on capacity (AER share).
4. Includes senior debt secured at project level (EUR 126.3 million) and
RCF at HoldCo level (EUR 69.3 million excl. guarantees).
5. Share price as at 19 September 2023. Assuming a full year dividend
of 5.51 cents per share.
6. As at 19 September 2023
WHY INVEST?
The Company seeks to generate stable returns, principally in the form of
income distributions, by investing in a diversified portfolio of renewable
energy infrastructure investments
Market Opportunity
- Participation in Europe's green energy transition
- Highly experienced Investment Adviser:
- Managing a 19.7 GW1 European clean energy portfolio
- EUR 14.0 billion(1) development and construction pipeline
- 2030 Aquila Capital target of avoiding 1.5 billion tonnes of CO(2)
during its lifetime(2)
AER Positioning
- European focused (excl. UK), diversified by geography and
technology
- Strong dividend cover supported by contracted revenue and a
diversified operating portfolio
- Modest gearing level (32.7%) provides flexibility(3)
Returns
- Portfolio levered discount rate of 7.7%(4)
- Trading at a 18.7% discount to NAV.(5)
- Disciplined capital allocation; EUR 20.0 million returned in share
buybacks during 1H23
1. Data as at 30 June 2023, including historic divestments.
2. According to the "GHG Accounting for Grid Connected Renewable Energy
Projects" of the "International Financial Institutions Technical Working Group
on Greenhouse Gas Accounting", the feed-in of electricity produced by
renewable energies leads to a theoretical avoidance of CO(2) emissions from
fossil fuels (Disclaimer CO(2) Lifetime Avoidance Clock | Aquila Capital
(aquila-capital.de).
3. This disclosure is considered to represent the Company's alternative
performance measures ("APMs"). Definitions of these APMs and other performance
measures used, together with how these measures have been calculated, can be
found below. All references to cents are in euros, unless stated otherwise.
4. Assumes drawn RCF debt of EUR 69.3 million with an average long-term
all-in cost of debt of 4.79%.
5. Based on the share price as at 19 September 2023 (83.5 cents) and the
NAV per Ordinary Share as at 30 June 2023 (102.7 cents), adjusted for
dividends in respect of Q2 2023 paid on 8 September 2023 and buybacks.
AT A GLANCE
Portfolio Breakdown(1)
By Technology
Wind energy | 43.3%
Solar PV | 52.2%
Hydropower | 4.4%
By Country
Portugal | 15.0%
Norway | 16.7%
Denmark | 13.7%
Finland | 6.2%
Spain | 41.6%
Greece | 6.7%
By Status
Operating | 100.0%
Diversified Technologies
Wind energy
213.7 MW
Four Countries
Solar PV
230.7 MWp
Two Countries
Hydropower
19.4 MW
One country
1. Totals may not add up to 100% due to rounding differences.
As a result of the diversification of energy generation technologies, the
seasonal production patterns of these asset types complement each other,
providing a balanced cash flow profile, while the geographic diversification
serves to reduce exposure to any one single energy market.
Wild energy | 213.7 MW Solar PV | 230.7 MWp Hydropower | 19.4 MW
TESLA BENFICA III SAGRES
150.0 MW 19.7 MWp 107.6 MW
Ownership: 25.9% Ownership: 100.0% Ownership: 18.0%
HOLMEN II ALBENIZ
18.0 MW 50.0 MWp
Ownership: 100.0% Ownership: 100.0%
OLHAVA OURIQUE
34.6 MW 62.1 MWp
Ownership: 100.0% Ownership: 50.0%
SVINDBAEK GRECO
32.0 MW 100.0 MWp
Ownership: 99.9% Ownership: 100.0%
THE ROCK TIZA
400.0 MW 30.0 MWp
Ownership: 13.7% Ownership: 100.0%
DESFINA
40.0 MW
Ownership: 89.0%(1)
1. Voting interest. Economic interest: 92.6%.
CHAIRMAN'S STATEMENT
On behalf of the Board of Directors, I am pleased to present the 2023 Interim
Report of Aquila European Renewables plc.
Introduction
In my last statement to you in April, I was pleased to report that the Company
had reached its initial goal and now had an efficiently invested balance sheet
with a diversified and resilient portfolio offering strong cash flow cover for
a progressive dividend. I also commented in that report on the large and
sustained discount to NAV at which the Company's shares had been trading,
which was the rationale for our EUR 20.0 million share buyback programme
announced in February.
Since that date, inflation has become a larger and more deeply embedded
problem for the UK economy, resulting in a consensus that UK interest rates
will need to remain 'higher for longer'. This deteriorating macro-economic
backdrop has contributed to further significant weakness in the Company's
share price, a problem that is widely reflected across our peer group of
renewable energy investment trusts, and indeed across the investment trust
sector more generally.
The Board recognises and accepts this current signal from the market - returns
at what were previously our target level are not, for the moment, sufficiently
attractive for investors to wish to entrust us with incremental capital. We
continue to believe that the Company's portfolio has been well constructed and
that the individual assets are sound and will deliver a reliable and
attractive future annual flow of income. Inflation in the European Union has
been steadily decreasing from its peak in October 2022. It is already
significantly lower than in the UK and expected to fall further by 2025, as
supply bottlenecks ease and food and commodity prices normalise. It is also
worth noting that interest rates in Europe are generally lower than in the UK,
further differentiating the Company from its UK counterparts. Nevertheless, as
our investor base is skewed to the UK, we anticipate that the effects of
inflation and interest rates on our share price will continue to be viewed by
the market largely through a UK lens.
In the period, the Company has completed a significant transformation of its
portfolio, both in terms of growth in operating capacity, as well as achieving
a more balanced mix between wind and solar PV technologies. The result is a
more efficient balance sheet and a diversified operating portfolio, which
offers strong cash flow to support a progressive dividend that remains well
covered despite recent downward revisions in power prices. The Company also
maintains a modest gearing level, currently at 32.7%. Given that backdrop,
combined with the sustained share price discount to NAV, the Board has reacted
decisively by announcing a variety of initiatives to ensure the value of the
underlying portfolio is fully reflected in the share price.
Key Initiatives
Given this context, and following the completion of the inaugural EUR 20.0
million share buyback programme, the Board decided to continue with a further
allocation of capital to the buyback programme. This is a sign of our
confidence in the underlying value of the existing portfolio and recognises
that buying back at a discount offers a better return on capital than is
currently achievable on new assets. It also aims to provide additional
short-term liquidity to investors. Under the initial share buyback programme,
a total of 20.8 million Ordinary Shares were repurchased at an average price
of 95.9 cents per Ordinary Share, representing a discount of 7.9% to the Q2
2023 NAV. As at 19 September 2023, the latest time prior to the publication of
this report, the Company has acquired a further EUR 5.1 million in shares at
an average price of 85.0 cents per Ordinary Share.
Share buybacks remain a tactical, rather than a strategic response to the
valuation issues. When consensus around the macro-economic outlook changes and
UK inflation has peaked, we anticipate a strong rebound in sector share
prices. However, as the timing of any such reversal is unknown, the Board
continues to pursue a variety of other initiatives whilst continuing to
carefully observe the inflationary outlook.
We have made good progress with these initiatives, including the rollout of
asset life extensions following the completion of due diligence across part of
the Company's solar PV and wind energy assets (representing 56.6% of the
portfolio's capacity). This has increased the NAV by 3.2 cents per Ordinary
Share during the reporting period. The Company and its advisers will evaluate
further asset life extensions across the remainder of the portfolio, subject
to due diligence.
The Company's advisers continue to explore debt financing opportunities to
take advantage of its modest gearing levels in order to build a larger-scale
portfolio. They are also considering a secondary listing on a European stock
exchange to improve the Company's marketability in Europe. An application has
been submitted to admit the Company's shares to trading on Euronext. A further
announcement will be made shortly.
Continuation Vote
At the Annual General Meeting ("AGM") held in June 2023, the continuation
resolution put forward to Shareholders was duly passed. Aquila Capital, which
holds approximately 2.3% of the issued share capital of the Company, abstained
from voting, reflecting their views on good corporate governance. It was
noted, however, that certain other Shareholders voted against the resolution.
The Board continues to welcome Shareholder feedback and has previously
announced that Shareholders will have an additional opportunity to vote on the
continuation of the Company. This is expected to be in September 2024.
Dividends and NAV
The Board announced a 5.0% increase to the dividend in February 2023 and is
targeting 5.51 cents per Ordinary Share for 2023, subject to the portfolio
performing in line with expectations. To date in 2023, the Company has paid or
declared dividends of 2.8 cents per Ordinary Share. When combined with the EUR
20.0 million share buyback, the Company has returned EUR 30.7 million to
Shareholders during the first half of 2023. Since the IPO in June 2019, the
Company has returned EUR 86.9 million(2) to Shareholders in the form of
dividends and share buybacks.
The Company's NAV per Ordinary Share was 104.1 cents as at 30 June 2023,
resulting in a total NAV return per Ordinary Share of -3.5%, including
dividends during the period. Movement in the NAV was primarily driven by a
decrease in power price curves across the majority of the portfolio, which was
driven by lower commodity prices (notably gas and coal) and lower demand
resulting from milder temperatures experienced in Europe. AER's annualised
total NAV return per Ordinary Share (including dividends paid) from IPO to
30 June 2023 has been 5.4%(3).
1H23 Performance
During the reporting period, total revenue was 17.6% below budget as a
consequence of declining short-term electricity spot market prices across most
of the portfolio's markets, reflecting the fall in commodity prices, lower
demand from milder-than-expected temperatures in Europe and elevated filling
levels of gas storage reservoirs.
The portfolio's production was 10.3% below budget, principally as a result of
below average wind speeds in the Nordics and considerably lower precipitation
than normal in Portugal for our hydropower asset, Sagres, despite high
technical availability across the portfolio. In light of the latest downward
revision in near-term seasonal power price forecasts provided by independent
third-party consultants, the Company is expecting a dividend cover of 1.2x for
2023, compared to 1.8x as announced in February 2023, whilst guidance on
dividend cover over the next five years was adjusted to 1.5x on average (2023
to 2027).
Director Appointment
I am pleased to welcome Myrtle Dawes as our newest non‑executive Director,
who joined the Board of Directors on 1 September 2023 as a member of the
Remuneration and Nomination Committee and the Audit and Risk Committee.
Myrtle, a chartered chemical engineer, has over 30 years' experience in the
energy sector, both in the UK and overseas, covering leadership roles in
engineering, project management, technology and digital transformation.
Currently, she is CEO of the Net Zero Technology Centre and non-executive
Director at FirstGroup plc and the Centre for Process Innovation. In 2017,
Myrtle featured in Breaking the Glass Ceiling and was selected as one of '100
Women to Watch' in the Cranfield FTSE Board Report 2017. In 2021, she was
recognised by TE:100 as one of the 'Women of the Energy Transition'. Her
appointment was the result of an extensive process led by the Nomination
Committee and supported by a third-party search firm.
Outlook
Despite the current market, the Board remains optimistic on the long-term
outlook for the listed renewable energy sector, bolstered by the ever-more
urgent need to decarbonise the world's energy supply. We expect this to
continue to ensure a favourable regulatory backdrop.
It remains the Board's ambition to build a larger-scale portfolio to further
enhance the investment proposition for our current and future Shareholders.
Our share price clearly needs to regain a premium to our NAV to enable us to
re-embark on our growth strategy. We hope that the Company's continued
operational performance, combined with our various initiatives and a more
propitious macro-economic environment, can return us to a growth path.
In the meantime, the Board and its advisers will evaluate a number of
different initiatives to help address the issues facing us and secure
recognition in the share price of the real underlying value of the portfolio.
We are committed to pursuing broader options if that value fails to be
reflected in the share price. We will keep Shareholders updated on any
key developments.
Ian Nolan
Chairman
26 September 2023
1. These are targets only and not forecasts. There can be no assurance
that these targets can or will be met and it should not be seen as an
indication of the Company's expected or actual results or returns.
2. As at 19 September 2023.
3. Based on an opening NAV per share of EUR 0.98.
INVESTMENT ADVISER'S REPORT
Leader in Investment and Asset Management in European Renewables
Overall CO(2)eq emissions avoided(1)
2.2 million tonnes
Green energy produced(1)
7.4 TWh
Households supplied(1)
2.0 million
Investment Adviser Background
Aquila Capital Investmentgesellschaft mbH (Aquila Capital) is one of the
leading investment and industrial development companies, managing over EUR
14.7 billion on behalf of institutional investors worldwide and running one of
the largest clean energy portfolios in Europe. Over the past two decades,
Aquila Capital and its subsidiaries have committed themselves to supporting
the green energy transition and creating a more sustainable world. As at 30
June 2023, the Investment Adviser manages wind energy, solar PV, hydropower
energy and battery storage assets with a capacity of approximately 19.7 GW(2).
Additionally, it has projects in sustainable real estate and green logistics,
either completed or under development. Aquila Capital also invests in energy
efficiency, carbon forestry and data centres.
The Investment Adviser's dedicated expert investment teams comprise over 700
employees worldwide. Moreover, the strategic partnership entered in 2019 with
Japan´s Daiwa Energy & Infrastructure draws on its sector networks and
experience to screen, develop, finance, manage and operate investments along
the entire value chain. As this business model requires local management
teams, Aquila Capital is represented across 17 investment offices. The
Investment Adviser currently has a significant pipeline of over 14.0 GW2 of
development and construction assets in the EMEA region, primarily in solar PV
located in Southern Europe. This represents an attractive source of growth
opportunities for AER.
Aquila Capital's in-house Markets Management Group ("MMG"), a team of experts
dedicated to sourcing and structuring Power Purchase Agreements ("PPA"),
market analysis, trading, origination, FX, interest rates and other hedging
products, has facilitated the Company's proactive approach to hedging and risk
management. Since its inception, the team has structured, negotiated, and put
in place more than 40 PPAs and has created an extensive network of offtakers,
being recognised as one of the most important players in the European
landscape. The ultimate aim is to secure stable revenues whilst always
ensuring the best possible risk adjusted return. MMG also supports the rest of
the teams within Aquila by providing market insights, analysis, research and
regulatory knowledge. It also undertakes regular reporting on market evolution
and events and ad-hoc research to identify emerging market trends.
The Company's Alternative Investment Fund Manager ("AIFM"), FundRock
Management Company (Guernsey) Limited (previously known as International Fund
Management Limited), has appointed Aquila Capital as its Investment Adviser in
respect of the Company. Aquila Capital's key responsibilities are to
originate, analyse and assess suitable renewable energy infrastructure
investments and advise the AIFM accordingly as well as to provide Asset
Management services.
1. Data as at 31 December 2022, sourced from the Aquila Capital annual
Sustainability Report.
2. Data as at 30 June 2023, including historical divestments.
Current Renewables Portfolio of Aquila Capital(1):
Portfolio Capacity(2)
Wind energy Solar PV Hydropower Energy storage systems 17 Offices
4,581 MW 12,221 MW 999 MW 1,860 MW
995 WTGs 344 PV parks 286 plants 26 projects
1. Map is shown for illustrative purposes only, as at 30 June 2023.
Exact locations of offices and assets might deviate. Points indicate one or
more asset and are not indicative of size.
2. Data as at 30 June 2023, including assets already sold.
Investment Portfolio
Project Country Capacity(1) Status COD(2) Asset Life from COD(2) Equipment Manufacturer Energy Offtaker(3) Offtaker Ownership in Asset Leverage(4) Acquisition Date
Wind Energy
Tesla Norway 150.0 MW Operational 2013, 2018 25y Nordex PPA Statkraft 25.9%6 20.4% Jul-19
Holmen II Denmark 18.0 MW Operational 2018 25y Vestas FiP Energie.dk 100.0% 33.8% Jul-19
Olhava Finland 34.6 MW Operational 2013-2015 27.5y Vestas FiT Finnish Energy 100.0% 36.6% Sep-19
Svindbaek Denmark 32.0 MW Operational 2018 29y Siemens FiP Energie.dk 99.9% 17.2% Dec-19 & Mar-20
The Rock Norway 400.0 MW Operational 2022 30y Nordex PPA Alcoa 13.7%6 48.8% Jun-20
Desfina Greece 40.0 MW Operational 2020 25y Enercon FiP DAPEEP 89.0%7 49.7%8 Dec-20
Solar PV
Benfica III Portugal 19.7 MW Operational 2017, 2020 40y AstroNova PPA Axpo 100.0% 0.0% Oct-20
Albeniz Spain 50.0 MW Operational 2022 40y Canadian Solar PPA Statkraft 100.0% 0.0% Dec-20
Ourique Portugal 62.1 MW Operational 2019 40y Suntec CfD ENI 50.0%6 0.0% Jun-21
Greco Spain 100.0 MW Operational 2023 40y Jinko PPA Statkraft 100.0% 0.0% Mar-22
Tiza Spain 30.0 MW Operational 2022 40y Canadian Solar PPA Axpo 100.0% 0.0% Jun-22
Hydropower
Sagres Portugal 107.6 MW Operational 1951-2006 n/a5 Various FiT EDP/Renta 18.0%6 22.9% Jul-19
Total (AER Share) 463.8 MW
1. Installed capacity at 100.0% ownership.
2. COD = Commissioning date.
3. PPA = Power Purchase Agreement, FiT = Feed-in tariff. FiP = Feed-in
premium, CfD = Contract for Difference. Further information on the contracted
revenue position can be found on below.
4. Leverage level calculated as a percent of debt plus fair value as at
30 June 2023.
5. 21 individual assets. Approximately ten years remaining asset life
when calculated using net full load years.
6. Majority of remaining shares are held by entities managed and/or
advised by Aquila Capital.
7. Represents voting interest. Economic interest is 92.6%.
8. Calculation based on voting interest.
Ongoing Value Creation
154.8 MW(1) of construction projects completed
The Rock
Country: Norway
Date Acquired: June 2020
Status: Operational
Capacity: 400.0 MW
Interest: 13.7%
In March 2023, a takeover under the Engineering, Procurement and Construction
("EPC") management agreement was achieved, representing the final milestone
for completion of the project. The asset has been in production since November
2022 and provides Alcoa's aluminium smelter in Mosjøen with renewable energy
under a 14-year PPA. Alcoa's aluminium smelter is a key contributor to
employment and growth in Mosjøen.
As indicated in the 2022 Annual Report, in accordance with the EPC takeover,
Eolus will remain responsible for the upcoming appraisal case with the Sami
district and remains liable for any negative financial implications. The case
was expected to be heard before the Helgeland District Court on 30 May 2023,
however, the District Court rescheduled the case as no mitigation measures
have been agreed to date. It is likely that a new hearing will be scheduled
for 27 May 2024. The project company expects the parties will find good and
workable solutions and AER Shareholders will be updated in due course.
The project company, the developer and the turbine supplier continue to be
involved in an arbitration process to settle outstanding claims related to
construction delays and extensions of time under the turbine supply agreement.
The project company does not expect the arbitration case to negatively affect
its financial position.
Jaén and Guillena
Country: Spain
Date Acquired: March 2022
Status: Operational
Capacity: 100.0 MWp
Interest: 100.0%
A key milestone was the commissioning of Guillena, the second solar PV asset
of the Greco portfolio, in April 2023. The first asset, Jaén, has been
operational since November 2022. Both assets received their Provisional
Acceptance Certificate ("PAC") in 2023, representing the final milestone for
completion.
Both Jaén and Guillena benefit from PPAs signed during favourable market
conditions in 2022. The contracts commenced in April 2023 and August 2023,
respectively.
In conjunction with Albeniz, completion of both The Rock and the Greco
portfolio has resulted in a valuation uplift of 8.8% (EUR 17.1 million,
4.4 cents per Ordinary Share)(2) versus cost as at 30 June 2023. Following
the completion of these projects, the Company has no further construction
projects within its portfolio, however, it retains the option to invest up to
30% of its Gross Asset Value in development or construction projects, enabling
additional value creation over time.
1. AER share.
2. Q2 2023 net asset value minus acquisition costs, capital expenditure,
plus distributions paid up to 30 June 2023.
Capital Deployment Profile Since IPO
As at 30 June 2023, the Company's remaining outstanding commitment is a EUR
1.3 million milestone payment associated with the Guillena project (one of two
assets within the Greco portfolio). This payment was made upon receipt of the
Provisional Acceptance Certificate ("PAC") in September 2023, after the
reporting period, and was funded out of operating cash flows from the Greco
portfolio.
The Company aims to build a larger-scale portfolio to further enhance its
investment proposition and contribute to the green energy transition. The
Company, together with its Investment Adviser, continues to monitor an
attractive pipeline of investment opportunities, underpinned by the Investment
Adviser's substantial development and construction pipeline throughout Europe
(over 14.0 GW).
Contracted Revenue Position
Contracted revenue net present value(2)
EUR 239.1m
Contracted revenue (aggregate over asset life)(3)
EUR 346.4m
Contracted revenue over the next five years(1)
50.5%
Weighted average contracted revenue life(4)
10.5 years
The Company is diversified across six countries and six different price zones
in Norway (NO2 and NO4 regions), Iberia (Spain and Portugal), Finland, Denmark
and Greece, allowing it to benefit from a diversified portfolio of offtake
structures, including subsidy schemes as well as PPAs from a wide variety of
counterparties.
Contracted revenues expected over the next five years, on a present value
basis, have decreased to 50.5% (31 December 2022: 51.9%) as a result of the
upcoming expiry of existing tariffs and PPAs across the portfolio, including
Olhava, Albeniz and Ourique, which expire from end of 2024 to 2027. The
Company and its Investment Adviser intend to replace these expiring contracts
with new PPAs over time, subject to prevailing market conditions.
Following an active period in 2022, no new PPAs were entered into by the
Investment Adviser and its in-house MMG division over the reporting period.
However, the Company will continue to focus on maintaining a sufficient degree
of contracted revenues to mitigate its exposure to power price volatility. The
Company's contracted revenue position also provides flexibility to capitalise
on periods of higher power prices.
The portfolio has good visibility of future cash flows, with a weighted
average contracted revenue life of approximately 10.5 years (31 December 2022:
7.4 years). The Company contracts its revenues with investment grade
counterparties, consisting of government entities, utilities and corporate
entities. In case the investment grade status is lost, credit enhancement
tools such as bonds, bank guarantees or letters of credit are put in place.
1. Forecast asset revenue from 1 July 2023 to 30 June 2028, which is
discounted by the weighted average portfolio discount rate as at 30 June 2023.
2. Net Present Value of contracted revenue over entire asset life as at
30 June 2023, discounted by the weighted average portfolio discount rate.
3. Aggregate contracted revenue over entire asset life (not discounted).
4. New weighting methodology based on hedged production.
Financial Performance
Performance(1)
Electricity Production (GWh)
Variance 1H23
Against
Technology Region 1H23 1H22 Variance (%) P50 Budget
Wind energy Denmark, Finland, Norway, Greece 260.5 216.0 20.6% (15.1%)
Solar PV Portugal, Spain 195.1 70.2 177.8% (0.8%)
Hydropower Portugal 33.2 17.2 93.4% (19.6%)
Total 488.8 303.4 61.1% (10.3%)
Load Factors
Technology 1H23 1H22
Wind energy 27.0% 32.3%
Solar PV 21.4% 13.7%
Hydropower 39.5% 21.4%
Total 27.0% 24.6%
Technical Availability(2)
Technology 1H23 1H22
Wind energy 94.0% 96.8%
Solar PV 99.7% 99.6%
Hydropower 98.8% 99.1%
Total 96.7% 97.4%
Revenues(3) (EUR million)
Technology 1H23 1H22 Variance (%)
Wind energy 16.9 18.8 (10.1)%
Solar PV 11.1 4.7 138.4%
Hydropower 3.5 2.7 30.0%
Total 31.5 26.1 20.5%
1. 1H23 data includes Guillena from April 2023. Desfina data based on
economic share (92.6%). 1H22 data includes Tiza from March 2022, Albeniz from
June 2022. Desfina data based on voting share (89.0%).
2. Average technical availability based on weighted installed capacity
(AER share).
3. Includes merchant revenue, contracted revenue and other revenue (e.g.
Guarantees of Origin, Electricity Certificates).
1H23 Monthly Production Performance vs. Budget (AER Share)
The Company's portfolio increased production by 61.1% during the first half of
2023 compared to the same period in 2022, with electricity produced amounting
to 488.8 GWh (1H22: 303.4 GWh), primarily due to added production from The
Rock (400.0 MW) and Jaén (50.0 MWp) becoming operational in November 2022.
It also benefited from the latest construction project Guillena (50.0 MWp),
which became operational in April 2023. These additional assets contributed
135.7 GWh of production to the portfolio in the period and represent
approximately 27.8% of total production in the first half of the year.
For the first six months of 2023, revenue was 17.6% below budget due to
falling electricity spot market prices across the portfolio's markets. This
reflected the decline in commodity prices, milder‑than-expected temperatures
in Europe and elevated filling levels of gas storage reservoirs. Prices in the
Nordics were also impacted due to increased interconnection links to Germany
and the United Kingdom, placing further downward pressure on prices in the
region.
Production performance during the reporting period was 10.3% below budget,
driven by below average wind speeds in the Nordics, and considerably lower
precipitation than normal in Portugal for the hydropower asset, Sagres. The
solar PV portfolio performed in line with budget over the first half of the
year, whilst performance at the Company's newest solar PV investment, Greco,
has been promising with production outperforming budget in 1H23.
Portfolio technical availability fell marginally from 97.4%(1) to 96.7%,
primarily due to The Rock suffering from defective gearboxes and a
malfunctioning anti-icing system, which impacted availability in the first
quarter of 2023. Availability and production improved significantly in the
second quarter of 2023 due to the subsequent summer season and the progressive
replacement of the gearboxes, whereas the anti-icing system is expected to be
repaired before the onset of this year's winder season.
The Company's Spanish solar PV portfolio, and in particular Jaén, was
impacted by curtailments at the request of the transmission agent and operator
("TSO") during the month of June, which had a minor impact on revenue during
the quarter. Curtailments have been requested by the TSO because of
oversaturation of the grid from elevated solar PV production in the summer
months. The Company and its advisers have assessed the impact to be of
approximately 2.3 GWh of curtailed production for Jaén, equivalent to around
EUR 160.0 thousand for the month of June. The number of curtailed hours
during the reporting period for the rest of the Company's Spanish solar PV
portfolio was negligible. The Investment Adviser is in the process of
introducing compliance software across its Spanish solar PV portfolio to
mitigate the impact of curtailments. The software was successfully installed
in late September 2023.
The addition of solar PV assets to the portfolio has significantly improved
the stability of production across the portfolio month-to-month and has
subsequently reduced the portfolio's reliance on wind production. This is
consistent with the investment philosophy of the Company, which is seeking to
diversify across different technologies and provide a balanced portfolio mix
between wind energy and solar PV.
A research project, partially funded by the Investment Adviser and the German
Ministry for Economic Affairs and Climate Action ("BMWK"), is collecting data
from the Company's Portuguese solar PV asset Benfica III. The Investment
Adviser's research partner, a German company called 'Sunsniffer', has
developed sensors for photovoltaic modules which can be inserted into the
module strings, and a research institute called 'Forschungszentrum Jülich'
has developed machine learning tools for data analysis and failure detection,
allowing for an in-depth analysis of any underperforming modules. Currently,
the Investment Adviser, as per the industry standard, monitors and operates at
the string level. However, the underperformance of one module can impact its
entire string, and a technician cannot identify which module in particular is
affected without checking every module of the affected string. The research
project is currently analysing the health status of the solar PV park in order
to determine where to incorporate the new sensors, which would improve asset
technical availability and, consequently, production.
Dividend cover (unaudited)
EUR million(1) 1H23 1H22 Variance (%)
Asset income 31.5 26.1 20.7%
Asset operating costs (7.9) (6.1) 28.5%
Interest and tax (2.5) (1.8) 41.8%
Asset underlying earnings 21.1 18.2 16.0%
Asset debt amortisation (4.9) (4.0) 21.7%
Company and HoldCo(2) expenses(3), other(4) (2.2) 0.7 (408.2%)
RCF interest and fees (1.2) (0.2) 588.5%
Total underlying earnings 12.8 14.7 (12.7%)
Dividends paid 10.7 10.4 2.5%
Dividend cover after debt amortisation (x) 1.2x 1.4x (0.2%)
Dividend cover before debt amortisation (x) 1.7x 1.8x Nmf(5)
1. Non-euro currencies converted to EUR as at 30 June 2023. Desfina
contribution reflects AERs economic interest rather than voting interest
(92.6%).
2. Tesseract Holdings Limited.
3. Expenses reflect recurring ordinary costs and expenses at AER and THL
level. Legal fees, investment expenses and amortised one-off cost of the
Revolving Credit Facility ("RCF") is not included. Expenses are reduced by
interest income on cash at banks.
4. 1H22 figure includes income accrued by AER in relation to shareholder loans
provided to construction assets.
5. nmf = not meaningful.
The table above calculates dividend cover based on the underlying earnings of
its investment portfolio, sourced from the profit & loss ("P&L")
statements from each of the Company's investments, with the exception of debt
amortisation which is sourced from the cash flow statement. Each of the
Company's investments are held through special purpose vehicles ("SPV").
The SPV, Company and HoldCo financial statements are unaudited.
Total underlying asset earnings are calculated by aggregating the P&L of
the Company's SPVs (adjusted for AER's share), less any repayments of project
level debt at the SPV level (adjusted for AER's share), less fund level costs
at the Company and HoldCo level.
Cash Dividend Cover (unaudited)
EUR million(1) 1H23 1H22 Variance (%)
Company
Net cash flow from operating activities 11.2 20.2 (44.4%)
Investment advisory fee funded by share issuance - 1.3 n/a
HoldCo
Net cash flow from operating activities (0.4) (17.6) (97.7%)
Adjustments
Shareholder loan and equity repayments(2) 2.4 8.1 (70.4%)]
RCF interest and fees (1.2) (0.2) 588.5%
Acquisition of accrued interest from Shareholder loan(3) 1.5 n/a
Asset cash flow used for investment activities(4) 0.3 - n/a
Other(5) (0.3) - n/a
Adjusted net cash flow 12.1 13.3 (9.5%)
Dividends paid (10.7) 10.4 2.5%
Cash dividend cover (x) 1.1x 1.3x Nmf(6)
663
The table above provides an alternative dividend cover calculation based on
actual cash distributions received by the Company and HoldCo from the
investment portfolio or SPVs. Cash distributions are paid in the form of
dividends or Shareholder loan payments (interest or principal).
Adjusted net cash flow is calculated by consolidating net cash flow from
operating activities at the Company and HoldCo, subject to certain adjustments
(as shown in the table above), the most notable being distributions from the
Company's assets in the form of Shareholder loan repayments from the Company's
assets to the HoldCo.
1. Non-euro currencies converted to EUR as at 30 June 2023. Desfina
contribution reflects AERs economic interest rather than voting interest
(92.6%).
2. Distributions from operating activities in the form of Shareholder
loan and equity repayments (Olhava EUR 2.2m, Tiza EUR 0.2m).
3. Accrued shareholder loan interest purchased at the Tiza acquisition
in 1H22.
4. Part of Guillena PAC payment made by the operating company.
5. Capitalisation of shareholder loan interest.
6. nmf = not meaningful.
Gearing(1)
As at As at
30 June 31 December
EUR million 2023 2022 Variance (%)
NAV 403.3 451.7 (10.7%)
Debt(2) 195.6 155.2 26.1%
GAV 598.9 606.9 (1.3%)
Debt (% of GAV)(3) 32.7 25.6 7.1 bps
Project debt weighted average maturity (years) 14.2 14.6 (0.4)
Project debt weighted average interest rate (%)(4) 2.6 2.5 0.1 bps
RCF interest rate (%)(5) 5.2 3.5 1.6 bps
The portfolio has modest gearing of 32.7% of GAV as at 30 June 2023 (31
December 2022: 25.6%)(6).
The Company's prospectus allows it to operate with a maximum gearing level of
50.0% of GAV(7). The Company's asset level debt is largely fully amortising
with fixed interest rates. Approximately EUR 4.9 million of asset level debt
(AER share) was repaid from operating cash flow in the first six months of
2023.
As at 30 June 2023, the RCF was drawn to EUR 75.0 million (31 December 2022:
EUR 34.9 million), including bank guarantees, with an undrawn limit of EUR
25.0 million. The RCF has been primarily used to fund the Company's
commitments related to the Greco project (EUR 69.3 million in total), whilst
the bank guarantees (EUR 5.7 million) have been primarily issued in relation
to dismantling bonds and PPA guarantees required for the Company's operating
assets in Spain. The RCF is a floating rate facility that expires in April
2025, in light of the Company having exercised a twelve-month extension option
in 2023.
Debt Summary as at 30 June 2023(1)
Drawn Debt Bullet Hedged
Project AER Share (EUR million) Currency Amortising Maturity Proportion Type
Tesla 25.9% 8.6 EUR Partly amortising Mar-29 100.0% Bank Debt
Sagres 18.0% 6.1 EUR Fully amortising Jun-33 70.0% Bank Debt
Olhava 100.0% 16.8 EUR Fully amortising Dec-30/ 100.0% Bank Debt
Sep-31
Holmen II 100.0% 13.6 DKK Fully amortising Dec-37 93.2% Bank Debt
Svindbaek 99.9% 7.8 DKK Fully amortising Dec-37 100.0% Bank Debt
The Rock: USPP 13.7% 31.5 EUR Fully amortising Sep-45 100.0% Debt Capital Markets
The Rock: Green Bond 13.7% 11.0 EUR Bullet Sep-26 100.0% Debt Capital Markets
Desfina 89.0% 31.0 EUR Fully amortising Dec-39 100.0% Bank Debt
Subtotal 126.3 97.8%
RCF 100.0% 69.3 EUR Bullet Apr-25 0.0% Bank Debt
Total 195.6 63.1%
1. Foreign currency values converted to EUR as at 30 June 2023. Data
represents AER's share of debt. AER share of Desfina's debt based on
voting interest.
2. Debt corresponds to senior debt secured at project level and RCF at
HoldCo level.
3. This disclosure is considered to represent the Company's alternative
performance measures ("APMs"). Definitions of these APMs and other performance
measures used, together with how these measures have been calculated, can be
found below. All references to cents are in euros, unless stated otherwise.
4. Weighted average all in interest rate for EUR denominated debt (excl.
RCF). DKK denominated debt has an average weighted interest rate of 2.8%
(31 December 2022: 2.8%).
5. Consists of 1M EURIBOR plus a margin of 1.85%.
6. Excludes bank guarantees of EUR 5.7 million (31 December 2022: EUR
10.9 million).
7. The Company may take on long-term structural debt provided that, at
the time of entering into such debt, it does not exceed 50% of the prevailing
Gross Asset Value. Any short-term debt, such as a Revolving Credit Facility,
will be subject to a separate gearing limit so as not to exceed 25% of the
Gross Asset Value at the time of entering into such debt.
Valuation
Fair Value (unaudited, EUR million)
The table below shows the fair values of the investments held by Tesseract
Holdings Limited ("HoldCo"), the Company's wholly owned subsidiary, as well as
the reconciliation to the respective item on the Company's balance sheet.
As at As at
30 June 31 December
EUR million 2023 2022 Variance (%)
Tesla 33.5 35.5 (5.7%)
Sagres 20.7 23.0 (10.0%)
Holmen II 26.6 39.5 (32.8%)
Olhava 29.2 27.2 7.3%
Svindbaek 37.4 46.9 (20.2%)
The Rock 44.6 41.7 7.0%
Benfica III 16.2 17.1 (5.3%)
Albeniz 51.2 55.1 (7.0%)
Desfina 31.4 28.5 10.2%
Ourique 33.5 36.4 (8.0%)
Greco 109.8 66.5 65.0%
Tiza 33.5 34.1 (1.8%)
Fair value of investments (HoldCo)(1) 467.5 451.5 3.5%
Cash and other current assets of HoldCo 3.0 6.4 (52.9%)
Revolving credit facility drawn by HoldCo (69.3) (24.0) 189.0%
Elimination of intercompany loans (0.4) (5.3) (92.2%)
Investments at fair value through profit or loss 400.7 428.6 (6.5%)
1. 1H23 includes new investments in Greco (EUR 45.3 million) and 'other'
(EUR 0.3 million). 2022 data includes capital contributions related to
construction assets (Albeniz: EUR 6.3 million), new investments (Greco and
Tiza, combined: EUR 94.3 million), capital injection
(Sagres: EUR 2.2 million) and 'other' (EUR 0.3 million).
The Company's NAV as at 30 June 2023 was EUR 403.3 million, or 104.1 cents per
Ordinary Share (30 June 2022: EUR 430.6 million, or 105.5 cents per Ordinary
Share). This represents a NAV total return of -3.5% per Ordinary Share (1H22:
5.3%) including dividends.
Dividends of EUR 10.7 million (2.7 cents per Ordinary Share) were paid during
the reporting period, with respect to the last quarter of 2022 and the first
quarter of 2023.
The main drivers of NAV movement throughout the reporting period include:
- forecast power prices: a decline in short-term electricity price
forecasts across most of the portfolio resulted in a decrease of 12.1 cents
per Ordinary Share. The methodology continues to assume an average of two
power price curves from independent market analysts over the life of each
asset, with the hydropower asset Sagres utilising an average of three power
curves. No forward or futures curves are used;
- inflation: lower short-term CPI forecasts resulted in a decrease
of 0.4 cents per Ordinary Share;
- discount rate: the Company's discount rate has remained unchanged
at 7.2% compared to 2022(1);
- share buyback programme: completion of the EUR 20.0 million share
buyback programme increased the NAV per Ordinary Share by 0.8 cents; and
- asset life extensions: following completion of due diligence,
asset life extensions have been applied to the Company's Spanish and
Portuguese solar PV assets and one Danish wind asset, boosting the NAV per
Ordinary Share by 3.2 cents.
Valuation Methodology
The Company owns 100.0% of its subsidiary Tesseract Holdings Limited ("HoldCo"
or "THL"). The Company meets the definition of an investment entity as
described by IFRS 10. As such, the Company's investment in the HoldCo is
valued at fair value.
The Company has acquired underlying investments in SPVs through its investment
in the HoldCo. The Investment Adviser has carried out fair market valuations
of the SPV investments as at 30 June 2023 and the Directors are satisfied with
the methodology, the discount rates and key assumptions applied and the
valuations.
All SPV investments are at fair value through profit or loss and are valued
using the IFRS 13 framework for fair value measurement. The economic
assumptions shown below were used in the valuation of the SPVs.
Portfolio Valuation - Key Assumptions
As at As at
30 June 31 December
Metric 2023 2022
Levered discount rate (asset level)(1) Weighted average 7.2% 7.2%
Long-term inflation Weighted average 2.0% 2.0%
Remaining asset life(2) Wind energy (years) 22 22
Solar PV (years) 39 29
Hydropower (years) 10 10
Operating life assumption(3) Wind energy (years)(4) 26 26
Solar PV (years) 40 30
Hydropower (years) n/a n/a
A key change in valuation assumptions compared to the previous report relates
to asset life extensions. Further information can be found below.
1. Excludes the impact of the RCF. Including the RCF, the levered
discount rate increases to approximately 7.7%.
2. Remaining asset life based on net full load years. Does not consider
any potential asset life extensions.
3. Asset life assumption from date of commissioning.
4. Assumes an asset life of 25 to 30 years.
Asset Life Extensions
The Company and the Investment Adviser have been undertaking an asset life
extension programme during the first half of the year in consultation with
external technical advisers. Following the conclusion of due diligence, the
Company implemented the following changes in asset life assumptions across the
portfolio:
- Albeniz, Greco, Tiza (solar PV, 180.0 MW): increased from 30 to 40
years (+10 years);
- Benfica III, Ourique (solar PV, 50.7 MW): increased from 30 to 40
years (+10 years);
- Holmen II (wind, 18.0 MW): unchanged at 25 years; and
- Svindbaek (wind, 32.0 MW): increased from 25 to 29 years (+4
years).
The above changes in aggregate generated a value uplift of 3.2 cents per
Ordinary Share (+2.9%) as at 30 June 2023. Holmen II (18.0 MW), was assessed
as not being suitable for an asset life extension due to a turbine load
assessment analysis.
The Board and Investment Adviser intend to rollout asset life extensions
across the remainder of the portfolio (109.0 MW, comprising Desfina, Tesla,
Olhava), subject to ongoing due diligence.
Market Prices
In the first six months of 2023, power prices across European geographies were
characterised by persistent volatility, driven by the downward trajectory of
commodity prices, most notably gas. This trend reflected a reduction in
demand, spurred by mild temperatures in Europe, elevated filling levels of gas
storage reservoirs and greater renewable generation feeding into the grid.
The Nordics electricity system spot price averaged 56.0 EUR per MWh in the
second quarter of 2023 against 85.1 EUR per MWh in the first quarter of 2023,
a decrease of 34.0%. Spot prices in Iberia were traded, on average, at 80.9
EUR per MWh in the second quarter of 2023, compared to 97.6 EUR per MWh in the
first quarter of 2023, a drop of 17.0%. In Greece, spot prices were 32.0%
lower than the previous quarter, averaging 106.3 EUR per MWh in the second
quarter of 2023 against 156.9 EUR per MWh in the first quarter of 2023.
Nordics
The Nordics electricity system spot price averaged 56.0 EUR per MWh in the
second quarter of 2023 against 85.2 EUR per MWh in the first quarter of 2023,
a 32.2% drop. The bearish trend across the Nordics can be attributed to the
following factors:
- normalising hydrological production, with hydro reservoirs
reaching the average levels expected for the period;
- decreasing fuel prices, leading to lower power prices in
Continental Europe, which increasingly affect the Nordics due to expanded
interconnections;
- higher wind energy output increasing supply; and
- reduced power demand as a result of mild weather.
Iberia
In Iberia, power prices gradually decreased over the reporting period in
conjunction with the downward trajectory of gas prices in Europe, higher
renewable output and reduced power demand, mostly as a consequence of
milder-than-expected weather in the first quarter of the year. Spot prices in
Iberia were traded, on average, at 80.9 EUR per MWh in the second quarter of
2023, compared to 97.6 EUR per MWh in the first quarter of 2023. The
front-year forward prices for 2023 have decreased from an average of 106.8 EUR
per MWh in the first quarter of 2023 to 99.8 EUR per MWh in the second quarter
of 2023.
Greece
Due to the high proportion of hours in which gas-fired generation sets the
marginal price in the country's wholesale market, power prices in Greece
continue to trade at a premium to those in Iberia and the Nordics, despite the
strong downward pull of fuel prices. Spot prices in Greece were 32.3% lower
than in the first quarter - in line with the falling trajectory of fuel prices
- and averaged 106.3 EUR per MWh in the second quarter of 2023 against 157.0
EUR per MWh in the first quarter of 2023.
Fuel Prices Evolution
The downward trend of commodity prices (notably gas and coal) contributed to
the continuation of the bearish trend in European power price levels since the
start of the year.
- European Union Emissions Allowances ("EUAs"): on average, EUA
prices traded on the EU's Emissions Trading System ("ETS") remained flat due
to low buying interest, low power demand and bearish natural gas prices.
- Gas forward prices steadily declined over the reporting period due
to the reduction in demand caused by mild temperatures in Europe, elevated
filling levels of gas storage reservoirs and high levels of LNG imports. On
average, gas prices in the second quarter plunged by roughly 34% over the
previous quarter, dropping from 53.0 EUR per MWh in the first quarter of 2023
to 35.1 EUR per MWh in the second quarter of 2023.
- Coal prices fell from an average of 146.2 USD per tonne in the
first quarter of 2023 to 118.6 USD per tonne in the second quarter of 2023, in
line with the trend of gas prices, due to weak fundamentals for the sector and
a negative macro‑economic outlook.
Inflation
Investments in renewables represent an effective protection against inflation.
Renewables benefit from rising electricity prices with no direct input cost
burden given their reliance on the weather. Over the last 20 or more years,
European electricity prices have typically outperformed European consumer
price indices. As a result, inflation is expected to continue to have a
positive impact on the earnings potential of the Company's portfolio.
Inflation in the European Union, at 5.5% in June, has been steadily decreasing
from its peak of 10.6% in October 2022 (8.4% average for 2022), and is
expected to fall further as supply chain bottlenecks ease and food and
commodity prices normalise. The European Central Bank expects headline
inflation in the Eurozone to fall to 5.4% by the end of 2023, 3.0% in 2024 and
2.2% in 2025. In contrast, the UK has experienced higher levels of inflation
compared to the EU, with UK CPI at 7.9% in June (vs. 5.5% in the EU), a trend
which has been observed since 2001.
Outlook
Longer-term global trends for the renewable energy sector, including
decarbonisation, energy security and affordability, continue to be strong.
However, the first half of the year saw the sector experience several
headwinds including power price volatility, supply chain bottlenecks and
persistently high inflation driving higher interest rates. Electricity prices
in the Company's key markets are forecast to continue to fall over the medium
term, reflecting the downward trend of commodity prices witnessed in the first
and second quarters of the year, as part of a normalisation of prices from the
peaks experienced in 2022. Inflation is expected to remain at similarly
elevated levels despite the continuing quantitative tightening of central
banks, at least over the short term, in light of supply chain constraints
aggravated by the ongoing war in Ukraine and historically low unemployment
levels among the world's largest economies. However, the current slowdown in
China's economy is already lowering prices for key raw materials, components,
equipment or services in the renewable supply chain, especially solar modules,
and a recovery in the country's economy may once again drive prices in an
upward trajectory.
A prolonged period of monetary tightening and higher interest rates has led to
a trend reversal in equity return expectations, as evidenced by the share
price decline across the sector observed on the London Stock Exchange. Despite
this, demand for renewable assets remains strong, leading to a mismatch
between public market and private market return expectations.
Despite this difficult backdrop, the Company has been consistent in executing
its strategy since its IPO in 2019 and, as a result, now benefits from a fully
operational and diversified portfolio which can deliver strong dividend cover.
The strong demand for renewables is underpinned by several positive tailwinds.
The greater certainty and visibility over the European regulatory landscape is
an encouraging tailwind for the Company and the sector, bolstered by the
fast-tracking of permitting and greater access to public funding for renewable
energy projects that is intrinsic of many national deployment and energy
independence plans.
The repercussions of climate change, evidenced by the rise in extreme weather
events and the latest summer heatwaves, are expected to add further impetus to
net zero targets and decarbonisation rates. Grid access and the need for
capacity upgrades also continue to be critical concerns across several
jurisdictions, given the high quantity of projects coming to market with grid
connection dates for the end of the decade and beyond. This is generating
added urgency for public and private investment in the near future.
The Company is well positioned to benefit from these trends, in light of its
aim to build a larger-scale portfolio to further enhance its investment
proposition and directly contribute to the green energy transition, deploying
capital to help fund the build-out of the very substantial construction
pipeline (over 14.0 GW(1) in European geographies) that is being developed by
its Investment Adviser.
Aquila Capital Investmentgesellschaft mbH
26 September 2023
1. Data as at 30 June 2023, including historical divestments.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
1. Environmental
Aquila Group is focused on the investment and development of essential assets.
This includes clean energy (wind energy, solar PV, hydropower and battery
storage), sustainable infrastructure and specialty asset classes, such as
carbon forestry and energy efficiency. Currently, it supplies two million
homes with renewable energy, which cumulatively avoids more than 10 million
tonnes of CO(2)e annually.
In 2022, Aquila Group formalised its mission to become one of the world's
leading sustainable investment and development companies for essential assets
by 2030. To show its commitment to the mission, a Group-wide goal was set to
avoid 1.5 billion tonnes of CO(2)e by 2035 throughout the portfolio's
lifetime, which is equivalent to 4.1% of CO(2)e emissions worldwide in
2021(1).
Using the appropriate tools, due diligence procedures and experts, Aquila
Group ensures that all material ESG factors are identified, assessed and
mitigated to protect investors from potential financial downside, while
considering their impact on society and the environment. In this context, the
Group's regulated Alternative Investment Fund Manager ("AIFM") entity and the
Investment Adviser of AER manages all relevant ESG elements using dedicated
subject matter experts.
The Group is committed to the UN's 17 Sustainable Development Goals,
particularly climate action ("SDG 13"), clean energy ("SDG 7") and industry,
and innovation and infrastructure ("SDG 9").
In 2018, the EU agreed to a climate and energy framework and set ambitious
goals for 2030. The aim is to have a clean, affordable and reliable energy
system in Europe, targeting the following initiatives.
UN Sustainable Development Goals for Europe
40.0%
At least a 40.0% decline below 1990 levels in greenhouse gas emissions
32.0%
A 32.0% share of renewables in the energy system
32.5%
A 32.5% improvement in energy efficiency
1. Worldwide CO(2)e emissions in 2021 were 36.3 billion tonnes according
to the International Energy Association: IEA, "Global Energy Review: CO(2)
Emissions in 2021" (March, 2022) p.3. Available at:
https://www.iea.org/reports/global-energy-review-co2-emissions-in-2021-2
(https://www.iea.org/reports/global-energy-review-co2-emissions-in-2021-2) .
The Company aims to invest in a diversified portfolio of renewable energy
infrastructure investments, such as hydropower plants, wind and solar parks,
across continental Europe and Ireland. With the objective of providing
investors with a diversified portfolio of renewable assets, AER can deliver on
its investment objectives as well as contribute towards the green economy.
AER contributes to the following three UN Sustainable Development Goals:
AER's Contribution to the UN Sustainable Development Goals
Contribution Towards
UN Sustainable
Goal Overview Development Goals
Ensure access to affordable, reliable, sustainable and modern energy for all. - AER's portfolio produces renewable energy, which contributes 7 AFFORDABLE AND CLEAN ENERGY
towards Europe's electricity mix.
- Renewable energy is a cost-effective source of energy compared to
other options.
- AER's investments in renewable assets help support and encourage
further investment in the industry.
Build resilient infrastructure, promote inclusive and sustainable - AER targets renewable investments that are supported by high 9 INDUSTRY, INNOVATION AND INFRUSTRUCTURE
industrialisation and foster innovation. quality components and infrastructure to optimise the energy yield and
subsequent return to investors.
- AER's investments help support the construction of shared
infrastructure (e.g. substations), which enables the further expansion of
renewable energy sources.
- AER's Investment Adviser, Aquila Capital, is responsible for
monitoring and optimising the Company's day-to-day asset performance. This
process also involves actively exploring how new technologies and other forms
of innovation can be utilised to enhance asset performance and sustainability
(energy yield, O&M and asset life).
Take urgent action to combat climate change and its impacts. - The Company's 463.8 MW portfolio powered approximately 133.9 13 CLIMATE ACTION
thousand households and avoided approximately 134.8 thousand tonnes of CO(2)e
emissions over the reporting period.(1) AER has ambitious goals to expand its
portfolio, which will be accretive to further CO(2)e avoidance over time.
- As a signatory to the UN Principles for Responsible Investments
("UN PRI"), the Company's Investment Adviser has integrated ESG criteria all
along its investment process for real assets, which includes considerations of
climate change.
GRESB
GRESB is a global ESG benchmark for real estate and infrastructure which
synthesises Environmental, Social and Governance ("ESG") data. Following the
successful GRESB assessment undertaken in the previous year, AER received 88
points, which was above the industry average of 82 points. The Company has
commenced the GRESB assessment for the current year and has submitted all the
required information. The results of the assessment are expected to be
published in October 2023.
1. Actual AER contribution as at 30 June 2023. The CO(2) equivalent
avoidance, the average European households supplied and household emissions
are approximations and do not necessarily reflect the exact impact of the
renewable energy projects. The cited sources of information are believed to be
reliable and accurate; however, the completeness, accuracy, validity and
timeliness of the information provided cannot be guaranteed and Aquila Capital
accepts no liability for any damages that may arise directly or indirectly
from the use of this information.
Spanish Solar PV ESG Initiatives
The natural environment around some of the Company's solar PV parks is the
Desierto de Tabernas National Park, situated to the south‑east of Spain
and representing the only desert in the entire European continent. This
constitutes a rich biodiversity of environmental resources that is of
particular geological interest. Specialist advisers have been commissioned to
implement environmental measures to mitigate the impact of the solar PV plants
on the environment and create habitats for flora and fauna. Several visits per
month are made to implement the measures, monitor their evolution and make
necessary adjustments. Below is a selection of closely monitored measures that
have been implemented across some of the Company's solar PV parks for local
flora and fauna.
Flora
- Translocation of rain-fed olive trees
- Regular maintenance measures and monitoring
- Planting of broom and palmetto trees to promote landscape
integration and the creation of biotopes appropriate for local species
- Clearing of vegetation through sheep grazing
Fauna
- Drinking troughs, feeding throughs and perches were installed in
order to favour the local fauna
- A hunting fence was installed in order to protect wildlife living
in the area
- Bird nest boxes were installed around the solar PV park,
specifically for the nesting of the lesser kestrel, common kestrel, barn owl
and little owl species
- A study was commissioned to analyse the degree of adaption of bird
species to the presence of the solar PV park, with special emphasis on the
lesser kestrel and Montagu's harrier species
- Stands for wild rabbits have been built in order to help the
breeding and permanence of this species
Desfina Reforestation
In May 2023, two thousand trees were planted in Greece's Parnassos National
Park. The project company will ensure their maintenance and watering for the
following three years. A wooden cabin was also constructed in 2022 at the
entrance of the park for the benefit of the local Forestry Authority.
2. Social
Renewable energy projects have an inherent major positive impact on the
environment with their ability to decarbonise the energy sector, aiding the
Company in the transition to a low carbon economy. With the European Green
Deal boosting renewable energy projects, investment into clean energy assets
has accelerated over recent years. With the increase in renewable energy
deployment, the pressure on land is growing as the need to expand carbon sinks
and protecting biodiversity is in direct conflict with agricultural and
renewable energy production.
Conflicts can arise when new renewable projects compete against other types of
land usage, such as residential housing, recreational areas, agriculture and
nature conservation, or when they cause landscape disruptions. Engagement with
local communities is an integral part of the Company's investment philosophy.
The assets continue to support communities through contracting local service
providers, payment of local taxes, as well as lease payments for utilisation
of the land.
3. Governance
The independent Board of Directors is responsible for AERʼs sustainability
policy and its implementation, with the daily operations being delegated to
its independent AIFM, FundRock Management Company (Guernsey) Limited
'FundRock'. FundRock monitors environmental, social and governance risks,
which are fully integrated across every single stage of its investment
process. The Aquila Group publishes its own Sustainability Report, describing
the Investment Adviser's approach to sustainability within the investment
process. Aquila Capital regards integrity and diversity as key pillars in its
governance and it has been vital for the growth and success of the Company.
The Investment Adviser is fully regulated and supervised by the Federal
Financial Supervisory Authority in Germany.
The Company was pleased to announce the appointment of Myrtle Dawes as a
non-executive Director on 1 September 2023, joining the Board of Directors as
a member of the Remuneration and Nomination Committee and the Audit and Risk
Committee. Myrtle, a chartered chemical engineer, has over 30 years'
experience in the energy sector, both in the UK and overseas, covering
leadership roles in engineering, project management, technology and digital
transformation. Currently, she is CEO of the Net Zero Technology Centre and
non-executive Director at FirstGroup plc and the Centre for Process
Innovation. In 2017, Myrtle featured in Breaking the Glass Ceiling and was
selected as one of '100 Women to Watch' in the Cranfield FTSE Board Report
2017. In 2021, she was recognised by TE:100 as one of the 'Women of the
Energy Transition'.
Diversity
The Board of Directors is appointed based on expertise and merit, being
mindful of the benefits generated by diversity. The Board is comprised of
members with different skills and experiences, whilst endeavouring to comply
with the Listing Rules on diversity. The current Board is comprised of three
men and two women, all non-executive Directors who have a significant number
of years of experience in their relevant fields.
Additionally, the Investment Adviser is also mindful of the benefits provided
by diversification, both in terms of culture (its employees comprise 56
different nationalities) and in terms of gender (its gender ratio is 58% men
and 42% women). Additionally, 27% of people in leadership positions are
female, of which two, Susanne Wermter (CEO Aquila Clean Energy) and
Christine Brockwell (CPO Aquila Clean Energy), are ranked in the 'Top 100
Women's Green Fund Power List', honouring women working in wind power
worldwide.(1)
( )
1. As at 31 December 2022.
AER Board
Men | 3
Women | 2
Investment Adviser:
Men | 58%
Women | 42%
56 - Different nationalities
Supply Chain Management
The Investment Adviser's membership in associations such as the Global
Infrastructure Investor Association ("GIIA") and the Global Listed
Infrastructure Organisation ("GLIO") accord it the opportunity to lobby for
human and labour rights along the value chain of several manufacturers. In
addition, membership in the associations is also beneficial in highlighting
the economic interests of the Investment Adviser to the relevant authorities.
The Investment Adviser takes a multi-faceted approach to the mitigation of
governance risks, limiting exposure to risks within the supply chain. All EPC
and O&M contracts are negotiated with contractors operating in a country
adhering to the European Union's labour minimum standards. Any sourcing of raw
materials, components, equipment or services from suppliers domiciled in
countries linked to the use of forced labour is made with guarantees that such
components are not associated with human rights violations.
Moreover, an in-house onboarding and screening process for suppliers is in
place to prevent and mitigate any risk of human rights violations, including a
pre-screening of counterparties in terms of bad press risk and a fully-fledged
Know Your Customer ("KYC") process. All counterparties are monitored by the
Investment Adviser according to internal compliance and procurement policies.
Measures include the selection of geographies with strong regulatory
frameworks, comprehensive internal due diligence processes that examine
counterparties and their governance frameworks, and the use of specialist
advisers to conduct technical and legal due diligence analyses at the project
level. All governance measures are audited by major audit firms on a regular
basis.
INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance
and Transparency Rules ("DTR"). The Chairman's Statement and the Investment
Adviser's Report in this Interim Report provide details of the important
events which have occurred during the period and their impact on the financial
statements. The following statements on Related Party Transactions, going
concern, the Statement of Directors' Responsibilities, the Chairman's
Statement and Investment Adviser's Report, together constitute the Interim
Management Report for the Company for the six months ended 30 June 2023. The
outlook for the Company for the remaining six months of the year ending 31
December 2023 is discussed in the Chairman's Statement and the Investment
Adviser's Report.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Company are detailed in the
Company's most recent Annual Report for the year ended 31 December 2022, which
can be found on the Company's website at www.aquila-european-renewables.com.
These remain unchanged during the period under review. The key risks are
summarised below:
- Economic and Political Risk - The revenue and value of the Company's
investments may be affected by future changes in the economic and political
situation;
- Operational Risk - The risk that the portfolio underperforms and, as a
result, the target returns are not met over the longer term. The risk that
service providers to the Company underperform, and as a result, impact the
Company's performance, reporting or reputation;
- Financial Risk - The risk that the valuations and underlying
assumptions used to value the investment portfolio are not a fair reflection
of the market, resulting in the investment portfolio being over or
under-valued;
- Compliance, Tax and Legal Risk - The failure to comply with relevant
regulatory changes, tax rules and obligations may result in reputational
damage or create a financial loss to the Company; and
- Emerging Risk - Climate-related threats and a potential financial
crisis have been identified as emerging risks. As climate change continues to
become a reality, the chance that one of the Company's sites is affected by a
climate‑related event, such as flooding or wildfires, becomes more likely.
Furthermore, the Company is likely to be subject to newly introduced
regulation in the fight against climate change.
Principal risks, including emerging risks, are mitigated and managed by the
Board through policy setting and regular reviews of the Company's risk matrix
by the Audit Committee to ensure that procedures are in place with the
intention of minimising the impact of the above-mentioned risks. The Board
relies on periodic reports provided by the Alternative Investment Fund
Manager, Investment Adviser and Administrator regarding risks that the Company
faces. When required, experts will be employed to gather information,
including legal advisers and environmental advisers.
The Company's Annual Report for the period ending 31 December 2022 contains
more detail on the Company's principal risks and uncertainties, including the
Board's ongoing process to identify, and where possible mitigate, the risks.
The Board is of the opinion that these principal risks are equally applicable
to the remaining six months of the financial year as they were to the six
months being reported on.
Related Party Transactions
The Company's Investment Adviser, Aquila Capital Investmentgesellschaft mbH,
and Directors are considered related parties under the Listing Rules. Details
of the amounts paid to the Company's Investment Adviser and the Directors
during the period are detailed in note 11 of this Interim Report which can be
found below.
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 Company.
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for at least twelve months from
the date of this document. In reaching this conclusion, the Directors have
considered the liquidity of the Company's portfolio of investments as well as
its cash position, income and expense flows. The Company's net assets as at 30
June 2023 were EUR 403.3 million (31 December 2022: EUR 451.7 million). As at
30 June 2023, the Company held EUR 4.1 million (31 December 2022: EUR 19.9
million) in cash and cash equivalent. The total expense for the period ended
30 June 2023 was EUR 2.1 million (30 June 2022: EUR 2.3 million). At the date
of approval of this document, based on the aggregate of investments and cash
held, the Company has substantial operating expenses cover representing
approximately 1.0% (as at 31 December 2022: 1.1%) of average net assets during
the year.
As at 30 June 2023, the Company had approximately EUR 126.3 million of
non-recourse debt (on a proportional basis) at the SPV level and the Directors
are satisfied that all key financial covenants are forecast to continue to be
complied with for at least the forthcoming twelve-month period from the date
of this document.
The Company has a modest level of gearing representing 32.7% as at 30 June
2023 of its Gross Asset Value, comprised of a RCF (which has an undrawn limit
of EUR 10.7 million) and non-recourse debt at the asset level. The Company
(via its subsidiaries, where applicable) is in compliance with its covenants
related to the RCF and non-recourse debt. The Company has recently negotiated
an extension to its RCF, which now expires in April 2025. The Board and
advisers have analysed the covenants of the RCF and, based on stress testing
the Company's RCF covenants, significant headroom exists in relation to both
the Interest Coverage Ratio ("ICR") and Loan to Value Ratios. For example,
based on the Company's RCF compliance certificate for the second quarter of
2023, forward cash flows would have to reduce by over 23.2% in order to breach
the Company's ICR.
The major cash outflows of the Company are the payment of dividends, costs
relating to the acquisition of new investments and payment due in respect of
the settlement of shares purchased in respect of the Company's buyback
programme. The Directors are confident that the Company has sufficient cash
balances to fund its commitments.
This assessment has included a detailed review of the issues arising following
the war in Ukraine; high volatility in commodity prices; the windfall revenue
clawback on inframarginal technologies (e.g. solar PV, wind energy, nuclear
and hydropower); other taxes that currently face the Company's assets, as
discussed in the Chairman's Statement and Investment Adviser's Report which
can be found above; and the impact of climate-related events on the Company's
assets. The Directors are also satisfied that the Company would continue to
remain viable under downside scenarios, including a decline in long-term
production and power price forecasts. For example, based on the guidance
provided in the Company's February 2023 Investor Presentation, the Company
expects its 2023 target dividend to be fully covered.
As announced on 30 May 2023, the Board has proposed a further opportunity to
vote on the continuation of the Company during the financial year ending 31
December 2024. This is expected to be around September 2024. If the
Continuation Resolution is not passed, then according to the Company's
articles, the Directors shall within six months of such Continuation
Resolution not being passed, put proposals to Shareholders for the
reconstruction, reorganisation or liquidation of the Company. Accordingly, the
Directors expect that if the Continuation Resolution is not passed, an event
which the Directors consider to be unlikely, formulating and implementing any
such proposals would require the Company to continue operations for a period
of at least twelve months from the date of approval of the Company's financial
statements.
Statement of Directors' Responsibilities
The DTR of the FCA require the Directors to confirm their responsibilities in
relation to the preparation and publication of the Interim Management Report
and Financial Statements. The Directors confirm to the best of their knowledge
that:
- the condensed set of financial statements contained within the Interim
Report has been prepared in accordance with the International Accounting
Standard 34 - IAS 34 Interim Financial Reporting; and
- the Interim Management Report, together with the Chairman's Statement
and Investment Manager's Report, includes a fair review of the information
required by 4.2.7R and 4.2.8R of the FCA Disclosure Guidance and Transparency
Rules.
The Interim Report has not been reviewed by the Company's Auditors. The
Interim Report was approved by the Board on 26 September 2023 and the above
Responsibility Statement was signed on its behalf by the Chairman.
Ian Nolan
Chairman
For and on behalf of the Board
26 September 2023
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Six months ended 30 June 2023 Six months ended 30 June 2022
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
Notes (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Unrealised (losses)/gains on investments - (24,091) (24,091) - 16,434 16,434
Net foreign exchange losses - (12) (12) - (5) (5)
Interest income 4 8,656 - 8,656 7,140 - 7,140
Dividend income 4 - - - 1,200 - 1,200
Investment advisory fees 5 (1,496) - (1,496) (1,522) - (1,522)
Other expenses (649) - (649) (779) - (779)
(Loss)/profit on ordinary activities before finance costs and taxation 6,511 (24,103) (17,592) 6,039 16,429 22,468
Finance costs - - - (99) - (99)
(Loss)/profit on ordinary activities before taxation 6,511 (24,103) (17,592) 5,940 16,429 22,369
Taxation 7 - - - - - -
(Loss)/profit on ordinary activities after taxation 6,511 (24,103) (17,592) 5,940 16,429 22,369
Return per Ordinary Share (cents) 6 1.64 (6.07) (4.43) 1.46 4.03 5.49
Return per Ordinary Share - diluted (cents) 6 1.64 (6.07) (4.43) 1.46 4.03 5.49
The total column of the Condensed Statement of Comprehensive Income is the
profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the period.
Return on ordinary activities after taxation is also the 'total comprehensive
income for the periodʼ.
The notes below are an integral part of these financial statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
As at As at
30 June 31 December
2023 2022
(Unaudited) (Audited)
Notes (EUR '000) (EUR '000)
Fixed assets
Investments at fair value through profit or loss 3 400,737 428,641
Current assets
Trade and other receivables 38 5,630
Cash and cash equivalents 4,128 19,893
4,166 25,523
Creditors: amounts falling due within one year
Trade and other creditors (1,647) (2,514)
(1,647) (2,514)
Net current assets 2,519 23,009
Net assets 403,256 451,650
Capital and reserves: equity
Share capital 8 3,874 4,082
Share premium 255,643 255,643
Special distributable reserve 101,556 125,082
Capital reserve 41,515 65,618
Revenue reserve 668 1,225
Total Shareholders' funds 403,256 451,650
Net assets per Ordinary Share (cents) 9 104.09 110.64
Approved by the Board of Directors and authorised for issue on 26 September
2023 and signed on its behalf by:
Ian Nolan
Chairman
Company number: 11932433.
The notes below are an integral part of these financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Special distributable
For the six months Share Share Capital Revenue
ended 30 June 2023 capital premium reserve reserve reserve Total
(Unaudited) Notes (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Opening equity as at 1 January 2023 4,082 255,643 125,082 65,618 1,225 451,650
Share buybacks 8 (208) - (19,883) - - (20,091)
Loss for the period - - - (24,103) 6,511 (17,592)
Dividend paid 10 - - (3,643) - (7,068) (10,711)
Closing equity as at 30 June 2023 3,874 255,643 101,556 41,515 668 403,256
Special
For the six months Share Share distributable Capital Revenue
ended 30 June 2022 capital premium reserve reserve reserve Total
(Unaudited) Notes (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Opening equity as at 1 January 2022 4,069 254,388 134,393 23,853 740 417,443
Shares issued in period 8 13 1,313 - - - 1,326
Share issue costs - (61) - - - (61)
Profit for the period - - - 16,429 5,940 22,369
Dividend paid 10 - - - - (10,447) (10,447)
Closing equity as at 30 June 2022 4,082 255,640 134,393 40,282 (3,767) 430,630
The notes below are an integral part of these financial statements.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Six months Six months
ended ended
30 June 2023 30 June 2022
(Unaudited) (Unaudited)
Notes (EUR '000) (EUR '000)
Operating activities
(Loss)/profit on ordinary activities before finance costs and taxation (17,592) 22,468
Adjustment for unrealised loss/(profit) on investments 24,091 (16,434)
Decrease/(increase) in trade and other receivables 5,592 (1,647)
(Decrease)/increase in other creditors (867) 15,784
Net cash from operating activities 11,224 20,171
Investing activities
Purchase of investments 3 - (48,350)
Repayments during the period 3 3,813 1,459
Net cash flow from/(used in) investing activities 3,813 (46,891)
Financing activities
Proceeds of share issues 8 - 1,326
Share issue costs - (61)
Share buybacks (20,091) -
Dividend paid (10,711) (10,447)
Finance costs - (99)
Net cash used in financing activities (30,802) (9,281)
Decrease in cash (15,765) (36,001)
Cash and cash equivalents at start of period 19,893 94,275
Cash and cash equivalents at end of period 4,128 58,274
The notes below are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
1. General Information
Aquila European Renewables plc (formerly Aquila European Renewables Income
Fund plc; "AER", 'the Company') is a public company limited by shares,
incorporated in England and Wales on 8 April 2019 with registered number
11932433. 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 5 June 2019 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 registered office and principal place of business of the Company is 6th
Floor, 125 London Wall, London, EC2Y 5AS.
The Company's investment objective is to generate stable returns, principally
in the form of income distributions, by investing in a diversified portfolio
of Renewable Energy Infrastructure Investments.
The Company's Investment Adviser is Aquila Capital Investmentgesellschaft mbH,
authorised and regulated by the German Federal Financial Supervisory
Authority.
FundRock Management Company (Guernsey) Limited (formerly Sanne Fund Management
(Guernsey) Limited) acts as the Company's Alternative Investment Fund Manager
for the purposes of Directive 2011/61/EU of the Alternative Investment Fund
Managers Directive.
Apex Listed Companies Services (UK) Limited (formerly Sanne Fund Services (UK)
Limited) provides administrative and company secretarial services to the
Company under the terms of an administration agreement between the Company and
the Administrator.
2. Basis of Preparation
The condensed financial statements included in this Interim Report have been
prepared in accordance with IAS 34 Interim Financial Reporting. The accounting
policies, critical accounting judgements, estimates and assumptions are
consistent with those used in the latest audited financial statements to 31
December 2022 and should be read in conjunction with the Company's annual
audited financial statements for the period ended 31 December 2022. The
financial statements for the year ended 31 December 2022 have been prepared in
accordance with the UK-adopted International Accounting Standards in
conformity with the requirements of the Companies Act 2006. The financial
statements have been prepared on the historical cost basis, as modified for
the measurement of certain financial instruments at fair value through profit
or loss.
The interim financial statements have also been prepared as far as is relevant
and applicable to the Company in accordance with the Statement of Recommended
Practice ("SORP") issued by the Association of Investment Companies ("AIC") in
July 2022.
These condensed 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 of 31 December
2022. The audited annual accounts for the year ended 31 December 2022 have
been delivered to Companies House. The audit report thereon was unmodified.
These financial statements are presented in euro (EUR), which is the currency
of the primary economic environment the Company operates in, and are rounded
to the nearest thousand, unless otherwise stated.
Accounting for Subsidiary
The Company owns 100.0% of its subsidiary Tesseract Holdings Limited ("THL"),
whose registered office and principal place of business is Leaf B, 20th Floor,
Tower 42, Old Broad Street, London, England, EC2N 1HQ. The Company has
acquired Renewable Energy Infrastructure Investments (the SPVs) through its
investment in the HoldCo. The Company finances the HoldCo through a mix of
loan investments and equity. The loan investment finance represents
Shareholder loans (the "Shareholder loans") provided by the Company to HoldCo.
The Company meets the definition of an investment entity as described by IFRS
10. Under IFRS 10, an investment entity is required to hold subsidiaries at
fair value through profit or loss and therefore does not consolidate the
subsidiary.
The HoldCo is also an investment entity, and as described under IFRS 10,
values its SPVsʼ investments at fair value through profit or loss.
Going Concern
The Directors have adopted the going concern basis in preparing the financial
statements. Details of the Directorsʼ assessment of the going concern status
of the Company, which considered the adequacy of the Companyʼs resources and
the impact of risks and uncertainties, including the Company's continuation
vote which the Board have proposed will be placed before Shareholders in
September 2024, are provided in the Interim Management Report which can be
found above.
Segmental Reporting
The chief operating decision-maker, which is the Board, is of the opinion that
the Company is engaged in a single segment of business, being investment in
renewable energy infrastructure assets to generate investment returns while
preserving capital. The financial information used by the Board to manage the
Company presents the business as a single segment.
Critical Accounting Judgements, Estimates and Assumptions
The preparation of the financial statements requires the application of
estimates and assumptions, which may affect the results reported in the
financial statements. Estimates, by their nature, are based on judgement and
available information.
The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying value of assets and liabilities are those
used to determine the fair value of the investments, as disclosed in note 3 to
the financial statements.
The Directors have concluded that the Company meets the definition of an
investment entity as defined in IFRS 10.
This conclusion involved a degree of judgement and assessment as to whether
the Company met the criteria outlined in the accounting standards.
The key assumptions that have a significant impact on the carrying value of
the Companyʼs underlying investments in the SPVs are the discount rates,
useful life of the assets, the rate of inflation, the price at which the power
and associated benefits can be sold, the amount of electricity the assets are
expected to produce and operating costs of the SPVs.
3. Investments at Fair Value through Profit and Loss
As at As at
30 June 31 December
2023 2022
(Unaudited) (Audited)
Investments at Investments at
Fair Value Fair Value
through Profit through Profit
or Loss or Loss
(EUR ʼ000) (EUR ʼ000)
(a) Summary of valuation
Analysis of closing balance:
Investments held at fair value through profit or loss 400,737 428,641
Total investments 400,737 428,641
(b) Movements during the period/year
Opening balance of investments, at cost 362,978 293,068
Purchases at cost - 71,369
Repayments during the period/year (3,813) (1,459)
Cost of investments 359,165 362,978
Revaluation of investments to fair value:
Unrealised gains in fair value of investments 41,572 65,663
Balance of capital reserve - investments held 41,572 65,663
Fair value of investments 400,737 428,641
(c) (Loss)/gains on investments in the period/year (per Statement of
Comprehensive Income)
Movement on unrealised valuation of investments held (24,091) 41,778
(Loss)/gains on investments (24,091) 41,778
Fair Value Investments
The Investment Adviser has carried out fair-market valuations of the SPV
investments at 30 June 2023 and the Directors have satisfied themselves as to
the methodology used, the discount rates and key assumptions applied, and the
valuation. All SPV investments are at fair value through profit or loss and
are valued using the IFRS 13 framework for fair value measurement.
The key assumptions that have a significant impact on the carrying value of
the Companyʼs underlying investments in SPVs are the discount rates, useful
life of the assets, the rate of inflation, the price at which the power and
associated benefits can be sold, the amount of electricity the assets are
expected to produce and operating costs of the SPVs.
The discount factors applied to the cash flows are reviewed annually by the
Investment Adviser to ensure they are at the appropriate level. The weighted
average valuation discount rate applied to calculate the SPV valuation is 7.2%
as at 30 June 2023 (31 December 2022: 7.2%).
Useful lives are based on the Investment Adviserʼs estimates of the period
over which the assets will generate revenue, which are periodically reviewed
for continued appropriateness. The assumption generally used for the useful
life of the wind farms is 25 to 30 years and solar PV is 40 years. The actual
useful life may be a shorter or longer period depending on the actual
operating conditions experienced by the asset.
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 SPV's valuation assumes long-term inflation rates
according to long-term central bank targets.
The price at which the output from the generating assets is sold is a factor
of both wholesale electricity prices and the revenue received from the
government support regime. Future power prices are estimated using external
third-party forecasts, which take the form of specialist consultancy reports.
The future power price assumptions are reviewed as and when these forecasts
are updated. There is an inherent uncertainty in future wholesale electricity
price projection. Power prices used in the valuation are based on market
forward pricing, and then a rolling average of capture rates.
The following assumptions were used in the valuations:
As at As at
30 June 31 December
2023 2022
Metric (Unaudited) (Audited)
Discount rate Weighted average 7.2% 7.2%
Long-term inflation Weighted average 2.0% 2.0%
Remaining asset life (weighted average)(1) Wind energy 22 years 22 years
Solar PV 39 years 29 years
Hydropower 10 years 10 years
1. Remaining asset life based on net full load years, does not consider
any potential asset life extensions.
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 significant to the fair
value measurement. Financial assets and financial liabilities are classified
in their entirety into only one of the following three levels:
Level 1
The unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable
(i.e. developed using market data) for the asset or liability, either directly
or indirectly.
Level 3
Inputs that are unobservable (i.e. for which market data is unavailable) for
the asset or liability.
The fair value of the Companyʼs equity and the Shareholder loans investments
in HoldCo are determined by the underlying fair values of the SPV investments,
which are not traded and contain unobservable inputs. As such, the Companyʼs
equity and the Shareholder loans investments in HoldCo have been classified as
Level 3.
The classification of the Companyʼs investments held at fair value is
detailed in the table below:
As at 30 June 2023
(Unaudited)
Level 1 Level 2 Level 3 Total
(EUR ʼ000) (EUR ʼ000) (EUR ʼ000) (EUR ʼ000)
Investments at fair value through profit and loss - - 400,737 400,737
- - 400,737 400,737
As at 31 December 2022
(Audited)
Level 1 Level 2 Level 3 Total
(EUR ʼ000) (EUR ʼ000) (EUR ʼ000) (EUR ʼ000)
Investments at fair value through profit and loss - - 428,641 428,641
- - 428,641 428,641
Due to the nature of the investments, they are always expected to be
classified as Level 3. There have been no transfers between levels during the
period ended 30 June 2023 (31 December 2022: nil).
The movement on the Level 3 unquoted investments during the period is shown
below:
As at As at
30 June 31 December
2023 2022
(Unaudited) (Audited)
(EUR ʼ000) (EUR ʼ000)
Opening balance 428,641 316,953
Additions during the period/year - 71,369
Repayments during the period/year (3,813) (1,459)
Unrealised gains on investments adjustments (24,091) 41,778
Closing balance 400,737 428,641
4. Income from Investments
Six months Six months
ended ended
30 June 2023 30 June 2022
(Unaudited) (Unaudited)
(EUR ʼ000) (EUR ʼ000)
Interest income from Shareholder loans 8,624 7,140
Bank interest income 32 -
Dividend income - 1,200
Total income 8,656 8,340
5. Investment Advisory Fees
Six months ended 30 June 2023 Six months ended 30 June 2022
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
(EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Investment advisory fees 1,496 - 1,496 1,522 - 1,522
Under the Investment Advisory Agreement, the following fee is payable to the
Investment Adviser:
a) 0.75 % per annum of NAV (plus VAT) of the Company up to EUR 300.0 million;
b) 0.65 % per annum of NAV (plus VAT) of the Company between EUR 300.0 million
and EUR 500.0 million; and
c) 0.55 % per annum of NAV (plus VAT) of the Company above EUR 500.0 million.
During the first two years of its appointment, the Investment Adviser has
undertaken to apply its fee (net of any applicable tax) in subscribing for, or
acquiring, the Company's Ordinary Shares. If the Ordinary Shares are trading
at a premium to the prevailing NAV, the Company will issue new Ordinary Shares
to the Investment Adviser. If, however, the Ordinary Shares are trading at a
discount to the prevailing NAV at the relevant time, no new Ordinary Shares
will be issued by the Company and instead the Company will instruct its broker
to acquire Ordinary Shares to the value of fee due in the relevant period. The
current Investment Adviser fee arrangement with Aquila Capital
Investmentgesellschaft mbH was extended whereby the Investment Adviser fee is
fully paid in the shares of the Company for additional two years until 30 June
2023.
The Investment Adviser is also entitled to be reimbursed for certain expenses
under the Investment Advisory Agreement. These include out-of-pocket expenses
properly incurred by the Investment Adviser in providing services, including
transactional, organisational, operating or travel expenses.
Share-based Payments
The Company settled investment advisory fees by issuing Ordinary Shares and
purchasing Ordinary Shares in the market. The Company has issued/purchased
the following shares to settle investment advisory fees for the period under
review:
Investment advisory fees (EUR) Fair value of issue price (EUR cents) Number of shares Issued/
Date of transaction Purchased
In respect of the period to 30 June 2023 (Unaudited)
31 March 2023 767,833 98.86 771,695 18 May 2023 Purchased
30 June 2023 728,290 87.00 831,701 7 August 2023 Purchased
Investment Fair value of
In respect of the period to 30 June 2022 (Unaudited) advisory fees issue price Number of Date of transaction Issued/
(EUR) (EUR cents) shares Purchased
31 March 2022 566,465 102.11 554,773 1 June 2022 Issued
31 March 2022 183,233 103.76 176,300 1 June 2022 Purchased
30 June 2022 772,650 101.00 760,053 8 August 2022 Purchased
6. Earnings/(Loss) Per Ordinary Share
Earnings per share is based on the loss for the period of EUR 17,592,000 (30
June 2022: profit of EUR 22,369,000) attributable to the undiluted weighted
average number of Ordinary Shares in circulation of 397,096,237 (30 June 2022:
407,601,334) and the diluted weighted average number of Ordinary Shares in
circulation of 397,096,237 (30 June 2022: 408,887,627) in the period to 30
June 2023. Revenue profit and capital loss are EUR 6,511,000 (30 June 2022:
EUR 5,940,000 profit) and EUR 24,103,000 (30 June 2022: EUR 16,429,000
profit), respectively.
Number of Ordinary Shares
As at 30 June As at 30 June
2023 2022
Weighted Average Number of Shares Used as the Denominator (Unaudited) (Unaudited)
Weighted average number of Ordinary Shares used as the denominator in 397,096,237 407,601,334
calculating basic earnings per share
The effect of settled investment advisory fees by issuing Ordinary Shares - 1,286,293
Weighted average number of Ordinary Shares and potential Ordinary Shares used 397,096,237 408,887,627
as the denominator in calculating diluted earnings per share
7. Taxation
Six months ended 30 June 2023 Six months ended 30 June 2022
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
(EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Corporation tax - - - - - -
Total tax charge for the period - - - - - -
Investment companies that have been approved by HM Revenue & Customs under
section 1158 of the Corporation Tax Act 2010 are exempt from tax on capital
gains. Due to the Company's status as an investment trust, and the intention
to continue meeting the conditions required to obtain approval in the
foreseeable future, the Company has not provided for deferred tax on any
capital gains or losses arising on the revaluation of investments.
8. Share Capital
As at 30 June 2023 As at 31 December 2022
(Unaudited) (Audited)
No. of shares (EUR ʼ000) No. of shares (EUR ʼ000)
Allotted, issued and fully paid Ordinary Shares of 1 cent each 408,225,705 4,082 408,225,705 4,082
Shares bought back and held in treasury (20,823,043) (208) - -
Total 387,402,662 3,874 408,225,705 4,082
There were no shares issued during the six months period to 30 June 2023.
On 3 February 2022, the Company issued 731,520 Ordinary Shares to the
Companyʼs Investment Adviser in relation to advisory fees payable for the
period ended 31 December 2021. In addition, on 9 June 2022, the Company issued
a further 554,773 Ordinary Shares to the Companyʼs Investment Adviser in
relation to advisory fees payable for the period ended 31 March 2022.
During the period under review, the Company purchased for treasury a total of
20,823,043 Ordinary Shares at an aggregate cost of EUR 20,091,000 (including
stamp duty and other fees) at an average price per Ordinary Share of 95.9
cents. There were no shares purchased for treasury during the year to 31
December 2022.
9. Net Assets Per Ordinary Share
Net assets per Ordinary Share as at 30 June 2023 is based on EUR 403,256,000
(31 December 2022: EUR 451,650,000) of net assets of the Company attributable
to the Ordinary Shares in issue as at 30 June 2023 of 387,402,662 (31 December
2022: 408,225,705).
10. Dividend Paid
Six months ended Six months ended
30 June 2023 30 June 2022
(Unaudited) (Unaudited)
Cents per Cents per
Ordinary Total Ordinary Total
Total dividends paid in the period Share (EUR '000) Share (EUR '000)
31 December 2022 interim - paid 17 March 2023 (2022: 11 March 2022) 1.3125c 5,335 1.2500c 5,096
31 March 2023 interim - paid 23 June 2023 (2022: 17 June 2022) 1.3775c 5,376 1.3125c 5,351
Total 2.6900c 10,711 2.5625c 10,447
The dividend relating to the period ended 30 June 2023, which is the basis on
which the requirements of section 1159 of the Corporation Tax Act 2010 are
considered, is detailed below:
Six months ended Six months ended
30 June 2023 30 June 2022
(Unaudited) (Unaudited)
Cents per Cents per Ordinary
Ordinary Total Share Total
Total dividends declared in the period Share (EUR '000) (EUR '000)
31 March 2023 interim - paid 23 June 2023 (2021: 17 June 2022) 1.3775c 5,376 1.3125c 5,351
30 June 2023 interim - paid 8 September 2023 (2021: 2 September 2022) 1.3775c 5,308 1.3125c 5,353
Total 2.7550c 10,684 2.6250c 10,704
11. Transactions with the Investment Adviser and Related Party Transactions
AIFM fees for the period ended 30 June 2023 amount to EUR 58,778 (30 June
2022: EUR 63,132). As at 30 June 2023, the fee outstanding to the AIFM was EUR
23,552 (30 June 2022: EUR 9,832). The AIFM, Company Secretary and
Administrator are part of the same PraxisIFM Group which was acquired by Sanne
Group plc, which was then subsequently acquired by Apex Group. The Company
Secretary and Administrator fees for the period ended 30 June 2023 amount to
EUR 123,774 (30 June 2022: EUR 134,000).
Fees payable to the Investment Adviser are shown in the Income Statement. As
at 30 June 2023, the fee outstanding to the Manager was EUR 728,282 (30 June
2022: EUR 772,798).
Fees are payable to the Directors for the year to 31 December 2022 at an
annual rate of EUR 75,000 to the Chairman, EUR 50,000 to the Chair of the
Audit and Risk Committee and EUR 43,000 to the other Directors. Directors'
fees paid during the year were EUR 169,000. With effect from 1 January 2023,
fees were increased by 5% for Mr MacLellan, Dr Rodrigues and Mr MacRitchie.
With effect from 1 January 2023, fees were paid at an annual rate of EUR
75,000 to the Chairman, EUR 52,500 to the Chair of the Audit and Risk
Committee and EUR 45,150 to the other Directors.
During the period, the Company advanced Shareholder loans to HoldCo of EUR nil
(30 June 2022: EUR 48,350,000). The accrued interest and the Shareholder loans
outstanding at the period end were EUR 244,638,000 (30 June 2022: EUR
247,284,518).
The Directors had the following shareholdings in the Company, all of which
were beneficially owned.
Ordinary Shares Ordinary Shares
as at as at
30 June 31 December
2023 2022
(Unaudited) (Audited)
Ian Nolan 150,000 100,000
David MacLellan 125,000 75,000
Kenneth MacRitchie 50,000 50,000
Patricia Rodrigues 50,000 50,000
12. Commitments and Contingencies
As at 30 June 2023, the Company's remaining outstanding commitment is a EUR
1.3 million milestone payment associated with the Guillena project (one of two
assets within the Greco portfolio). This payment was made upon receipt of the
Provisional Acceptance Certificate ("PAC") in September 2023, after the
reporting period, and was funded out of operating cash flows from the Greco
portfolio. The Company did not have any new investments or capital commitments
during the first six months of 2023 and continues to maintain investment
discipline when assessing new investment opportunities.
13. Distributable Reserves
The Company's distributable reserves consist of the special reserve and
revenue reserve. Capital reserve represents unrealised investments and as such
is not distributable.
The revenue reserve is distributable. The amount of the revenue reserve that
is distributable is not necessarily the full amount of the reserve as
disclosed within these financial statements of EUR 668,000 as at 30 June 2023
(31 December 2022: EUR 1,225,000).
14. Subsidiaries, Associates and Other Entities
The following table shows subsidiaries of the Company. As the Company is
regarded as an investment entity as referred to in note 2, these subsidiaries
have not been consolidated in the preparation of the financial statements.
Profit/(Loss)
Profit/(Loss) for the year Total assets
for the period ended Total assets balances as at
Subsidiary entity ended 31 December balances as at 31 December
name and Effective Country of 30 June 2023 2022 30 June 2023 2022
registered address ownership % Investment incorporation (EUR million) (EUR million) (EUR million) (EUR million)
Tesseract Holdings Limited Leaf B, 20th Floor, Tower 42 Old Broad Street 100.0 HoldCo Subsidiary entity, owns underlying SPV investments United Kingdom (28.5) 43.0 156.1 180.2
London EC2N 1HQ
The following table shows the investments held via SPVs which are held by
Tesseract Holdings Limited, the Company's wholly owned subsidiary.
Profit/(Loss)for the year
Profit/(Loss) ended Total assets balances as at 31 December 2022 (EUR million)
Subsidiary entity name and registered address for the period 31 December Total assets
ended 2022 balances as at 30 June 2023 (EUR million)
Effective Country of incorporation 30 June 2023 (EUR million) (EUR million)
ownership % Activity
Holmen II Wind Park ApS 100.0 Subsidiary entity, owns investment in Holmen II Denmark 9.9 DKK 4.3 182.8 DKK 27.2
Københavnsvej 81
4000 Roskilde
Denmark
Aalto Wind No 2 Ltd. Oy 100.0 Subsidiary entity, owns investment in Olhava Finland 1.1 (0.0) 48.6 53.0
c/o Intertrust (Finland) Oy
Bulevardi 1, 6th floor
FI-00100 Helsinki, Finland
Prettysource Lda Avenida Fontes Pereira de Melo, n.º 14 100.0 Subsidiary entity, owns investment in Benfica III Portugal 0.0 0.1 4.4 4.2
11.º floor, 1050 121 Lisbon
Astros Irreverentes 100.0 Subsidiary entity, owns investment in Benfica III Portugal 0.0 0.1 4.4 4.2
Unipessoal Lda Avenida Fontes Pereira de Melo,
n.º 14
11.º floor, 1050 121 Lisbon
Contrate o Sol 100.0 Subsidiary entity, owns investment in Benfica III Portugal 0.0 0.2 2.1 2.1
Unipessoal Lda
Rua Filipe Folque
no. 10J, 2 Dto, 1050-113
Lisbon
Argeo Solar S.L. Paseo de la Castellana 100.0 Subsidiary entity, owns investment in Albeniz Spain (1.4) (1.7) 37.5 40.2
259D, 14S-15, Madrid
Spain
Vector Aioliki Desfinas S.A. 89.0 Subsidiary entity, owns investment in Desfina Greece 0.3 2.2 52.4 56.7
Salaminos Str. 20
15124 Maroussi
Attica, Greece
Ega Suria S.L. 100.0 Subsidiary entity, owns investment in Tiza Spain 0.4 0.4 27.9 24.1
Paseo de la Castellana 259D
Floors 14 and 15
28046 Madrid
Azalent Investment S.L. 100.0 Subsidiary entity, owns investment in Greco Spain 0.1 (0.4) 99.5 52.4
Paseo de la Castellana 259D
Floors 14 and 15
28046 Madrid
Svindbaek Vindkraft 100.0 Subsidiary Denmark 0.4 2.1 36.9 37.5
HoldCo ApS entity, owns investment in Svindbaek
Gyngemose Parkvej 50
2860 Søborg
2860 Søborg
The following table shows associates of the Company. The Company's investments
in associates are held through HoldCo.
Profit/(Loss)
Profit/(Loss) for the year Total assets
for the period ended Total assets balances as at
Associate entity ended 31 December balances as at 31 December
name and Effective Country of 30 June 2023 2022 30 June 2023 2022
registered address ownership % Activity incorporation (EUR million) (EUR million) (EUR million) (EUR million)
Palea Solar Farm 50.0 Associate Portugal 0.5 (0.4) 51.7 51.3
Ourique S.A entity, owns
Avenida Fontes equity
Pereira de Melo, investment in
no. 14, 11. Andar Ourique
1050-121 Lisbon Portugal
Midtfjellet Vindkraft AS 25.9 Associate Norway (9.7) NOK 132.0 NOK 958.9 NOK 1,069.7 NOK
Sandvikvågvegen 45 entity, owns
N-5419 Fitjar, Norway equity
investment
in Tesla
As disclosed in note 3, the Company finances the HoldCo through a Shareholder
loan and equity. The Shareholder loan accrues at an interest rate of 7.0%.
HoldCo finances its SPV investments through a mix of Shareholder loans and
equity. The Shareholder loans accrue at an interest rate range of 2.5% to
9.75%.
There are no restrictions on the ability of the Companyʼs subsidiaries and
associatesʼ entities to transfer funds in the form of interest and dividends.
15. Post Balance Sheet Events
Share Buyback Programme
Since the period end and as at 19 September 2023, being the latest practical
date prior to the release of these accounts, the Company had purchased for
treasury a total of 6 million Ordinary Shares at an aggregate price of EUR 5.1
million at an average price per Ordinary share of 85.0 cents.
New Board Member
On 1 September 2023, Myrtle Dawes was appointed as an additional Board member.
16. Status of this Report
These interim financial statements are not the Companyʼs statutory accounts
for the purposes of section 434 of the Companies Act 2006. They are unaudited.
The unaudited Interim Financial Report will be made available to the public at
the Companyʼs registered office. The report will also be available in
electronic format on the Companyʼs website,
www.aquila‑european‑renewables.com.
The information for the year ended 31 December 2022 has been extracted from
the last published audited financial statements, unless otherwise stated. The
audited financial statements have been delivered to the Registrar of
Companies. PricewaterhouseCoopers LLP reported on those accounts and their
report was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under sections 498(2) or 498(3) of
the Companies Act 2006.
The Interim Financial Report was approved by the Board on 26 September 2023.
ALTERNATIVE PERFORMANCE MEASURES
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 less than
the net asset value per Ordinary Share.
As at 30 June 2023
NAV per Ordinary Share (cents) a 104.1
Share price (cents) b 89.5
Discount (b÷a)-1 (14.0%)
Ongoing Charges
A measure, expressed as a percentage of average net assets, of the regular,
recurring annual costs of running an investment company.
As at 30 June 2023
Average NAV (EUR '000) a 418,009
Annualised expenses (EUR '000) b 4,312
Ongoing charges (b÷a) 1.0%
Total Return
A measure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company into the Ordinary Shares of the Company on the ex-dividend date.
As at 30 June 2023 Share price NAV
Opening at 1 January 2023 (cents) a 92.3 110.6
Dividend adjustment b 2.7 2.7
Closing at 30 June 2023 (cents) c 89.5 104.1
Total return ((b+c)÷a)-1 (0.1%) (3.5%)
Dividend Cover
Dividend cover ratio calculation based on net results generated at the SPVs
adjusted for the Company level expenses during the period:
Period ended Period ended
30 June 30 June
2023 2022
Net result generated at the SPVs (EUR '000) a 12,806 14,675
Dividend paid (EUR '000) b 10,711 10,447
Dividend cover ratio a÷b 1.2x 1.4x
Dividend cover ratio calculation based on the consolidated cash flow of the
Company and its HoldCo:
Period ended Period ended
30 June 30 June
2023 2022
Adjusted net cash flow from operating activities (EUR '000) a 12,080 13,346
Dividend paid (EUR '000) b 10,711 10,447
Dividend cover ratio a÷b 1.1x 1.3x
Gross Asset Value
The Company's gross assets comprise the NAV of the Company's Ordinary Shares
and the debt at the underlying SPV level, with the breakdown as follows:
Period ended Period ended Year ended
30 June 30 June 31 December
2023 2022 2022
Net Asset Value (EUR '000) a 403,256 430,630 451,650
Debt at the SPV level (EUR '000) b 126,291 140,310 131,203
RCF drawn (EUR '000) c 69,349 - 24,000
Gross Asset Value (EUR '000) a+b+c 598,896 570,939 606,853
Gearing
The Company's gearing is calculated as total debt as a percentage of Gross
Asset Value
Period ended Period ended Year ended
30 June 30 June 31 December
2023 2022 2022
Gross Asset Value (EUR '000) a 598,896 570,939 606,853
Debt at the SPV level (EUR '000) b 126,291 140,310 131,203
RCF drawn (EUR '000) c 69,349 - 24,000
Gearing ratio (b+c)÷a 32.7% 24.6% 25.6%
ENDS
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