REG - Aquila Eur Renwables Aquila Euro Rnw-AERI - Final Results
25/04/2024 07:00
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RNS Number : 9415L Aquila European Renewables PLC 25 April 2024
AQUILA EUROPEAN RENEWABLES PLC
(the "Company", the "Fund" or "AER")
LEI Number: 213800UKH1TZIC9ZRP41
Final Results
We are pleased to present the results for the year ended 31 December 2023.
Highlights
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.
Highlights
· Dividend cover of 1.1x (1.6x before debt amortisation). Robust
dividend cover of 1.3x expected over the next five years(1).
· 2024 target dividend guidance of 5.79 cents (5.0% increase on
2023)(2).
· Attractive dividend yield of 7.4%(3).
· EUR 49.0 million of capital returned to shareholders in the form of
dividends and share buybacks over 2023, reducing total Ordinary Shares in
issue by 7.4%.
· Active portfolio management delivered 4.6 cents per Ordinary Share
in valuation uplift.
· In April 2023, the Company extended the maturity date of the
Revolving Credit Facility ("RCF") by twelve months to April 2025.
· Completion of 154.8 MW of construction assets, resulting in a fully
operational portfolio.
· On 1 September 2023, Myrtle Dawes was appointed as an additional
Board member of the Company. Ms Dawes has over 30 years of experience in the
energy sector.
· In October 2023, the Company completed a secondary listing on the
Euronext Growth Dublin stock exchange, further enhancing its marketability in
Europe.
· In December 2023, the Board responded to the receipt of unsolicited
proposals from Octopus Renewables Infrastructure Trust plc ("ORIT") in
relation to a possible combination under section 110 of the Insolvency Act
1986 and confirmed it would consider the combination proposed by ORIT as part
of a review of broader options already underway.
· Members of the Board of Directors and the Investment Adviser
acquired AER Ordinary Shares.
Subsequent Events
· On 11 January 2024, AER entered into a EUR 50 million(4) five-year
debt facility with ING Bank N.V. Sucursal en España, secured by its 180 MWp
Spanish solar PV operating portfolio. Net proceeds were used to repay part of
the Revolving Credit Facility ("RCF").
· On 15 January 2024, the Company's inaugural ESG Report was released
on the Company's website, highlighting key metrics, environmental and social
initiatives.
· On 18 January 2024, the Investment Adviser, Aquila Capital,
announced a strategic partnership with Commerzbank AG aimed at significantly
accelerating its growth into one of the leading asset managers for sustainable
investment strategies in Europe(5).
1. Dividend cover presented is net of project debt repayments, excludes
the impact of any future share buybacks and assumes the 2024 target dividend
is paid in 2024 to 2028. 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. Dividend yield is calculated by dividing the target dividend of 5.79
cents per Ordinary Share for 2024 by the market share price as at 31 December
2023.
4. Excludes any ancillary debt facilities (debt service reserve and
letter of credit facilities). See below for more details.
5. See below for more details.
Financial Information As at As at
31 December 31 December
2023 2022
Net assets (EUR million) 372.5 451.7
NAV per Ordinary Share (cents)(1) 98.5 110.6
Total NAV return per Ordinary Share(1,2) (6.0%) 12.9%
Dividends per Ordinary Share (cents)(3) 5.51 5.25
Ordinary Share price (cents) 78.5 92.3
Ongoing charges(1,5) 1.1% 1.1%
Dividend yield(4) 7.4% 5.7%
Dividend cover 1.1x 1.4x
Ordinary Share price discount to NAV(1) (20.3) (16.6%)
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 average NAV over the period and regular
recurring annual operating costs of the Company, further details can be found
below.
5. Dividend yield is calculated by dividing the target dividend of 5.79
cents per Ordinary Share for 2024 by the market share price as at 31 December
2023.
6. Calculation based on the operational result at special purpose
vehicle ("SPV") level. Please see below for further details.
OVERVIEW
AER 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 clean energy transition.
· Highly experienced Investment Adviser:
o Managing a 25.7 GW clean energy portfolio(1).
o EUR 24.8 billion development and construction pipeline¹.
· 2030 Aquila Capital target of avoiding 1.5 billion tonnes of CO(2)
during its lifetime(2).
Positioning
· European focused (excl. UK), diversified by geography and
technology.
· Strong dividend cover supported by contracted revenues (PPAs,
Government regulated tariffs) to ensure earnings visibility and a diversified
operating portfolio.
· Modest gearing levels (approx. 34.3%) provides flexibility(3).
Returns
· Target investment return of 6.0% to 7.5%, net of fees and expenses,
over the longer term.
· Portfolio levered discount rate of 7.2% excluding fund level
leverage(4).
· Trading at a 20.3% discount to NAV(5).
· Disciplined capital allocation: EUR 27.8 million(6) returned in
share buybacks over 2023.
· Attractive dividend yield of 7.4%(7).
· NAV total return since IPO of 20.8%(8).
1. Data as at 31 December 2023, including historical divestments.
2. According to the 'GHG Accounting for Grid Connected Renewable Energy
Projects' of the 'International Financial Institution's 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, available at:
https://www.aquila-capital.de/en/disclaimer-co2-lifetime-avoidance-clock
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. Fund level leverage assumes drawn RCF debt of EUR 74.7 million.
Discount rate excludes the impact of the solar PV financing which closed in
January 2024.
5. Based on the share price as at 31 December 2023 (78.5 cents) and the
NAV per Ordinary Share as at 31 December 2023 (98.5 cents).
6. Excluding fees and stamp duty.
7. Dividend yield is calculated by dividing the target dividend of 5.79
cents per Ordinary Share for 2024 by the market share price as at 31 December
2023.
8. Based on an opening NAV after launch expenses of EUR 0.98 per
Ordinary Share. Calculation includes dividends paid during the period.
For further details contact:
Media contacts:
Edelman Smithfield
Ged Brumby | 020 3047 2527
Kanayo Agwunobi | 020 3047 2126
Sponsor, Broker and Placing Agent
Numis Securities 020 7260 1000
Tod Davis
David Benda
George Shiel
Chairman's statement
On behalf of the Board of Directors, I am pleased to present the Annual Report
and Financial Statements of Aquila European Renewables Plc, our fourth full
set of accounts since listing.
Introduction
Despite a challenging macro-economic environment, marked by a convergence of
high inflation, substantial interest rate increases, supply chain disruptions
and falling commodity and electricity prices, the Company's diversified
operating portfolio continued to deliver strong cash flows to cover a
progressive dividend.
Nonetheless, the deteriorating macro-economic conditions in 2023 widened the
Company's share price discount to NAV, a problem that is shared by our peer
group of renewable energy investment trusts. Against this backdrop, in May
2023, the Board and the Investment Adviser commenced a series of initiatives
designed to secure greater appreciation of the value inherent in the
portfolio. Since then, I am pleased to note that AER has made significant
progress in implementing many of these initiatives.
Key Initiatives
One of the initiatives outlined in May 2023 was a further programme of share
buybacks, where the Company was able to return EUR 27.8 million¹ to
shareholders at an average price of 92.3 cents per Ordinary Share,
representing an average discount of 15.8%, reducing total Ordinary Shares in
issue by 7.4% and resulting in NAV accretion of 1.4 cents per share. The
implementation of this programme is a sign of our confidence in the underlying
value of the existing portfolio and recognition that buying back at a discount
offered a better return on capital than was achievable on new investment
opportunities in 2023, whilst also providing additional short-term liquidity
to investors. Share buybacks continue to remain a tactical, rather than a
strategic, response to the Company's valuation discount, given the timing of a
rebound in sector share prices remains unknown.
On 2 October 2023, AER was admitted to trading on the Euronext Growth Dublin
stock exchange, achieving another key initiative of securing a secondary
listing. Under the ticker AERI, the listing is intended to further enhance the
Company's marketability in Europe, given its euro currency denomination and
European-focused investment strategy.
Another key objective was the rollout of asset life extensions following the
completion of due diligence by the Company's advisers across the portfolio(2),
resulting in a NAV uplift of 4.6 cents per Ordinary Share during the reporting
period. The average asset, life assumptions for the solar portfolio were
increased from 30 years to 40 years, and those of the wind portfolio from 25
years to an average of 28 years, in line with industry standards and a
reflection of the quality of the asset portfolio.
Subsequent to the year end, the Company, via its wholly owned subsidiaries,
also secured a EUR 50.0 million five-year debt financing for its 180 MWp
unlevered Spanish solar PV operating portfolio. We are pleased the debt
financing was secured at attractive terms, with an all-in interest rate below
that of the existing RCF. Net proceeds from the debt financing, which was
drawn in January 2024, were used to repay the RCF, resulting in available
capacity under the RCF of circa EUR 68.2 million (current facility limit: EUR
100.0 million). Consequently, the Company's overall gearing level remains
unchanged at approximately 34.3% of its GAV(3).
Notwithstanding the progress achieved with these initiatives, the share price
continues to trade at a significant discount to NAV. Your Board has previously
announced that it was committed to reviewing broader options if the underlying
value of the portfolio failed to be reflected in the share price.
In December 2023, the Board responded to the receipt of unsolicited proposals
from Octopus Renewables Infrastructure Trust plc ("ORIT") in relation to a
possible combination under section 110 of the Insolvency Act 1986 and
confirmed it would consider the combination proposed by ORIT as part of a
review of broader options which was already underway.
In support of the Board's evaluation of options for the future of the Company,
I have had the opportunity to engage with a number of our shareholders. Whilst
feedback in relation to the quality of the portfolio and the Investment
Adviser has been positive, a number of shareholders feel that the status quo
is undesirable in the current macro environment, as the Company is limited in
its ability to grow and improve the underlying liquidity of its shares.
The Board's review of broader options, including consideration of a variety of
proposals that have been received for a combination with the Company under
section 110 of the Insolvency Act 1986, is underway and it expects to be able
to update shareholders regarding progress before the end of June 2024.
Performance
During the reporting period, total revenue was below budget due to declining
short-term electricity spot market prices across most of the portfolio's
markets, reflecting the fall in commodity prices, lower demand due to
milder‑than‑expected temperatures in Europe and elevated filling levels
of gas storage reservoirs. The portfolio's production was 9.4% below budget,
primarily as a result of below-average wind speeds in the Nordics, despite the
Company's solar PV and hydropower assets performing in line with or above
expectations during the period.
The dividend paid in 2023 amounted to EUR 21.2 million and was fully covered
at 1.1x. When combined with the EUR 27.8 million(1) share buyback, the Company
has returned EUR 49.0 million to shareholders over 2023. Since the IPO in June
2019, the Company has returned EUR 94.9 million to shareholders in the form of
dividends and share buybacks. The Company's NAV per Ordinary Share was 98.5
cents as at 31 December 2023, resulting in a total NAV return per Ordinary
Share of -6.0%, including dividends during the period. Movement in the NAV was
primarily the result of a combination of the development of power price
curves, buybacks and the introduction of the resource rent tax ("RRT") in
Norway(2). AER's annualised total NAV return per Ordinary Share (including
dividends paid) from IPO to 31 December 2023 was 4.3%.
The Board has set a target dividend for 2024 of 5.79 cents per Ordinary Share,
equivalent to a 5.0% increase compared to the dividend target set for 2023, on
the basis that the operating performance and cash flow of the Company is in
line with expectations. The target dividend is expected to be fully covered.
ESG
The Company contributes to the UN Sustainable Development Goals to ensure
access to affordable, reliable, sustainable and modern energy for all. In
October 2023, we announced our third GRESB ("Global Real Estate Sustainability
Benchmark") assessment results for the year, with a score of 92 out of 100,
representing an improvement compared with last year's result, which is also
higher than the GRESB average of 88 points amongst the Company's peer group.
The Company's GRESB rating also increased from three out of five stars to four
out of five stars as a result of improvements in categories such as ESG
reporting, risk management and stakeholder engagement. We look forward to
keeping shareholders updated on further progress throughout the year.
The Board was pleased to release the Company's inaugural ESG Report in January
2024, highlighting key metrics, environmental and social initiatives that
illustrate the breadth of action that the Company has taken across its
portfolio. Full details of the Company's approach to combatting climate
change, enhancing biodiversity of flora and fauna, boosting regional and local
community engagement, ensuring sustainable supply chain management and
best-practice labour standards, as well as other environmental and social
topics, can be found in this dedicated report.
Director Appointment
As announced in this year's Interim Results, Myrtle Dawes joined the Board of
Directors on 1 September 2023 as our newest non‑executive Director, serving
as a member of the Remuneration and Nomination Committee and the Audit and
Risk Committee. Ms Dawes, 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
a non-executive Director at FirstGroup plc.
Investment Adviser
The Board is pleased to note the Investment Adviser announced a strategic
partnership with Commerzbank AG on 18 January 2024 aimed at significantly
accelerating the Investment Adviser's growth into one of the leading asset
managers for sustainable investment strategies in Europe(2).
Post the year end, Lars Meisinger, Head of International Sales and Business
Development, has left the Investment Adviser to take up a senior role in the
property sector; his duties have been reassigned internally and the Board
would like to thank him for his service.
Regulatory Changes
2023 saw sustained efforts from the European Union ("EU") to accelerate the
deployment of renewables, with an agreement to reform the bloc's electricity
market design, plans to enhance the competitiveness of the Eurozone's wind
industry, the raising of renewable energy targets for 2030 to 42.5% of the
overall electricity mix, the Net Zero Industry Act for EU manufacturing and
continued emphasis on the implementation of ten-year National Energy and
Climate Plans ("NECPs") by all member states.
It is expected that these proposals will incentivise further expansion of
renewables in Europe. As the EU pursues its goal of energy independence and
its net zero targets, we remain optimistic for the future of the sector and
see further opportunities for investment as more renewable energy
infrastructure developers ramp up capital recycling programmes.
In contrast to the EU's pro-renewables policies, the Norwegian Parliament
passed a series of legislative changes to taxes applicable to existing and new
onshore wind farms, effective from 1 January 2024, including a resource rent
tax of 25% on all onshore wind farms, which was disappointing from an
environmental perspective. These tax changes were reflected in the fourth
quarter valuations of the Company's Norwegian wind farms, The Rock and
Tesla(3). Note the analyst power price forecasts used to support the Q4
valuations of The Rock and Tesla do not include any potential impact of
Norway's resource rent tax on the country's medium and long-term power price
forecasts, which may need to reflect the likely outcome of the tax on future
build-out of much-needed renewable energy capacity in the country.
Outlook
We expect the macro-economic environment for 2024 to benefit from several
positive cyclical catalysts, with the core assumption being that inflation in
the European Union will continue to recede in the coming months. The easing of
significant price increases across the board witnessed in 2022 and 2023 should
lead to a further fall in inflation towards the European Central Bank's
inflation target of 2.0%. However, many trends including ageing demographics
in the labour market, de-globalisation, energy shortages, disrupted supply
chains, and higher defence spending as a result of the continued conflict in
Ukraine, will ensure that inflation remains elevated compared to the last
decade. Against this backdrop, in the absence of any exogenous events that
could derail assumptions on inflation or the global economic situation, the
market consensus is that central banks should begin to cut interest rates this
year, reversing the steepest tightening cycle in over 40 years. Lower interest
rates have the effect of reducing the discount rate applied to the DCF
valuation of assets, thus increasing value - all other things being equal.
The past year also saw accelerated European and national deployment plans for
renewables across most countries the Company is invested in, as governments
recognise the urgency of renewable energy developments as a source of energy
security and environmental progress, while also signalling increased stability
and visibility over the regulatory landscape. Combined with a more favourable
interest rate outlook, we expect this to bode well for the renewable energy
sector.
Your feedback as shareholders is highly valued and we hope our actions since
the Annual General Meeting ("AGM") in June 2023, including the announced
review of broader options, demonstrate we are listening and will continue to
act decisively in the interests of all shareholders. Finally, following the
inaugural continuation vote put to shareholders at the last AGM, your Board
committed to providing shareholders, notwithstanding the outcome of the
ongoing review of broader options, with a further opportunity to vote on the
future of the Company by September 2024.
Ian Nolan
Chairman
24 April 2024
1. Excluding fees and stamp duty.
2. See below for more details.
3. See below for more details on key regulatory changes.
INVESTMENT ADVISER'S REPORT
Leader in Investment and Asset Management in European Renewables
Overall CO(2)e emissions avoided(1)
2.4 million tonnes
Clean energy produced(1)
8.2 TWh
Households supplied(1)
2.3 million
INVESTMENT ADVISER BACKGROUND(1)
Aquila Capital Investmentgesellschaft mbH ('Aquila Capital') is one of the
leading investment and industrial development company, managing over EUR 14.6
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 clean
energy transition and creating a more sustainable world. As at 31 December
2023, the Investment Adviser manages wind energy, solar PV, hydropower energy
and battery storage assets with a capacity of approximately 25.7 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 expert investment teams comprise 750 employees
worldwide. Moreover, the strategic partnership entered into 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 19 investment offices. The
Investment Adviser currently has a significant pipeline of over 17.5 GW(3) 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 ("PPAs"),
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 32 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, has appointed Aquila Capital as its
Investment Adviser for 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. Figures presented in this section refer to Aquila Group.
2. Data as at 31 December 2023 for the year 2023, based on current
portfolio of the Aquila Group. For details on the methodology for avoided
emissions, refer to:
https://www.aquila-capital.de/fileadmin/user_upload/PDF_Files_Whitepaper-Insights/20231121_LAE_White_paper_EN.pdf
3. Data as at 31 December 2023, including historical divestments.
The Investment Adviser announced a strategic partnership with Commerzbank AG
on 18 January 2024 - aimed at significantly accelerating the Investment
Adviser's growth into one of the leading asset managers for sustainable
investment strategies in Europe. Commerzbank is a major listed European
banking institution serving a diverse client base of around 26,000 corporate
client groups and nearly 11 million private and corporate clients, with a
global presence in more than 40 countries. As part of this partnership,
Commerzbank will acquire a 74.9% stake in the Investment Adviser, whilst
ensuring the continued managerial independence of the Investment Adviser,
which will remain autonomous in terms of operations, investment decisions,
product development and brand representation. The parent company of the
Investment Adviser, Aquila Group, will remain engaged as a shareholder with
its remaining 25.1% shareholding. The existing asset management team
responsible for AER will remain unchanged. The transaction is subject to the
required regulatory approvals and is expected to close in the second quarter
of 2024(1). Post the year end, Lars Meisinger, Head of International Sales and
Business Development, has left the company to take up a senior role in the
property sector. His duties have been reassigned internally and the Company
thanks him for his service.
Wind energy
4,702 MW
1,010 WTGs
Solar PV
15,733 MWp
370 PV parks
Hydropower
1,050 MW
295 plants
Energy storage systems
4,190 MW
15 projects
19 Offices
1. Aquila Capital, 'Aquila Capital Investmentgesellschaft and
Commerzbank join forces: Aim to create a leading European asset manager for
sustainable investment strategies' (2024), available at:
https://www.aquila-capital.de/en/investments/details/aquila-capital-investmentgesellschaft-and-commerzbank-join-forces-aim-to-create-a-leading-european-asset-manager-for-sustainable-investment-strategies
(https://www.aquila-capital.de/en/investments/details/aquila-capital-investmentgesellschaft-and-commerzbank-join-forces-aim-to-create-a-leading-european-asset-manager-for-sustainable-investment-strategies)
2. Data as at 31 December 2023, including historical divestments.
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) 24.2% Jul-19
Holmen II Denmark 18.0 MW Operational 2018 25y Vestas FiP Energie.dk 100.0% 30.7% Jul-19
Olhava Finland 34.6 MW Operational 2013-2015 30y Vestas FiT Finnish Energy 100.0% 31.8% Sep-19
Svindbaek Denmark 32.0 MW Operational 2018 29y Siemens FiP Energie.dk 99.9% 15.7% Dec-19 & Mar-20
The Rock Norway 400.0 MW Operational 2022 30y Nordex PPA Alcoa 13.7%(6) 52.8% Jun-20
Desfina Greece 40.0 MW Operational 2020 25y Enercon FiP DAPEEP 89.0%(7) 53.9%(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.a.(5) Various FiT EDP/Renta 18.0%6 22.9% Jul-19
Total (AER Share) 463.8 MW
1. Installed capacity at 100% 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 below.
4. Leverage level calculated as a percentage of debt plus fair value as
at 31 December 2023. Leverage figures exclude the solar PV debt financing
which closed in January 2024.
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 approximately 91.5%.
8. Calculation based on voting interest.
Portfolio Updates as at 31 December 2023
154.8 MW(1) of construction projects completed in 2023
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 of January 2024, The Rock's anti-icing system has been operational at 69
out of 72 turbines. The anti-icing system of the remaining three turbines is
expected to be installed before the next winter season commences.
The Sami appraisal case is expected to be heard before the Helgeland District
Court on 27 May 2024. In March 2024, the Norwegian Ministry of Energy made a
final decision with regard to the mitigating measures for The Rock that must
be undertaken by the project company to facilitate reindeer migration. Further
details of the mitigating measures can be found in the Company's Regulatory
News Service issued on 22 March 2024. The Ministry noted in its decision that
for several seasons, reindeer have been migrated through the site during the
operational phase of The Rock, supporting the Ministry's view that (i) the
migration path cannot be considered closed; and (ii) the implementation of
mitigating measures will have a positive contribution to the migration of
reindeer through the site.
The Investment Adviser welcomes the decision by the Ministry, which it
believes will be an important factor in the upcoming appraisal case. As
communicated with shareholders previously, Eolus, the developer of The Rock,
remains responsible for handling the appraisal case and for the economic
impact on the project company associated with the outcome of that case, as
well as the economic impact associated with the mitigation measures noted
above. The Company will continue to keep shareholders updated regarding any
key developments.
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. A ruling on this arbitration case is expected in the
fourth quarter of 2024.
Jaén and Guillena
Country: Spain
Date acquired: March 2022
Status: Operational
Capacity: 100.0 MWp
Interest: 100.0%
A key milestone has been 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 long‑term PPAs signed
during favourable market conditions in 2022.
The contracts commenced in April 2023 and August 2023, respectively.
Completion of Guillena and The Rock has resulted in a valuation uplift of 3.7%
(EUR 5.3 million, 1.4 cents per Ordinary Share) versus cost as at 31 December
2023². Following the completion of this project, the Company has no further
construction projects within its portfolio.
1. AER share.
2. Q4 2023 net asset value minus acquisition costs, capital expenditure,
plus distributions paid up to 31 December 2023.
As at 31 December 2023, the Company had no material outstanding commitments.
The Company did not have any new investments and capital commitments in 2023
and continues to maintain investment discipline when assessing new investment
opportunities. The Company deemed that repurchasing shares at a discount over
the course of 2023 offered a higher return on capital than was achievable by
investing in new assets, whilst also signalling confidence in the underlying
value of the existing portfolio.
CONTRACTED REVENUE POSITION
Contracted revenue net present value(1) EUR 225.8m
Contracted revenue over the next five years(3) 52.0%
Contracted revenue (aggregate over asset life)(2) EUR 335.2m
Weighted average contracted revenue life(4) 10.2 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 remained constant at 52.0% (31 December 2022: 51.9%), noting that
a number of existing contracts are expected to progressively expire over this
time period.
The Company and its Investment Adviser intend to replace these expiring
contracts with new PPAs over time, subject to prevailing market conditions.
During 2023, two new PPAs became active within the Greco portfolio (Jaén and
Guillena) following their signing in 2022, coinciding with the operational
status of both projects. 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 10.2 years(4) (31 December
2022: 10.8 years(4)). The Company contracts its revenues with investment grade
counterparties, consisting of government entities, utilities and corporate
entities
1. Net present value of contracted revenue as at 31 December 2023 over
the entire asset life, discounted by the weighted average portfolio discount
rate.
2. Aggregate contracted revenue over entire asset life (not discounted).
Forecast asset revenue from 1 January 2024 to 31 December 2028 which is
discounted by the weighted average portfolio discount rate as at 31 December
2023, includes Guarantees of Origin ("GoOs") and Electricity Certificates
("El-Certs").
3. New weighting methodology based on hedged production.
FINANCIAL PERFORMANCE¹
Performance(2)
Electricity Production (GWh)
Technology Region 2023 2022 Variance (%) Variance 2023 against P50 Budget
Wind energy Denmark, Finland, Norway, Greece 508.5 440.8 15.4% (16.2%)
Solar PV Portugal, Spain 402.6 187.5 114.8% (1.7%)
Hydropower Portugal 60.8 38.2 59.3% 7.1%
Total 971.9 666.4 45.8% (9.4%)
Load Factors
Technology 2023 2022
Wind energy 26.3% 31.9%
Solar PV 20.7% 18.9%
Hydropower 35.8% 22.5%
Total 25.9% 27.1%
Technical Availability(3)
Technology 2023 2022
Wind energy 94.0% 96.6%
Solar PV 99.8% 99.9%
Hydropower 98.3% 99.2%
Total 97.0% 97.5%
Revenues(4) (EUR million)
Technology 2023 2022 Variance (%)
Wind energy 32.0 46.2 (30.6%)
Solar PV 23.7 12.2 94.4%
Hydropower 6.1 4.8 27.0%
Total 61.8 63.2 (2.1%)
The Company's portfolio increased production by 45.8% over 2023 compared to
2022, with electricity produced amounting to 971.9 GWh (2022: 666.4 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 285.9 GWh of production to the
portfolio in the period and represent approximately 29.4% of total production
in 2023.
Over 2023, revenue was 15.1% 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
affected due to increased interconnection links to Germany and the United
Kingdom, placing further downward pressure on prices in the region.
1. Some totals may not add up due to rounding differences.
2. 2023 data: includes Guillena from April 2023; Desfina data based on
economic share (91.5% as at 31 December 2023). 2022 data: includes Tiza from
March 2022, Albeniz from June 2022 and The Rock and Jaén from November 2022.
Desfina data based on voting share (89.0%), except for revenues, which were
based on economic share (93.0% as at 31 December 2022).
3. Average technical availability based on weighted installed capacity
(AER share).
4. Includes merchant revenue, contracted revenue and other revenue (e.g.
Guarantees of Origin, Electricity Certificates).
Production performance during the reporting period was 9.4% below budget, due
to below-average wind speeds in the Nordics and underperformance at the
Norwegian wind farm The Rock (performance -5.3% excluding the impact of The
Rock), especially between June and October 2023. The solar PV portfolio's
production was broadly in line with budget over the year. Production at the
Company's hydropower asset, Sagres, benefited from high water availability
throughout the second half of the year and ended the year above budget.
Average portfolio technical availability fell marginally from 97.5% in 2022 to
97.0% in 2023, as a result of gearbox replacements, icing losses and
substantial repairs on the Anti-Icing System ("AIS"). As of January 2024, The
Rock's anti-icing system has been operational at 69 out of 72 turbines,
whereas all ten damaged gearboxes have been replaced. The AIS of the remaining
three turbines is expected to be installed before the next winter season will
commence. One turbine saw its rotor fall off in January 2024 due to
storm-related wind speeds surpassing the maximum operational limit of 26 m/s
for wind farms and will be replaced before the next winter season commences.
Icing-related availability losses are not expected to re-occur in the next
winter season. Compensation from the Operations and Maintenance ("O&M")
provider, Nordex, under the existing availability guarantee is expected in the
second quarter of 2024.
The Company's Spanish solar PV portfolio and in particular Jaén (part of the
Greco portfolio), was affected by technical curtailments at the request of the
transmission agent and operator ("TSO"), occurring primarily over the summer
season due to oversaturation of the grid. Approximately 5.1 GWh of production
was curtailed over the year, equivalent to a loss of circa EUR 0.4 million.
Compliance software was installed in late September 2023 to partially mitigate
the impact of future technical curtailments.
The Company is currently certifying its Spanish solar PV assets with the
country's TSO, with the intention of evaluating the option of participating in
ancillary markets to generate additional revenue. An O&M tender process
for AER's Spanish solar PV portfolio is also ongoing, with the expectation
that it may result in a meaningful reduction in the Spanish portfolio's
operating expenditure.
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.
Financial Performance and Dividend Cover(1)
Dividend Cover
EUR million² 2023 2022 Variance (%)
Asset Income 62.5 63.2 (1.1%)
Asset operating costs (14.9) (12.3) 20.3%
Interest and tax (6.2) (6.0) 4.0%
Asset underlying earnings 41.4 44.9 (7.7%)
Asset debt amortisation (11.0) (10.9) 1.0%
Company and HoldCo(3) expenses(4) (4.7) (4.3) 8.6%
RCF interest and fees (3.4) (0.6) 487.7%
Total underlying earnings 22.3 29.1 (23.2%)
Dividends paid 21.2 21.2 0.4%
Dividend cover after debt amortisation (x) 1.1x 1.4x nmf(5)
Dividend cover before debt amortisation (x) 1.6x 1.9x nmf(5)
Reconciliation to Company Cash Flow Statement
EUR million(2) 2023 2022 Variance (%)
Total underlying earnings 22.3 29.1 (23.2%)
SPVs
Distributions to HoldCo (38.2) (31.3) 22.2%
Movement in working capital 7.8 (2.7) (389.3%)
HoldCo
Expenses (excluding investment expenses) 3.6 1.6 130.3%
Company
Investment advisory fee funded by share issuance(6) - (1.3) n.a.
Interest and dividend income 16.5 17.1 (3.6%)
Movement in working capital 4.5 4.5 (0.4%)
Other(7) (3.0) (0.1) 179.8%
Company net cash flow from operating activities 16.3 16.9 (3.8%)
The first table calculates dividend cover based on the underlying earnings of
its investment portfolio, taken from the profit & loss ("P&L")
statements from each of the Company's investments, with the exception of debt
amortisation which is taken from the cash flow statement. Each of the
Company's investments is held through special purpose vehicles ("SPVs")(8).
The SPV, Company and HoldCo financial statements are audited.
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.
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, are set
out below. Numbers and percentages may vary due to rounding differences.
2. Non-euro currencies converted to EUR as at 31 December 2023. Desfina
contribution reflects AERs economic interest (91.5%) rather than voting
interest (89.0%), whereas asset debt amortisation reflects the voting interest
of all assets throughout the report.
3. Tesseract Holdings Limited.
4. 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.
5. Not meaningful.
6. Investment advisory fee funded by share issuance treated as a cash
flow expense for Company net cash flow from operating activities.
7. Deduction of legal costs and currency losses, addition of financing
costs.
8. References to SPVs in this section also includes holding companies,
where applicable.
The Company reported dividend cover of 1.1x during 2023. The decrease compared
to 1.4x reported in 2022 was driven by a 7.7% decrease in asset underlying
earnings, which was primarily the result of a significant decrease of
electricity spot market prices, partially offset by the contribution of new
assets to the portfolio, as well as higher funding costs commensurate with
increased RCF utilisation. Dividends paid remained flat, reflecting the net
effect of dividend per share growth of 5%, combined with share buyback
activities.
Cash Dividend Cover
EUR million(1) 2023 2022 Variance (%)
Company
Net cash flow from operating activities 16.3 16.9 (3.8%)
Investment advisory fee funded by share issuance - 1.3 n/a
HoldCo
Net cash flow from operating activities 9.6 (2.7) (459.7%)
Adjustments
Shareholder loan and equity repayments(2) 9.5 10.6 (10.1%)
RCF interest and fees (4.2) (1.3) 217.4%
Acquisition of accrued interest from shareholder loan - 1.5 n/a
Asset cash flow used for investment activities(3) 1.6 - n/a
Consolidation adjustments (1.2) (2.6) (54.3%)
Other(4) (0.5) 0.3 (259.3%)
Adjusted net cash flow 31.2 24.0 24.5%
Dividends paid (21.2) (21.2) 0.4%
Cash dividend cover (x) 1.5x 1.1x(5) nmf(6)
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, shareholder loan payments (interest or principal) or equity
repayments.
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.
Cash dividend cover increased from 1.1x(5) to 1.5x in 2023 as a result of the
further expansion of the operating portfolio and timing effects of
distributions. The assets Tiza, Jaén and The Rock contributed a full year to
the performance of the portfolio, with a partial contribution from the
Guillena project which became operational in April 2023.
1. Non-euro currencies converted to EUR as at 31 December 2023. Desfina
contribution reflects AER's economic interest rather than voting interest
(91.5%).
2. Distributions from operating activities in the form of shareholder
loan and equity repayments (Olhava EUR 2.2 million, Benfica III EUR 0.5
million, Desfina EUR 4.3 million, Ourique EUR 0.6 million, Greco EUR 1.1
million, Tiza EUR 0.2 million).
3. Part of Jaén and Guillena PAC payment made by the operating company
(EUR 1.6 million).
4. Capitalisation of shareholder loan interest (The Rock EUR 0.1
million, Albeniz EUR 0.2 million, Benfica III EUR 0.2 million).
5. The deviation in the cash dividend cover for 2022 compared to the
Annual Report 2022 is due to the inclusion of RCF interest and fees.
6. Not meaningful.
Update on Initiatives
Spanish Solar PV Financing
The Company (via its wholly owned subsidiaries) has entered into a EUR 50.0
million(1), five-year non-recourse debt facility ("Debt Facility") with ING
Bank N.V. Sucursal en España. The Debt Facility is secured by AER's wholly
owned Spanish solar PV portfolio, which consists of 180 MWp of unlevered
operating assets supported by long-term contracted Power Purchase Agreements.
The Debt Facility implies a conservative gearing level of approximately 21.1%
for the Spanish solar PV portfolio, based on fair values as at 31 December
2023. The Company has been able to secure the loan at attractive terms, with
an all-in interest rate below the existing Revolving Credit Facility ("RCF").
Pricing terms of the Debt Facility remain confidential. The Debt Facility is
90% hedged via an interest rate swap over the life of the loan and is also
partially amortising, with a balloon repayment at maturity. The Debt Facility
also benefits from an accordion option (EUR 18.0 million), as well as two
twelve-month extension options, both of which are subject to lender consent.
Net proceeds from the Debt Facility, which was fully drawn in January 2024,
were used to repay the RCF, reducing its drawn balance to EUR 26.1 million
(excluding bank guarantees, current facility limit: EUR 100.0 million). As a
result, the Company's overall gearing level remains unchanged at approximately
34.3% of its GAV.
Asset Life Extensions
The Company and the Investment Adviser have been undertaking an asset life
extension programme in 2023 in consultation with external technical advisers.
Following the conclusion of due diligence, the Company implemented the
following changes (where applicable) 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, 81.8 MW): increased from 30 to 40
years (+10 years)
· Holmen II (Wind, 18.0 MW): unchanged at 25 years
· Svindbaek (Wind, 32.0 MW): increased from 25 to 29 years
· (+4 years)
· Tesla (Wind, 150.0 MW): unchanged at 25 years
· Olhava (Wind, 34.6 MW): increased from 27.5 to 30 years
· (+2.5 years)
· Desfina (Wind, 40.0 MW): the Investment Adviser is currently
undertaking due diligence in relation to a potential asset life extension
The above changes in aggregate generated a value uplift of 4.6 cents per
Ordinary Share (+4.2%) as at 31 December 2023.
1. Excludes any ancillary debt facilities (debt service reserve and
letter of credit facilities).
Benfica III Research Project
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 that 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
affect 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 to determine where to incorporate the new sensors, which would improve
asset technical availability and, consequently, production.
Euronext Secondary Listing
The Company was successfully admitted to trading on the Euronext Growth Dublin
stock exchange on 2 October 2023. The secondary listing, under the ticker
AERI, is expected to further enhance the Company's marketability in Europe,
given its euro currency denomination and European-focused investment strategy,
and thereby also potentially boost the liquidity of the underlying shares over
time.
Gearing(1)
As at As at
31 December 31 December
EUR million 2023 2022 Variance (%)
NAV 372.5 451.7 (17.5%)
Debt2 194.8 155.2 25.5%
GAV 567.4 606.9 (6.5%)
Debt (% of GAV)3 34.3 25.6 8.8 bps
Project debt weighted average maturity (years) 13.9 14.6 (0.7) years
Project debt weighted average interest rate(4) (%) 2.6 2.5 7 bps
RCF interest rate (%)(5) 5.7 3.5 217 bps
The portfolio remains modestly levered with the Company operating at a gearing
ratio of 34.3% of GAV (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 11.0 million of asset level debt
(AER share) was repaid from operating cash flow at the asset level during
2023.
As at 31 December 2023, the RCF was drawn to EUR 80.4 million (31 December
2022: EUR 34.9 million), including bank guarantees, with an undrawn limit of
EUR 19.6 million. The RCF has been primarily used to fund the Company's
commitments related to the Greco project (EUR 74.7 million in total) whilst
the bank guarantees (EUR 5.7 million) have been primarily issued in relation
to dismantling and PPA guarantees required for the Company's operating assets
in Spain. The RCF is a floating rate facility which expires in April 2025,
following the Company exercising its twelve-month extension option in 2023. In
January 2024, net proceeds from the Company's recently announced EUR 50.0
million Spanish solar PV debt facility were used to repay the RCF, reducing
its drawn balance to approximately EUR 26.1 million (excluding bank
guarantees).
All AER's levered investments are performing above minimum bank covenant
levels, with the exception of Olhava (7.0% of portfolio fair value as at 31
December 2023) which breached its Debt Service Coverage Ratio ("DSCR") on 31
December 2023 as a result of a combination of low power prices, low production
and high debt amortisation levels. The Company does not expect any material
consequences as a result of the breach.
1. Foreign currency values converted to EUR as at 31 December 2023. Data
represents AER's share of debt. AER share of Desfina debt based on voting
interest. Totals may not add up due to rounding differences.
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 2.7% (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.
Debt Summary as at 31 December 2023(1)
Project AER share Drawn debt (EUR million) Currency Bullet/amortising Maturity Hedged proportion Type
Tesla 25.9% 8.2 EUR Partly amortising Mar-29 100.0% Bank Debt
Sagres 18.0% 6.0 EUR Fully amortising Jun-33 70.0% Bank Debt
Olhava 100.0% 14.4 EUR Fully amortising Dec-30/Sep-31 100.0% Bank Debt
Holmen II 100.0% 11.8 DKK Fully amortising Dec-37 100.0% Bank Debt
Svindbaek 99.9% 7.0 DKK Fully amortising Dec-37 100.0% Bank Debt
The Rock: USPP Bond 13.7% 31.2 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% 30.5 EUR Fully amortising Dec-39 100.0% Bank Debt
Subtotal 120.1 98.5%
RCF 100.0% 74.7 EUR Bullet Apr-25 0.0% Bank Debt
Total 194.8 60.7%
Valuation
Fair Value
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
31 December 31 December Variance
EUR million 2023 2022 (%)
Tesla 25.8 35.5 (27.2%)
Sagres 20.1 23.0 (12.4%)
Holmen II 26.5 39.5 (32.9%)
Olhava 30.8 27.2 13.5%
Svindbaek 37.7 46.9 (19.6%)
The Rock 37.7 41.7 (9.5%)
Benfica III 16.1 17.1 (5.6%)
Albeniz 50.5 55.1 (8.4%)
Desfina 26.1 28.5 (8.3%)
Ourique 30.5 36.4 (16.1%)
Greco 103.4 66.5 55.5%
Tiza 32.5 34.1 (4.9%)
Fair Value of Investments (HoldCo)² 438.0 451.5 (3.0%)
Cash and other current assets of HoldCo 9.6 6.4 49.6%
Revolving Credit Facility drawn by HoldCo (74.7) (24.0) 211.3%
Elimination of intercompany shareholder loan, other (0.5) (5.3) (91.2%)
Investments at fair value through profit or loss 372.4 428.6 (13.1%)
1. Foreign currency values converted to EUR as at 31 December 2023. Data
represents AER's share of debt. AER share of Desfina's debt based on voting
interest.
2. 2023 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, 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 31 December 2023 was EUR 372.5 million or 98.5 cents
per Ordinary Share (31 December 2022: EUR 451.7 million or 110.6 cents per
Ordinary Share). This represents a NAV total return of -6.0% per Ordinary
Share (31 December 2022: 12.9%) including dividends.
A dividend of EUR 21.2 million (5.445 cents per Ordinary Share) was paid
during the reporting period, with respect to the last quarter of 2022 to the
third quarter of 2023.
The main drivers of NAV movements throughout the full-year 2023 reporting
period include:
· forecast power prices: a decline in short-term electricity price
forecasts across the portfolio resulted in a decrease of 11.0 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;
· share buyback programme: EUR 27.8 million(1) of capital returned to
shareholders in the form of share buybacks over 2023, reducing total Ordinary
Shares in issue by 7.4%, increased the NAV per Ordinary Share by 1.4 cents;
· asset life extensions: increasing the average asset life
assumptions for the solar portfolio from 30 years to 40 years, and those of
the wind portfolio from 25 years to an average of 28 years, boosted the NAV
per Ordinary Share by 4.6 cents; and
· Norwegian resource rent tax for Tesla and The Rock
(-4.4 cents)(2).
Since IPO, AER has achieved an annualised total NAV return of 4.3% over 4.5
years (excluding any reinvestment of dividends), which is below the Company's
long-term target of 6.0% to 7.5%. The lower-than-targeted return is primarily
attributable to the Company's NAV performance in 2023, which recorded the
first negative total NAV return in the Company's short operating history at
-6.0% including dividends as a result of the drivers described above.
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 31 December 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.
1. Excluding fees and stamp duty.
2. See below for more details.
Valuation Assumptions
As at 31 December 2023
Discount rates The discount rate used in the valuations is calculated according to
internationally recognised methods. Typical components of the discount rate
are risk-free rates, country-specific and asset-specific risk premia.
The latter comprise the risks inherent to the respective asset class, as well
as specific premia for other risks such as development and construction.
Power price Power prices are based on power price forecasts from leading market analysts.
The forecasts are independently sourced from providers with coverage in almost
all European markets as well as providers with regional expertise. The
approach applied to all asset classes (wind, solar PV and hydropower) remains
unchanged with the first two using a blend of two power price curve providers
and the third using a blend of three power price curve providers.
Energy yield/load factors Estimates are based on third-party energy yield assessments, which consider
historic production data (where applicable) and other relevant factors.
Inflation rates Long-term inflation is based on the monetary policy of the European Central
Bank. Short-term inflation assumptions are based on the first three years
being sourced from Refinitiv and an interpolation for another two years to the
long-term rate.
Asset life In general, an operating life of 25 to 30 years for onshore wind and 40 years
for solar PV is assumed. The operating lives of hydropower assets are
estimated in accordance with their expected concession terms.
Operating expenses Operating expenses are primarily based on respective contracts and, where not
contracted, on the assessment of a technical adviser.
Taxation rates Underlying country-specific tax rates are derived from due diligence reports
from leading tax consulting firms.
Portfolio Valuation - Key Assumptions
As at As at
Metric 31 December 2023 31 December 2022
Discount rate Weighted average 7.2% 7.2%
Long-term inflation Weighted average 2.0% 2.0%
Remaining asset life(1) Wind energy (years) 22 22
Solar PV (years) 36 29
Hydropower (years) 9 10
Operating life assumption(2) Wind energy (years) 28(3) 26
Solar PV (years) 40 30
Hydropower (years) n/a n/a
There were no significant changes in the key valuation assumptions compared to
the previous reporting period.
1. Remaining asset life based on net full load years. Does not consider
any impact from the Greek wind farm Desfina's potential asset life extension.
2. Asset life assumption from date of commissioning.
3. Assumes an asset life of 25 to 30 years.
Norwegian Tax Changes
On 19 December 2023, following an extensive consultation process that received
input from the Investment Adviser, other industry players and the Renewables
Norway organisation, the Norwegian Parliament passed a series of legislative
changes to taxes applicable to existing and new onshore wind farms, effective
from 1 January 2024. A resource rent tax of 25% on all onshore wind farms has
been introduced, lower than the 40% initially proposed. An increased base for
tax depreciation (up to a maximum 85% of the historical investment cost) was
also included. A natural resource tax and a high-price contribution tax have
been discontinued, whereas a production tax on wind farms was only marginally
increased from 0.02 NOK per kWh to 0.023 NOK per kWh. These tax changes were
reflected in the Q4 valuations of the Company's Norwegian wind farms The Rock
and Tesla (the assets account for 14.5% of the Q4 total portfolio fair value).
Analyst power price forecasts used to support the Q4 valuations of The Rock
and Tesla do not include any potential impact of Norway's resource rent tax on
the country's medium and long-term power price forecasts, which may need to
reflect the likely outcome of the tax on future build-out of much-needed
renewable energy capacity in the country.
MARKET COMMENTARY AND OUTLOOK
Market Power Prices
In 2023, power prices across European regions were characterised by persistent
volatility, driven by the downward trajectory of commodity prices, most
notably gas and carbon prices during the last quarter of the year. 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 national grids. Overall, near-term power price
forecasts are significantly lower year-on-year, but remain above long-term
averages. Medium to long-term power price forecasts have not changed
materially in the year.
In response to the prolonged period of high energy prices in 2022, national
governments across Europe sought to intervene in electricity markets by either
altering the price set by the market or more commonly by introducing windfall
taxes and price caps. Against a backdrop of declining gas and power prices,
the European Commission did not recommend extending emergency measures beyond
June 2023 and no European country in which the Company is invested in decided
to extend windfall tax measures into 2024.
Nordics
In 2023, power prices in the Nordics saw an increasing convergence with prices
in continental Europe, catalysed by increased interconnection links with
Germany and the UK, and thus a greater correlation to European commodity
prices, most notably gas. In the second half of the year, specifically from
July to October, high hydro output and renewable generation further depressed
power prices. The Nordic electricity system spot price averaged EUR 56.4 per
MWh in 2023 (2022: EUR 135.9 per MWh).
However, due to the different patterns for southern and northern price zones
in Norway, the impact of higher commodity prices differs widely. The southern
price zones (NO1, NO2 and NO5) were significantly affected by continental
Europe due to the existing interconnections. In contrast, northern regions
(NO3 and NO4) were less affected by fluctuations in power prices due to the
lower local demand and abundant wind Resources. Conversely, the higher
interconnection to the southern zones is now reducing this disparity. Aquila
European Renewables has exposure to NO2 and NO4 price zones in Norway via its
interest in Tesla and The Rock respectively.
Iberia
Average electricity spot market prices in Iberia traded at a discount compared
to other European regions. This was due to a temporary gas price cap mechanism
introduced by the Spanish and Portuguese governments in mid-June 2022, which
held back the impact of escalating fuel prices on power prices.
The cap was in force up to 31 December 2023, having stopped applying since
March 2023 due to the steep decline in gas prices. Power demand also remained
depressed, decreasing 2.5% from 2022, and high renewable output, especially in
the last quarter of the year, also contributed to the downward trajectory in
power prices. In Iberia, spot prices traded at an average of EUR 87.2 per MWh
in 2023 (2022: EUR 167.5 per MWh).
A Spanish windfall revenue clawback tax for renewable generators, which
expired in December 2023, was not extended for 2024. The impact of the
clawback has been to restrict captured market revenue to prices in the
approximate range of EUR 85.0 and EUR 100.0 per MWh. The impact on the
Company's Spanish portfolio was minimised given relatively high hedging ratios
as a proportion of total production and the exemption of PPA revenues below
EUR 67.0 per MWh from the windfall tax. A generation tax was re-introduced in
2024, gradually rising from 3.5% over the first quarter, to 5.25% in the
second quarter, and increasing to 7.0% over the second half of the year. The
impact of the tax, including its effect on spot market power prices, is
expected to be reflected in the first quarter 2024 valuation of the Spanish
solar PV portfolio.
Greece
Power prices in Greece were more elevated than other European countries due to
the higher proportion of hours in which gas-fired generation sets the marginal
price in the country's wholesale market. However, the downward trajectory in
commodity prices still resulted in a substantial decrease in the average power
price for 2023 to EUR 119.2 per MWh (2022: EUR 279.9 per MWh). A windfall tax
with a threshold of EUR 85.0 per MWh, applying to the revenues in the
day-ahead market of renewable generators, expired on 1 June 2023.
However, given the revenues of the Company's Greek wind farm, Desfina, are
100% hedged by a feed-in tariff, the windfall tax had no impact on the asset's
revenue.
Fuel Price 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. The predominant marginal price setter for power prices in
the markets the Company is invested in is European natural gas. Throughout
2023, low demand and a robust gas supply saw gas storage levels reach the
upper bounds of the ten-year range for most of the year, primarily due to the
higher volume of liquefied natural gas ("LNG") imports and two consecutive
mild winters across Europe. Industrial electricity demand also recovered at a
slower rate than anticipated from the significant falls of 2022 as industries
lowered production to deal with the higher power price environment. Both of
these factors applied a downward pressure on near-term power prices.
European Union Emissions Allowance ("EUA") prices traded on the EU's Emissions
Trading System increased marginally from an average price of EUR 81.2 per MWh
in 2022 to an average price of EUR 85.5 per MWh in 2023, despite low buying
interest in the second half of the year.
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 2023 plunged by roughly 69% from 2022 prices, dropping from an
average of EUR 132.5 per MWh in 2022 to an average of EUR 41.0 per MWh in
2023.
Coal prices fell from an average of USD 285.2 per tonne in 2022 to an average
of USD 124.7 per tonne in 2023, in line with the trend of gas prices, due to
weak fundamentals for the sector and a negative macro-economic outlook.
Regulatory Developments
Overall, 2023 was a year of considerable progress for the renewable energy
sector, with an electricity market reform and other EU legislation aimed at
materialising increasingly ambitious decarbonisation targets.
EU Market Design
On 14 December, the European Parliament and Council reached an agreement to
reform the European Union's ("EU") electricity market design. The agreement
was formally adopted in April 2024. The outcome of this reform is positive as
it does not envisage a fundamental change in the pay-as-clear market design
and should incentivise the deployment of renewables. The reform will support
long‑term contracts such as PPAs, boosting their uptake by smaller market
participants through guarantee schemes to reduce risks associated with
offtaker payment default, facilities to pool demand, annual assessments of the
PPA marker at an EU and Member State level, and voluntary standardised PPA
contracts.
The agreement will further improve liquidity in forward markets by creating
virtual hubs, similar to the Nordic forward market hub, for Europe's various
price zones and accelerate the build-out of renewables by mandating two-way
contracts for difference for new publicly financed investments in renewable
generation. The reform will also boost the electricity market's flexibility by
adapting capacity mechanisms to further promote the participation of renewable
technologies, such as demand response and storage. An acceleration of grid
development and more‑flexible connection arrangements are also included,
along with quantifiable national targets for demand response and storage. The
Company expects this reform to the electricity market design to further
incentivise the expansion of renewable generation in Europe.
The Green Deal Industrial Plan: Placing Europe's Net-Zero Industry in the Lead
The European Council and the European Parliament reached a provisional
agreement on the Net-Zero Industry Act ("NZIA") on 6 February 2024, aimed at
bolstering Europe's renewable sector and achieving the EU's climate goals.
This agreement entails measures such as establishing a single list of net-zero
technologies, simplifying permit-granting procedures for manufacturing
projects, fostering innovation through regulatory sandboxes, and enhancing
workforce skills. Key targets also include sourcing 40% of annual solar PV
deployment from EU manufacturing and achieving an annual CO2 carbon capture
and storage capacity of at least 50 million tonnes by 2030. Additionally, the
agreement includes the streamlining of construction permit procedures, the
creation of net-zero industrial valleys, and greater clarity on public
procurement criteria. Furthermore, rules on public procurement will ensure
transparency and diversification of technology supply, with at least 30% of
the volume auctioned annually per member state. After the provisional
agreement reached on 6 February, the NZIA awaits formal adoption by both
institutions later in 2024. It is expected the reform will expedite the
build-out of renewable capacity whilst also boosting the competitiveness of
Europe's renewable energy sector.
A revised Renewable Energy Directive entered into force in all EU countries on
20 November 2023, raising the EU's renewable energy target to 42.5% of final
energy consumption by 2030, up from the original goal of 32%. Implementation
of the Directive will lead to considerable fluctuations in the bloc's
electricity market throughout this transition, given the underlying assumption
that renewable capacity will need to triple by 2030 to 1.3 TW, in line with
the global goal set at the 2023 United Nations Climate Change Conference
("COP28"). Solutions to stabilise the electricity grid's supply and demand are
thus indispensable considering the scale of these targets, requiring greater
investment in battery storage systems to improve grid efficiency, greater
interconnection between European countries, and an expansion in grid capacity
build‑out. This urgency is exemplified in the fact that installed
interconnection capacity equalled less than one-fifth of Spain's peak demand,
already one of the most decarbonised, with renewables accounting for 62% of
installed capacity in 2023, highlighting the need to significantly boost
interconnection with the rest of the European power market.
Wind Power Action Plan
In October, the European Commission proposed a Wind Power Action Plan that is
expected to enhance the competitiveness of the Eurozone's wind industry. The
proposal will accelerate permitting, improve auction designs, ensure fair
competition from foreign manufacturers, expand access to finance to the EU
wind supply chain and facilitate grid build-out, including cross-border grid
projects.
Outlook
2023 saw heightened volatility in the global economy as most major markets
transitioned from more than a decade of historically low interest rates to the
sharpest and steepest tightening cycle by central banks in the developed world
since 1979, contributing to sluggish aggregate and industrial demand across
the EU. A more volatile geopolitical environment is also expected in 2024,
marked by high volatility in commodity prices and supply disruptions from the
ongoing conflict in Ukraine, the crisis in the Near East and attacks on
shipping in the Red Sea. Disruptions in shipping in the Red Sea have already
resulted in lead time and transportation cost increases across all renewable
supply chains as shipping lanes from Asia to Europe increasingly transition to
circumnavigating Africa rather than passing through the Suez Canal. Concerns
over an escalation to a wider Middle Eastern conflict and increased
competition with Asia over liquefied natural gas supply could have a material
impact on commodity and power prices.
Despite this volatile backdrop, narrowing contributions from food and energy
prices have brought annual headline inflation downwards over the year, with
Eurozone headline inflation falling from a peak of 11.5% in October 2022 to
2.9% year on year in December 2023, trending down to the European Central
Bank's target of 2.0%. The Company's exclusive exposure to European markets is
thus a key differentiator from its UK-centric peer group, where headline
inflation has decreased from a peak of 11.1% to 4.6% year on year over the
same period. Conversely, European core inflation has remained harder to bring
down, trending at more than double the European Central Bank's targets across
the developed world due to the much higher concentration of services
inflation, the latter boosted by strong wage growth resulting from tight
labour markets. Nevertheless, it is expected that both headline and core
inflation should continue to recede in 2024 and that the interest rate cycle
has peaked across developed markets, given the already significant drop in
inflation since the 2022 highs. Thus, in the absence of any exogenous events
that could derail assumptions on inflation or the global economic situation,
the market consensus is that central banks should begin to cut interest rates
later this year, a promising tailwind for asset valuations that it is hoped
should narrow the disconnect between private and public market valuations for
renewable infrastructure.
Electricity prices in most of the Company's key markets are also forecast to
continue to fall over time, reflecting the downward trend of commodity prices
witnessed in the second half of 2023, the latter spurred by elevated filling
levels of gas storage reservoirs amid milder seasonal weather conditions.
These forecasts are reflected in the Company's power price curves as at year
end 2023 for most price zones, showcasing a continued drop in prices in the
short to medium term, plateauing in the long term.
However, in the short term, greater competition with Asia over liquefied
natural gas supply, at least until a new wave of gas liquefaction capacity is
set to come online between 2026 and 2028, will continue to pressure commodity
and thus electricity prices into the next winter season. Furthermore, the
current slowdown in China's economy is already lowering prices for key raw
materials, components, equipment and services in the renewable supply chain,
especially solar modules, and a recovery in the country's economy may drive
prices in an upward trajectory.
2023 was a significant milestone for Europe's renewable energy sector, with
the EU committing to more-ambitious energy transition and decarbonisation
targets for 2030 and beyond, as well as the introduction of reforms aimed at
creating a more favourable regulatory environment for the sector to ensure
energy security and affordability. In addition, wind and solar PV capacity
produced a record 27% of EU electricity in 2023, up from 23% in 2022, their
largest ever annual capacity additions and a promising development for the
sector as wind power generation surpassed that from gas for the first time(1).
The urgency in adopting renewables is evidenced by forecasts that require a
three-fold increase in global renewable capacity by 2030 to remain on target
with the net zero emissions scenario by 2050 and limiting the global
temperature rise to 1.5°C(2).
Emerging trends, notably the rise of generative artificial intelligence, the
increased adoption of 5G networks and cloud computing are expected to
transform productivity and economies worldwide. Other notable demand growth
drivers include the rising share of electric vehicles, the wider introduction
of heat pumps, battery storage systems and the electrification of industrial
processes; all these trends are key to remain on target with Europe's net zero
emissions scenario by 2050.
Looking ahead, the themes of decarbonisation and energy security will continue
to spur demand for the renewable energy transition, with expanding the
deployment and operational competitiveness of renewables assets being a key
priority for governments across Europe. Overall, the Company's balanced
portfolio of fully operational wind, solar and hydro-electric assets is
expected to benefit from these secular tailwinds and, together with the
Investment Adviser, play a meaningful role in Europe's energy transition.
Aquila Capital Investmentgesellschaft mbH
24 April 2024
1. Ember, 'European Electricity Review 2024', available at:
https://ember-climate.org/insights/research/european-electricity-review-2024/
2. International Energy Agency ("IEA"), 'Keeping the door to 1.5°C
open' (2023), available at:
https://www.iea.org/reports/world-energy-outlook-2021/keeping-the-door-to-15-0c-open
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
1. Environmental
Aquila Group, the Investment Adviser of the Company, focuses on the investment
in, 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. In 2023, Aquila Group supplied 2.3
million homes with renewable energy, which cumulatively avoided 2.4 million
tonnes of CO(2)e annually¹.
In 2022, Aquila Group formalised a mission to become one of the world's
leading sustainable investment and development companies for essential assets
by 2030. To show commitment to the mission, it set a Group-wide goal to avoid
1.5 billion tonnes of CO(2)e by 2035 in its portfolio's lifetime, equivalent
to 4.0% of CO(2) emissions world-wide in 2023².
UN Sustainable Development Goals for Europe
40.0%
At least a 40.0% decline from 1990 levels in greenhouse gas emissions
32.0%
A 32.0% share for renewables in the energy system
32.5%
A 32.5% improvement in energy efficiency
Using the appropriate tools, due-diligence procedures and experts, Aquila
Group ensures it identifies, assesses and mitigates all material ESG factors,
to protect investors from potential financial downside, while considering
their impact on society and the environment. In this context, Aquila Capital
Investmentgesellschaft mbH (Aquila Capital), our regulated alternative
investment fund management ("AiFM") entity, and Investment Adviser of the AER,
manages all relevant ESG elements using dedicated subject-matter experts.
Together, we are committed to the UN Sustainable Development Goals,
particularly climate action (SDG #13), clean energy (SDG #7), industry
innovation, and infrastructure (SDG #9).
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 is able to
deliver on its investment objectives as well as contribute towards the green
economy.
1. Data as at 31 December 2023 for the year 2023, based on current
portfolio of the Aquila Group. For details on the methodology for avoided
emissions, refer to:
https://www.aquila-capital.de/fileadmin/user_upload/PDF_Files_Whitepaper-Insights/20231121_LAE_White_paper_EN.pdf.
The calculation of the average European household consumption is based on
Eurostat data (https://ec.europa.eu/eurostat/web/main/home). The average EU-27
household electricity consumption per person (in MWh per capita) is multiplied
by the average EU-27 household size, resulting in the average consumption of
electricity of the average household size (in MWh per household). The
electricity generated by the assets is divided by the EU-27 average
consumption of electricity and household size (in MWh per household) resulting
in the final value displayed.
2. Worldwide CO(2) emissions in 2023 from energy combustion, industrial
processes, and flaring were 37.4 billion tonnes according to the International
Energy Agency ("IEA"), available at:
https://www.iea.org/reports/co2-emissions-in-2023
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 9 INDUSTRY, INNOVATION AND INFRASTRUCTURE
industrialisation and foster innovation. high-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 exploring how new technologies and other forms of
innovation can be used to enhance asset performance and sustainability (energy
yield, O&M, asset life).
Take urgent action to combat climate change and its impacts. · The Company's 463.8 MW portfolio powered approximately 266.4 13 CLIMATE ACTION
thousand households and avoided approximately 267.6 thousand tonnes of CO(2)
emissions over the reporting period¹.
· As a signatory to the UN Principles for Responsible ("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 and provides
actionable insights to its members, partners, and investors.
In its third year of participation in the GRESB assessment, the Company has
achieved an improvement in both its overall GRESB score and rating for the
period. AER achieved an overall GRESB score of 92 out of 100 (assessment
performed in 2023 in relation to 2022: 88 out of 100), the highest rating ever
achieved by the Company, and higher than the average of 88 points amongst its
peer group. In addition, AER achieved a 4 out of 5-star GRESB rating
(assessment performed in 2022 in relation to 2021: 3 out of 5). While the
GRESB score is an absolute measure, the GRESB rating is an overall relative
measure of ESG management and performance of the Company, highlighting
improvement over time.
At the portfolio level, compared to its last GRESB assessment, the results
show an improvement in performance in the categories of Reporting (e.g. ESG
investor reporting and incident management) and Risk Management (e.g.
risk-management systems at asset level, social-risk assessments and incident
reporting), while the score in Stakeholder Engagement was maintained. At the
asset level, the ratings upgrade recognises AER's strong risk-management
framework and improved Stakeholder Engagement, while the performance in
resource and emission management was maintained for AER's assets.
1. Actual AER contributions at 31 December 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.
Environmental Initiatives
Below is a selection of initiatives implemented across AER's portfolio to
preserve and improve flora and fauna, undertaken over the first nine months of
2023.
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 implemented across some of the Company's solar PV parks for
local flora and fauna.
Flora
· Translocation of rain-fed olive trees.
· 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.
· Regular maintenance measures and monitoring.
Fauna
· Drinking troughs, feeding troughs and perches were installed in
order to suit the local fauna.
· A hunting fence was installed to protect wildlife.
· Bird nest boxes were installed, specifically for the nesting of the
lesser kestrel, common kestrel, barn owl and little owl species.
· A study commissioned to analyse the degree of adaptation of bird
species to the presence of the solar PV parks, with special emphasis on the
lesser kestrel and Montagu's harrier species.
· Stands for wild rabbits built to help the breeding and survival of
this species.
Desfina Wind Farm Reforestation
In May 2023, 2,000 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 can 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. In light of the European
Green Deal boosting renewable energy projects, investment into clean-energy
assets has accelerated over recent years. As renewable energy deployment
increases, pressure on land is growing. The need to protect biodiversity may
result in conflicts over agricultural and renewable energy land usage.
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 by contracting local service
providers, paying local taxes, and lease payments for use of the land.
Workshop with University Students at Jaén
On 30 November 2023, the Investment Adviser's Asset Management team hosted a
training session on solar photovoltaic energy for a group of Electrical and
Industrial Engineering students from Spain's University of Jaén at the
Company's 50 MW solar plant located in the same municipality. The students
were given the opportunity to see first-hand how a solar PV plant operates and
gain technical knowledge of the plant's components, as well as learn about the
development and execution of a project of these characteristics. This
initiative is part of the proactive social management approach carried out at
all the Company's assets, with the aim of having a positive impact on the
regions and local communities where the assets operate.
Save the Children Telethon at The Rock
The Rock wind park was one of two businesses in the municipality of Vefsn,
Norway, that contributed to a national telethon called Save the Children. The
project company made a small one-time donation.
The telethon is a national event and a new organisation is donated money every
year. This is positive publicity for The Rock, since it highlights its
contribution to the local community.
3. Governance
Independent Board of Directors
The independent Board of Directors is responsible for AERʼs governance and
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.
Appointment of New Non-Executive Director
The Company was pleased to announce the appointment of Myrtle Dawes as a
non-executive Director ("NED") in September 2023, joining the Board of
Directors as a member of the Remuneration and Nomination Committee and the
Audit and Risk Committee. Ms Dawes, 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. In 2017, Ms Dawes 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.
Board and Employee Diversity
The Board of Directors is appointed based on expertise and merit, being
mindful of the benefits generated by diversity. The Board comprises members
with different skills and experiences, while endeavouring to comply with the
Listing Rules on diversity. The current Board comprises 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 culture
(some 60 nationalities are represented among its employees), and in gender
(its gender ratio is 61% male and 39% female).
AER Board:
3 men
2 women
Investment Adviser:
61% men
39% women
60 different nationalities
Sustainable Supply-Chain Management
The Investment Adviser's membership in associations such as the Global
Infrastructure Investor Association ("GIIA") and the Global Listed
Infrastructure Organization ("GLIO") afford it the opportunity to lobby for
human and labour rights along the value chain of several manufacturers, to
prevent trade disruptions. 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 has also been a member of
SolarPower Europe since 2022, a leading solar PV association influencing
regulations and business landscapes for the sector. The Investment Adviser's
Head of Procurement is Chair of the Supply Chain Sustainability Workgroup for
SolarPower Europe.
The Investment Adviser takes a multi-faceted approach to the mitigation of
governance risks, limiting exposure to risks within the supply chain. All
Engineering, Procurement and Construction ("EPC") and Operations and
Maintenance ("O&M") contracts are negotiated with contractors operating in
a country adhering to the European Union's minimum labour 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 for 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 regions 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 regularly.
Investment policy and key performance indicators
Investment Policy
The Company will seek to achieve its investing objective, set out above,
through investment in renewable energy infrastructure in continental Europe
and the Republic of Ireland, comprising (i) wind, photovoltaic and hydropower
plants that generate electricity transforming the energy of the wind, the
sunlight and running water as naturally replenished resources, and (ii)
non-generation-renewable-energy-related infrastructure associated with the
storage (such as batteries) and transmission (such as distribution grids and
transmission lines) of renewable energy, in each case either already operating
or in construction or development ('Renewable Energy Infrastructure
Investments').
The Company will acquire a mix of controlling and non-controlling interests in
Renewable Energy Infrastructure Investments and may use a range of investment
instruments to pursue its investment objective, including, but not limited to,
equity, mezzanine or debt investments.
In circumstances where the Company does not hold a controlling interest in the
relevant investment, the Company will seek, through contractual and other
arrangements, to, inter alia, ensure the Renewable Energy Infrastructure
Investment is operated and managed in a manner consistent with its investment
policy, including any borrowing restrictions.
Investment Restrictions
The Company aims to achieve diversification principally by investing in a
range of portfolio assets across a number of distinct regions and a mix of
wind, solar PV and hydro technologies involved in renewable energy generation.
The Company will observe the following investment restrictions when making
investments:
· no more than 25 per cent of its Gross Asset Value (including cash)
will be invested in any single asset;
· the Company's portfolio will comprise no fewer than six Renewable
Energy Infrastructure Investments;
· no more than 20 per cent of its Gross Asset Value (including cash)
will be invested in non-generation renewable energy related infrastructure
associated with the storage (such as batteries) and transmission (such as
distribution grids and transmission lines) of renewable energy;
· no more than 30 per cent of its Gross Asset Value (including cash)
will be invested in assets under development or construction;
· no more than 50 per cent of the Gross Asset Value (including cash)
will be invested in assets located in any one country;
· no investments will be made in assets located in the UK; and
· no investments will be made in fossil fuel assets.
Compliance with the above restrictions will be measured at the time of
investment and non-compliance resulting from changes in the price or value of
assets following investment will not be considered as a breach of the
investment restrictions.
The Company will hold its investments through one or more special purpose
vehicles ("SPVs") and the investment restrictions will be applied on a
look-through basis.
Although not forming part of the investment restrictions or the Investment
Policy, where Renewable Energy Infrastructure Investments benefit from a Power
Purchase Agreement, the Company will take reasonable steps to avoid
concentration with a single counterparty and intends that no more than 25 per
cent of income revenue received by Renewable Energy Infrastructure Investments
will be derived from a single off-taker.
Changes to the Investment Policy
The Directors do not currently intend to propose any material changes to the
Company's Investment Policy. Any material changes to the Company's Investment
Policy set out above will only be made with the approval of shareholders.
Hedging
The Company does not intend to use hedging or derivatives for investment
purposes but may from time to time use derivative instruments such as futures,
options, futures contracts and swaps (collectively 'Derivatives') to protect
the Company from fluctuations of interest rates or electricity prices. The
Derivatives must be traded on a regulated market or by private agreement
entered into with financial institutions or reputable entities specialising in
this type of transaction.
Liquidity Management
The AIFM will ensure a liquidity management system is employed for monitoring
the Company's liquidity risks. The AIFM will ensure, on behalf of the Company,
that the Company's liquidity position is consistent at all times with its
investment policy, liquidity profile and distribution policy. Cash held
pending investment in Renewable Energy Infrastructure Investments or for
working capital purposes will be invested in cash equivalents, near cash
instruments, bearer bonds and money market instruments.
Borrowing Limits
The Company may make use of long-term limited recourse debt for Renewable
Energy Infrastructure Investments to provide leverage for those specific
investments. The Company may also take on long-term structural debt provided
that at the time of entering into (or acquiring) any new long-term structural
debt (including limited recourse debt), total long-term structural debt will
not exceed 50 per cent of the prevailing Gross Asset Value. For the avoidance
of doubt, in calculating gearing, no account will be taken of any Renewable
Energy Infrastructure Investments that are made by the Company by way of a
debt or a mezzanine investment. In addition, the Company may make use of
short-term debt, such as a Revolving Credit Facility, to assist with the
acquisition of suitable opportunities as and when they become available. Such
short-term debt will be subject to a separate gearing limit so as not to
exceed 25 per cent of the Gross Asset Value at the time of entering into (or
acquiring) any such short-term debt.
In circumstances where these aforementioned limits are exceeded as a result of
gearing of one or more Renewable Energy Infrastructure Investments the Company
has a non‑controlling interest in, the borrowing restrictions will not be
deemed to be breached. However, in such circumstances, the matter will be
brought to the attention of the Board who will determine the appropriate
course of action.
Dividend Policy
The Company is targeting a progressive dividend over the medium term with a
minimum dividend of 5 cents per Ordinary Share, subject to having sufficient
distributable reserves. Dividends are expected to be paid quarterly, normally
in respect of the three months to 31 March, 30 June, 30 September and 31
December, and are expected to be made by way of interim dividends to be
declared in May, August, November and February.
The Company will declare dividends in euros and shareholders will, by default,
receive dividend payments in euros.
Shareholders may, by completing a dividend election form, elect to receive
dividend payments in sterling (at their own exchange-rate risk). The date the
exchange rate between euro and sterling is set will be announced when the
dividend is declared.
A further announcement will be made once the exchange rate has been set.
Dividend election forms will be available from the Registrar, Computershare
Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY or by
telephone 0370 707 1346.
The Company's target dividend for 2024 was approved by the Board and is set
out above.
KEY PERFORMANCE INDICATORS ("KPIS")
The Board measures the Company's success in achieving its investment objective
by reference to the following KPIs:
(i) Achievement of NAV and Share Price Growth since IPO (June 2019)
2023 (1.6%) share price returns
20.8% NAV
2022 6.7% share price returns
27.6% NAV
2021 11.3% share price returns
14.1% NAV
2020 10.8% share price returns
6.3% NAV
The Board monitors both the NAV and share price performance and compares with
other similar investment trusts. A review of performance is undertaken at each
quarterly Board meeting and the reasons for relative under and
over-performance against various comparators is discussed. The Company's NAV
total return¹ and total Shareholder return since IPO¹ (June 2019) to 31
December 2023 was 20.8% and -1.6% (2022: 27.6% and 6.7%) respectively. The
Company's NAV total return¹ and share price total return¹ for the year to 31
December 2023 was -6.0% and -9.0% (2022: 12.9% and -4.5%) respectively. On an
annualised basis, the NAV total return¹ per Ordinary Share has achieved 4.3%
since IPO.
The Chairman's Statement shown above incorporates a review of the highlights
during the year. The Investment Adviser's Report shown above highlights
investments made and the Company's performance during the year.
(ii) Maintenance of a Reasonable Level of Premium or Discount of Share Price
to NAV(1)
2023 (20.3%)
2022 (16.6%)
2021 (0.6%)
2020 6.5%
The Company's broker monitors the premium or discount on an ongoing basis and
keeps the Board updated as and when appropriate. At quarterly Board meetings,
the Board reviews the premium or discount in the year since the previous
meeting, in comparison with other investment trusts with a similar mandate.
The share price closed at a 20.3% discount to the NAV as at 31 December 2023
(2022: 16.6% discount).
On 3 February 2023, the Board announced the details of a Buyback Programme in
response to the widening discount at which the Company's share price was
trading, as compared with its NAV per Ordinary Share, as they believed the
share price did not accurately reflect the inherent value in the portfolio.
This is part of a broader package of initiatives seeking to improve the
marketability of the Company's shares, which has included a new listing on
Euronext Growth Dublin. Since that date, the Company has bought back for
Treasury a total of 30,103,575 Ordinary Shares for an aggregate amount of EUR
27.8 million(2).
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, are set
out below. All references to cents are in euros, unless stated otherwise.
2. Excluding fees and stamp duty.
(iii) Maintenance of a Reasonable Level of Ongoing Charges(1)
2023 1.1%
2022 1.1%
2021 1.1%
2020 1.4%
The Board receives management accounts containing an analysis of expenditure
which it reviews at its quarterly Board meetings. The Board reviews the
ongoing charges¹ quarterly and considers these to be reasonable in comparison
with its peers.
Based on the Company's average net assets during the year ended 31 December
2023, the Company's ongoing charges figure was 1.1% (2022: 1.1%) calculated in
accordance with the Association of Investment Companies ("AIC") methodology.
(iv) To Meet its Target Total Dividend in each Financial Year (cents per
share) Target:
2024 5.79 cents (target dividend)
2023 5.51 cents
2022 5.25 cents
2021 5.00 cents
2020 4.00 cents
The Board approved a target dividend of 5.79 cents per Ordinary Share ('2024
Target Dividend') in relation to the year ending 31 December 2024. The 2024
Target Dividend is in accordance with the Company's dividend policy to pay a
progressive dividend over the medium term and is subject to the portfolio
performing in line with expectations. The 2024 Target Dividend represents an
increase of 5.0% versus the prior year and followed a 5.0% increase in the
2023 target dividend announced in February 2023.
The dividend target set for 2023 was for not less than 5.51 cents per Ordinary
Share, subject to the performance of the portfolio. These were paid in four
equal interim dividends, of 1.3775 cents.
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, are set
out below. All references to cents are in euros, unless stated otherwise.
SECTION 172
Section 172 of the Companies Act 2006 requires the Board to act in a way it
considers would most likely promote the success of the Company for the benefit
of all stakeholders, taking into account the interests of stakeholders and the
environment in its decision-making, and to share how this duty has been
discharged.
The Board's values - integrity, accountability and transparency - mean that
the Board has always worked hard to communicate effectively with the Company's
stakeholders.
This is a two-way process and the feedback received from the Company's
stakeholders is highly valued and factored into the Board's decision‑making
process. The Company has a range of stakeholders, and this section maps out
who they are, what the Board believes their key interests to be, how the
Company enables engagement with stakeholders and highlights the key results
that have consequently arisen during the year.
Company Sustainability and Stakeholders
As an externally managed investment company, the Company does not have any
employees. Its main stakeholders are as set out in the diagram below, which
explains the relationship between the Company and each of its stakeholders.
Company's Operating Model
The Company was listed on the main market of the London Stock Exchange on 5
June 2019 and subsequently listed on the Euronext Growth Dublin Exchange on 2
October 2023. The Company's investments are held via its sole subsidiary,
Tesseract Holdings Limited, which, in turn, holds the investment portfolio via
a number of Special Purpose Vehicles ("SPVs").
Engagement with Stakeholders
The Board is aware of the need to foster the Company's business relationships
with suppliers, customers and other key stakeholders through its stakeholder
engagement activities. These activities include meetings, annual reviews,
presentations and publications and enable the Board to ensure it fulfils its
strategies and discharge its duties under section 172 of the Act.
The Board carried out an annual review of its key service providers, including
the Investment Adviser, to understand the culture of its service providers,
and to ensure they and the Company can maintain high standards of business
conduct. The annual review process involves assessing the service providers'
policies and control environments to ensure their continued competitiveness
and effectiveness.
Shareholders
As a public company listed on the London Stock Exchange, the Company is
subject to the Listing Rules and the Disclosure Guidance and Transparency
Rules. It is a regulatory requirement, for the Board to act fairly between
shareholders. The Board ensures the Company complies with the Listing Rules at
all times and seeks the advice of the Company Secretary, lawyers and corporate
broker in its dealings.
With the support of the Company's brokers, the Chairman and key Board members
met many of the Company's key investors to gauge their views on the Company's
progress since IPO and, more recently, to gauge the appetite of shareholders
for the proposal from Octopus Renewables Infrastructure Trust plc to combine
with the Company via a scheme of reconstruction pursuant to section 110 of the
Insolvency Act 1986.
Separately, the Investment Adviser participated in a roadshow to meet with the
Company's key investors. The Board discussed the outcome of these meetings
and, as a consequence of these meetings, and to better align the Company with
its shareholders, a number of initiatives were undertaken as detailed in the
below Key Decisions section.
At its quarterly Board meetings, the Board reviews and discusses detailed
reports from the Company's broker and media PR consultants in relation to the
Company's share performance, trading and liquidity as well as the composition
of, and changes to, the register of shareholders. Shareholders' views are also
considered by the Board at those meetings to assist the Board's
decision-making process and to ensure expected returns are achieved and
sufficient capital is available to invest in appropriate renewable energy
infrastructure investments, and to grow the business in line with strategy and
expectation. Details of the decisions taken by the Board during the year can
be found below under 'Key Decisions made During the Year'.
The Investment Adviser and Board believe it is important for the Company's
continued success, to have the potential to access equity capital to expand
the Company's portfolio over time, to further diversify the investment
portfolio, to create economies of scale and, at times when the Company's
shares are trading at a premium against its NAV, as a means to manage such
premium.
The Company may issue shares from its Treasury account but will only issue
shares at a premium to NAV at the time of issue.
To help the Board in its aim to act fairly between the Company's members, it
seeks to ensure effective communication is provided to all shareholders. The
Board encourages shareholders to attend the Annual General Meeting or General
Meetings, where Directors and representatives of the Investment Adviser are
available to meet shareholders in person and answer questions. The Annual
Report and half-yearly accounts are distributed to the Company's shareholders
and made available on the Company's website. The quarterly factsheet is also
available on the Company's website.
The Company's website - www.aquila-european-renewables.com - is considered an
essential communication channel and information hub for shareholders. As such,
it includes full details of the investment objective, supporting philosophy
and investment process and performance along with news, opinions, disclosures,
results and key information documents. It also presents information about the
Board, its committees and other governance matters, and shareholders are
encouraged to view the website, to better understand the Company.
Service Providers
As an externally managed investment trust, the Company conducts all its
business through its key service providers. The Board believes that
maintaining positive relationships with each of the Company's service
providers is important to support the Company's long-term success.
To ensure strong working relationships, the Company's key service providers
(the Investment Adviser, AIFM, Company Secretary, Administrator) are invited
to attend quarterly Board meetings to present their respective reports.
This enables the Board to exercise effective oversight of the Company's
activities. During the year, the Board spent a considerable amount of time
between Board meetings engaging with the Company's key service providers to
continue to develop strong working relationships and to determine good working
practices, to ensure the smooth operational function of the Company.
The Board and its advisers seek to maintain constructive relationships with
the Company's key service providers on behalf of the Company through the
annual review process, regular communications, meetings and the provision of
relevant information.
Alternative Investment Fund Manager ("AIFM")
The AIFM is an important service provider for the Company's long-term success.
The AIFM has engaged Aquila Capital to act as the Company's Investment Adviser
for the purpose of providing investment advisory services to the Company. The
AIFM is responsible for reviewing each investment opportunity before it is
presented to the Board. In addition to the reports the Board receives from the
Investment Adviser, it also receives quarterly reports from the AIFM. The
Board maintains regular contact with the AIFM to foster a constructive working
relationship. Additionally, the AIFM is responsible for monitoring the risks
faced by the Company, and these are regularly discussed at meetings of the
Audit and Risk Committee.
Investment Adviser
The Investment Adviser is the most significant service provider to the Company
and a description of its role can be found in the published Annual Accounts.
The performance of the Investment Adviser is determined by the quality of the
Investment Adviser management team and their ability to source high-quality
assets at attractive prices.
The Board monitors the Company's investment performance closely in relation to
its objectives, investment policy and strategy. To assist the Board, the
Investment Adviser provides monthly reports. Additionally, the Investment
Adviser presents its quarterly production and operational update reports at
each quarterly Board meeting. The Board maintains constructive dialogue with
the Investment Adviser between meetings.
On a periodic basis, the Board visits the Investment Adviser at its Hamburg
office, the site of one of the portfolio assets or one of its other offices,
so it can gain a better understanding of the Investment Adviser, to meet key
members of the team and gain further insight into the operation of each asset.
The Investment Adviser's remuneration is based on the NAV of the Company. From
IPO until 30 June 2023 the Investment Adviser's fees were paid in shares,
which aligned the Investment Adviser's interests with those of the Company's
shareholders.
Portfolio Investments
Prior to being presented to the Board of the HoldCo, the Company's wholly
owned subsidiary, the Company's Board is presented with potential investment
opportunities identified by the Investment Adviser that have undergone a
process of analysis and challenge by the AIFM, including considerations
relating to environmental, social and governance issues.
The Board considers each proposal by the Company's investment objective,
investment policy and strategy, as disclosed above and with consideration for
the wider group of stakeholders. In considering each investment opportunity,
the Board considers the Company's long-term success, having particular regard
to the following aspects of each proposal:
· potential revenue forecast to be generated by each asset;
· the diversity of the Company's portfolio;
· any community and environmental issues associated with each asset;
· geopolitical risk;
· the length of tenure of each asset;
· hedging aspects to limit risk; and
· funding aspects, including the use of gearing.
As at 31 December 2023, the Company and the HoldCo had EUR 29.5 million of
liquidity consisting of EUR 9.9 million in cash on hand plus EUR 19.6 million
in an undrawn Revolving Credit Facility.
Society and the Environment
The Company is an investor in renewable energy assets and is acutely aware of
its impact on the environment. The Company has an ESG policy and climate risk
strategy that ensure it considers society and the environment when
implementing its investment strategy. The ESG policy is available on request
from the Company Secretary.
You can find further details of matters relating to ESG can be found above or
on its website at https://www.aquila-european-renewables.com.
Key Decisions made During the Year
Decisions Relating to the Company's Portfolio of Assets
No new investment activities were undertaken as the returns were not adequate
relative to share buybacks.
No new PPA agreements were entered into during 2023. However two new PPAs
became active during the year in relation to the Greco assets. The Investment
Adviser monitors pricing developments in AER's key markets and has ongoing
dialogue with potential counterparties.
Solar PV Debt Financing
Subsequent to the year end, the Company, via its wholly owned subsidiary,
entered into a five-year non-recourse debt facility with ING Bank N.V.
Sucursal en España on 8 January 2024. The debt facility was sought in order
to secure financing at attractive terms, the proceeds of which were used to
repay the RCF.
Buyback Programme
On 3 February 2023, the Board agreed to introduce a share Buyback Programme
pursuant to the authority granted to the Board at the last Annual General
Meeting to purchase up to 14.99% of the Company's issued share capital. The
Board authorised the buyback as it believes the current share price does not
accurately reflect the inherent value in the Company's portfolio. For the
period from 3 February 2023 until the Buyback Programme was paused on 12
October 2023, the Company bought back for Treasury a total of 30,103,575
Ordinary Shares for an aggregate amount of EUR 27.8 million(1) at an average
discount of 15.8%.
The liquidity in the Company's shares has markedly improved.
1. Excluding fees and stamp duty.
Euronext Growth Dublin Listing
During the year, the Board agreed to consider a secondary listing on the
Euronext Growth Dublin exchange to help improve the Company's marketability
and appeal in Europe. The Company's shares began trading on the Euronext
Growth Dublin exchange on 2 October 2023.
Investment Adviser's Fees
The Company's Supplemental Investment Advisory Agreement, dated 10 May 2019
('Supplemental IAA') stipulated that, for the quarterly periods until 30 June
2023, the Investment Adviser shall be paid in shares in lieu of fees. The
following transactions were approved by the Board in satisfaction of the
Supplemental IAA:
Date Issue or purchase Amount acquired by the Investment Adviser Price paid per
of Ordinary Shares
Ordinary Share (cents)
3 February 2023 Purchased 900,340 90.00
18 May 2023 Purchased 771,695 98.86
7 August 2023 Purchased 831,701 87.00
Dividend Guidance
In accordance with AER's investment objective to pay a progressively growing
dividend over the medium term, the Company is pleased to announce a target
dividend of 5.79 cents per Ordinary Share ('2024 Target Dividend') in relation
to the year ending 31 December 2024, subject to the portfolio performing in
line with expectations. The 2024 Target Dividend represents an increase of
5.0% versus the prior year and follows a 5.0% increase in the 2023 dividend
announced in February 2023.
Revolving Credit Facility
Through its wholly owned subsidiary, Tesseract Holdings Limited, the Company
has access to a Revolving Credit Facility ('RCF') with a maximum limit of EUR
100.0 million.
During the year, the Board authorised the AIFM and the Investment Adviser to
extend the term until maturity of the RCF to April 2025.
Board Changes
On 2 February 2023, Dr Patricia Rodrigues replaced Kenneth MacRitchie as Chair
of the Remuneration and Nomination Committee as part of the Board's ongoing
commitment to ensure they maintain suitable diversity and representation
within the Board structure.
On 1 September 2023, Myrtle Dawes was appointed to the Board as an additional
non-executive Director to the Company.
RISK AND RISK MANAGEMENT
Principal Risks and Uncertainties
During the year the Company has carried out a rigorous assessment of its
principal and emerging risks, and the procedures in place to identify any
emerging risks are described below.
Procedures to Identify Principal or Emerging Risks
The Board regularly reviews the Company's risk matrix, with a focus on
ensuring that the appropriate controls are in place to mitigate each risk. The
experience and knowledge of the Board is important, as is advice received from
the Board's service providers, specifically the AIFM, who is responsible for
the risk and portfolio management services and outsources the portfolio
management to the Investment Adviser.
1. Investment Adviser: the Investment Adviser provides a report to the Board
quarterly, or periodically as required, on industry trends, insight to future
challenges in the renewable sector including the regulatory, political and
economic changes likely to affect the renewables sector;
2. Alternative Investment Fund Manager: following advice from the Investment
Adviser and other service providers, the AIFM maintains a register of
identified risks including emerging risks likely to affect the Company;
3. Broker: provides advice periodically, specific to the Company, on the
Company's sector, competitors and the investment company market, while working
with the Board and Investment Adviser to communicate with shareholders;
4. Company Secretary: briefs the Board on forthcoming governance changes that
might affect the Company; and
5. AIC: The Company is a member of the Association of Investment Companies,
which provides regular technical updates as well as drawing members' attention
to forthcoming industry and regulatory issues.
Procedure for oversight
The Audit and Risk Committee undertakes a regular review of the Company's risk
matrix, and a formal review of the risk procedures and controls in place at
the AIFM and other key service providers, to ensure emerging (as well as
known) risks are adequately identified and, so far as is practicable,
mitigated.
Principal Risks
The Board considers the following to be the principal risks faced by the
Company along with the potential impact of these risks and the steps taken to
mitigate them.
Economic, Political and Market
Risks Potential Impact/Description Mitigation
1. Electricity Prices The income and value of the Company's investments may be affected by future The Company holds a balanced mix of investments that benefit from government
changes in the market price of electricity. subsidies as well as long-term fixed price PPAs. Of AER's forecast revenue for
the next five years (on a present value basis), approximately 52% will be
generated via government tariffs or fixed price PPAs, protecting the Company's
revenue from volatile electricity prices.
While some of the revenues of the Company's investments benefit from fixed
prices, they are also partly dependent on the wholesale market price of
electricity, which is volatile and is affected by a variety of factors,
including: The Investment Adviser retains the services of market-leading energy
consultants to assist with determining future power pricing for the respective
regions.
· market demand;
· generation mix of power plants; The underlying SPV companies may use derivative instruments such as futures,
options, futures contracts and swaps to protect from fluctuations in future
· government support for various forms of power generation; electricity prices.
· fluctuations in the market price of commodities; and
· foreign exchange. The Investment Adviser models and monitors power price curves on an ongoing
basis and will recommend appropriate action. In addition, the Investment
Adviser has a dedicated team which is responsible for the originating,
negotiating and executing of all PPAs.
There is a risk that the actual prices received vary significantly from the
model assumptions, leading to a shortfall in anticipated revenues by the
Company.
The Investment Adviser reviews the hedging strategy on a deal-by-deal basis,
both at time of investment and on an ongoing basis. Should changes be required
to the hedging strategy, these will be recommended to the AIFM and Board.
Increased EU goals to push green economies will lead to a ramp up of
renewables and capacities, with potential to lead to grid oversupply issues
resulting in pricing pressures.
The current energy geopolitical crisis in Europe is increasing energy prices
and volatility which is likely to have an impact on performance.
Windfall taxes, regulation and price caps introduced across Europe to curb
excess profits could affect the Company's revenue.
2. Equity Market Volatility and shareholder Pressure Volatility in equity markets may cause the Company's shares to rise or fall The Company's advisers monitor market conditions and report regularly to the
and therefore to trade at a premium or a discount to its net asset value. If Board. If the Company is unable to raise new capital, it could defer making
volatility causes the shares to trade at a discount, this could affect the any new investments until the stock market recovers and, in extreme
Company's ability circumstances, could sell existing investments to reduce debt and raise
liquidity.
to raise further equity to allow it to repay debt or to support further
investments.
The Company's share price decreased, and remains in excess of 20% discount to
its net asset value. As a result, the Board introduced a share buyback
If the shares trade at a significant discount for a period of time, the programme on 3 February 2023. The Board and its advisers continue to monitor
Company could become vulnerable to a takeover. In addition, loss of confidence the share price. Additionally, the Board has considered broader options for
by shareholders may increase the likelihood of attracting votes against the the Company's future, including a merger via section 110 of the Insolvency Act
continuation vote to be put to shareholders in September 2024. 1986, which is currently being explored.
Volatility can allow significant equity positions to be built and the risk Shareholder analysis is obtained regularly enabling monitoring of the
that a sole shareholder increases its ownership to such an extent that they Company's largest shareholders. The views of the larger shareholders can be
are able to exert significant influence over the Company and decisions made by monitored by the Company and any concerns managed before the influence becomes
the Board. overbearing.
3. Change in Political Sentiment A change in political direction or regulation in one of the countries in which The AIFM, advised by the Investment Adviser with its 17 offices in 16
the Company targets investment could lead to changes, reductions, caps or countries, continuously monitors all jurisdictions the Company invests.
withdrawals of government support arrangements, a windfall tax or potentially
the nationalisation of investments. This could have a material impact on the
valuation of the investments and the Company's net asset value.
Tax, legal and ESG due diligence ("DD") is undertaken on each investment and
reviewed before signing off any investment proposal.
Environmental groups may threaten the Company with litigation or put pressure
on the government in relation to its renewables ambitions and permits due to
environmental concerns and impact on the projects. Additional due diligence on development and construction assets is undertaken
for new investment opportunities to avoid or mitigate any potential issues.
The Investment Adviser has significant experience in these assets and performs
ongoing monitoring of these risks.
Regulatory changes at the SPV level are monitored by the Investment Adviser
and reported to the Board/AIFM on an ongoing basis.
Operational
4.Environmental /Social/Governance ("ESG") Failure to adhere to its ESG Policy and Impact Strategy could result in the The Investment Adviser performs detailed due diligence on ESG factors for each
Company being liable for damages or compensation to the extent that such asset prior to acquisition and on a periodic basis thereafter, taking into
losses are not covered by insurance policies. In addition, adverse publicity consideration each ESG risk identified by the Board and Investment Adviser.
or reputational damage could follow. Further details on how ESG is mitigated, and the wider approach of the
Investment Adviser to ESG matters, can be found above.
Significant ESG risks to the portfolio could include:
Environmental - climate change, biodiversity issues or environmental
impairment.
Social - impact on local communities where the Company's assets operate, as
well as employee welfare including health and safety incidents.
Governance - lack of a strong governance framework within the Company could
expose it to, among other things, the negative impact of bribery and
corruption.
5.Competition for Assets With increasing numbers of investors seeking exposure to renewable assets, it The record of the Investment Adviser and its market position and penetration
is possible new competitors will enter the market the Company operates. This allow it to access potential investments that newer entrants may not have
could lead to increased pricing for the Company's target investments, with access to. Through the Investment Adviser, the Company has access to a number
corresponding lower returns and slower deployment of uninvested cash. of assets in the development phase, creating a competitive advantage for the
Company.
The Board is mindful of pricing when it reviews new investment proposals and
the need to achieve the Company's target objective and strategy.
6. Counterparty Risk The majority of the operational risk in the Company's investments is retained Operation and maintenance ("O&M") of assets are subcontracted to a
by the counterparty or its subcontractors. Failure to properly operate and counterparty who is responsible for ensuring effective continuing operation
maintain assets may result in reduction of revenues and value of assets. and maintenance of that asset. The Investment Adviser ensures each such
However, some risks will remain within the investment. counterparty has the experience and resources to comply with its obligations
and monitors compliance on an ongoing basis.
Poor performance by a subcontractor may lead to the need for a replacement,
which could have cost implications, affecting the performance of the Constant monitoring of the investments and the counterparties or service
investment and potentially distributions to the Company until the issue is providers allows the Investment Adviser to identify and address risks early.
resolved. Diversification of counterparties and service providers ensures any impact is
limited.
The value of the Company's investments and the income they generate may be
affected by the failure of counterparties to comply with their obligations The Investment Adviser assesses the credit risk of companies by defined
under a PPA. criteria before they become counterparties to PPAs, EPCs and TSA providers.
7. Performance of the Investment Adviser The Investment Adviser manages over EUR 14.7 billion for clients worldwide. The Company and AIFM are made aware of and review potential conflicts of
There is a risk of conflict when allocating potential new investments across interest at the time each investment is made. The Investment Adviser procures
various clients including the Company. and provides the Board with an independent fairness valuation opinion, which
mitigates the risk where valuations conflict exists. When assets are bought
along with other funds managed by the Investment Adviser, the price is
externally validated.
The Investment Adviser employs experienced executives to identify, acquire and
manage the Company's investments. There is a risk that a key person leaves the
Investment Adviser.
In addition, an investment allocation policy has been implemented by the
Investment Adviser and has been agreed by the Board.
The strength and depth of the Investment Adviser's resources mitigate the risk
of a key person's departure.
8. IT Security A hacker or third party could obtain access to the Investment Adviser or any Service providers have been carefully selected for their expertise and
other service provider and destroy data or use it for malicious purposes. Data reputation in the sector. Each service provider has provided assurances to the
records could be destroyed, resulting in an inability to make investment AIFM and the Company on their cyber policies and business-continuity plans,
decisions and monitor investments. along with external audit reviews of their procedures where applicable.
Risk that the emergence of increasingly advanced AI will lead to new risks to The Investment Adviser and key service providers have information-security
the Company, including, but not limited to, decline in human autonomy, policies in place, and have appointed IT security officers whose tasks are to
increased cybersecurity vulnerabilities, data loss, impersonation for the provide support for emergency events and crises, the monitoring of the
purposes of extracting information or money. resumption, and repair of the IT security measures after completion of a
disturbance or incident, and the ongoing development of improvements to the IT
security concept.
The pandemic and, more recently the Russian and Ukraine war, has increased IT
security concerns and threats being posed to the Company and operating
structure by hackers that may lead to loss of information or even a cash loss. The Investment Adviser's in-house Asset Management team has reviewed the
protective measures taken by the counterparties and has further increased the
vigilance against cyber-attacks that could affect the performance and
infrastructure of the investments. Insurance is in place to cover potential
losses from direct attacks. For indirect attacks (e.g. against grid operation
or transmission system) the various administrators, operation and maintenance
providers are required to maintain sufficient insurance coverage to mitigate
possible damages.
Financial
9. Portfolio Valuation There is a risk the Company's asset valuations and underlying assumptions, The principal component of the Company's balance sheet is its portfolio of
such as future electricity prices and discount rates, are not a fair renewable investments. Each quarter, the AIFM is responsible for preparing a
reflection of the market, meaning the investment portfolio could be over or fair market value of the investments, with input and guidance from the
under-valued. Investment Adviser. These valuations and the key underlying assumptions are
interrogated by the Board before being approved.
The Investment Adviser has a strong track record of undertaking valuations of
renewable assets built up over the years since it was founded in 2001.
In addition, when a conflicted new investment is being proposed by the
Investment Adviser, a fairness valuation opinion from an independent adviser
is procured by the Investment Adviser for the AIFM and the Board.
The Investment Adviser and broker monitor market competitors and provide
feedback on valuation methodologies and assumptions to the valuation team.
10. Leverage Risk/ Interest Risk The use of leverage creates risks including: The Company's investment policy restricts the use of leverage to:
· exposure to interest rates, which can fluctuate; · short-term debt: 25% of the prevailing GAV; and
· covenant breaches; · long-term structural debt: 50% of the prevailing GAV.
· liquidity risks;
· enhanced loss on underperforming investments; and As at 31 December 2023, the Company's subsidiary, Tesseract Holdings Limited,
had 13.2% of short-term debt and at SPV level there was 21.2% of long-term
· the ability to refinance assets impacts asset returns and cash structured debt as a percentage of GAV. The AIFM monitors all debt levels to
flows. these policy restrictions and reports them to the Board quarterly.
Fluctuations in interest rates may affect discount rates applied to the The Investment Adviser provides updates of the covenant compliance to the AIFM
portfolio valuations, as well as affecting cost of debt in both the underlying and to the Board periodically, and looks at refinancing as early as possible.
SPVs and the Company.
Interest rate risk on bank debt at the asset level is mitigated by the use of
hedging instruments.
Liquidity and forward looking cashflow management is monitored by the
Investment Adviser and AIFM.
The majority of the Company's long-term structural debt is non-recourse,
largely fixed interest rates and fully amortising.
Compliance, Tax and Legal
11. Changes to Tax Legislation or Rates Changes in tax legislation, base erosion and profit shifting rules, substance, The corporate structure of the Company is reviewed periodically by the Company
withholding tax rules and rates, could result in tax increases, resulting in a and its advisers. The Board has been kept informed on a timely basis of the
decrease in income received from the Company's investments. recent introduction of the windfall (and other tax arrangements) taxes
introduced across Europe to curb profits of energy providers, and has
carefully considered the impact on the Company's portfolio, which is further
discussed in the Investment Adviser's Report.
A windfall tax on profits from an investment levied by government.
The Investment Adviser works closely with tax and industry experts before
providing structuring recommendations to the Company prior to investment and
on an ongoing basis.
12. Regulatory and Compliance Changes The Company fails to comply with section 1158 of the Corporation Tax Act to All service providers, including the broker, Company Secretary, Administrator,
ensure maintenance of investment trust status, UK Listing Authority Investment Adviser and AIFM, are experienced in these areas and provide
regulations including Listing Rules, Foreign Account Tax Compliance Act and comprehensive reporting to the Board and on compliance with these regulations.
Alternative Investment Fund Managers Directive ("AIFMD").
The AIFM is experienced in compliance with the AIFMD reporting obligations and
The Company fails to comply with relevant ESG rules and regulations and fails reports at least quarterly to the Board.
to monitor those such as the SFDR, changing disclosure requirements and
greenwashing risks.
The Investment Adviser monitors changes in regulation across the markets the
Company operates.
Failure to comply with the relevant rules and obligations may result in
reputational damage to the Company or have a negative financial impact.
The Company complies with article 8 of the SFDR and, as noted under "ESG",
looks to comply with local requirements to mitigate potential risks.
Possible uncertainty remains with post-Brexit negotiations and eventual trade
deals agreed.
Unfavourable terms can affect withholding taxes, double tax treaty limitations
and various other trading concerns.
Additionally, the Company operates in multiple markets throughout Europe, and
some have shown signs of changes or potential changes in regulation as a
response to high power prices.
13. Financial Crises Risk of bank failure. On 10 March 2023, Silicon Valley Bank and Signature Bank The Company's bankers are carefully chosen based on their credit rating.
came close to collapse, prompting US regulators to take control in an attempt Further due diligence is undertaken on each bank to ensure they are robust
to prevent contagion. On 19 March 2023, it was announced that the Swiss before the Company engages them.
government had successfully negotiated the acquisition of Credit Suisse by
UBS, to prevent its collapse and prevent contagion. If either the US
regulators or the Swiss Government had been unsuccessful in preventing
contagion, the Company's bankers could have been affected, creating The Company's funds are held by a number of banks, to diversify counterparty
difficulties for the Company to operate. risk. Since the 10 March 2023 announcement, the AIFM has undertaken a review
of the Company's banking arrangements to identify any exposure to Silicon
Valley, Signature and Credit Suisse banks. Following this analysis, the AIFM
has concluded that the Company's exposure is nil.
Emerging Risks
14. Climate-related risks Climate-related risks can be categorised as physical or transitional risks. The Company should be sufficiently protected through hedging of price risks in
Physical risks are those associated with the physical effects of climate the event of unforeseen changes in regulatory requirements related to climate
change. They can be event‑based (acute), such as cyclones, hurricanes, change.
wildfires, heatwaves, pandemics, droughts and floods; or longer-term (chronic)
shifts in climate patterns, such as sustained higher temperatures with melting
of glaciers and ice sheets causing sea-level rise, permafrost melting, chronic
heatwaves and desertification, extreme variability in precipitation, land Insurance is usually in place in the event of acute climate risks such as
degradation and changes in air quality. physical damage due to floods, or wildfires resulting in production losses.
Transitional risks are those that arise as economies move towards Financial model forecasts are based on P50 production (the estimated annual
less-polluting, greener solutions. These include externally imposed risks such amount of electricity generation that has a 50% probability of being exceeded
as the effect of legal and regulatory requirements or policy changes, changes - both in any single year and over the long term - and a 50% probability of
in societal demands, advances in technologies, market changes and the being underachieved) data sourced from energy yield assessments provided by
consequent business decisions taken to respond to such changes. Transitional external service providers.
risks have the potential to crystallise suddenly, for example as a result of
policy changes. Physical or transitional climate-related risks could affect
the operation of the Company's assets and hence the production or revenue
generated by the portfolio assets. The Company also mitigates the frequency of both physical and transitional
risks through extensive geographical diversification of its portfolio.
15. Act of War/Sanctions As evidenced with the ongoing war in Ukraine and the various restrictions The Investment Adviser, using its extensive experience, is constantly
imposed, as well as the conflict in Gaza, acts of war and resulting sanctions monitoring geopolitical and macro-economic developments. Where required, it
can lead to O&M supply delays, volatile energy markets and general undertakes external geopolitical and risk analysis.
uncertainty.
The Company does not have any direct exposure to Ukraine, Russia, Israel or
This can also lead to short-term price increases and more focus on renewable Gaza. There are also no direct business relations with counterparties from
energy infrastructure and increased competition for assets. these countries.
With increasing competition for renewable investments, new regions may be The Company has limited exposure to supply chain risk and a shift in focus to
considered, potentially introducing additional political and regulatory risks. renewable energy and energy efficiency is a positive.
The Broker, Administrator, AIFM and Company advisers all monitor and inform
the Board as soon as they are aware of any developments that may impact the
Company or its business.
16. Continuation Vote The risk that through shareholder dissatisfaction with the Company's The broker, Administrator, AIFM and Company advisers all monitor and inform
performance compared to their expected returns, there is a vote against the the Board as soon as they are aware of any developments that may affect the
Company's continuation due to take place in September 2024. Company or its business.
The Board regularly assesses the sentiment of shareholders and, if it
considered there was growing discontent the Board would act accordingly.
Viability Statement
In accordance with the UK Corporate Governance Code and the Listing Rules, the
Directors have assessed the prospects of the Company over a longer period than
the twelve-months required by the 'Going Concern' provision.
In reviewing the Company's viability, the Directors have assessed the
viability of the Company for the period to 31 December 2028 (the 'Period').
The Board believes the Period, being approximately five years, is an
appropriate time horizon over which to assess the viability of the Company,
particularly when taking into account the long-term nature of the Company's
investment strategy and the principal risks outlined above. Based on this
assessment, the Directors have a reasonable expectation that the Company will
be able to continue to operate and to meet its liabilities as they fall due
over the period to 31 December 2028.
In considering the prospects of the Company, the Directors looked at the key
risks facing the Company, HoldCo and the SPVs, focusing on the likelihood and
impact of each risk as well as any key contracts, future events or timescales
that may be assigned to each key risk. The Directors are satisfied that the
Company would continue to remain viable under downside scenarios, including a
decline in long-term production and power price forecasts. These risks,
together with the mitigating factors of each, are shown in the Principal Risks
section on above.
As a sector-focused renewable energy investment company, the Company aims for
a progressively growing dividend while preserving the capital value of its
investment portfolio. As part of its analysis, the Board was mindful that the
Company's portfolio assets, held via HoldCo, are fully operational with asset
lives of up to 40 years, significantly in excess of the period under
consideration.
This assessment also included a detailed review of the issues arising
following the war in Ukraine, and conflict between Israel and Hamas in
Palestine, high volatility in commodity prices and tax changes which affect
the Company's assets (for example, the changes to Norway's taxation of onshore
wind farms) that currently face the Company's assets as disclosed in the
Principal Risks section on above and in the Investment Adviser's Report shown
above.
The Company and its subsidiaries have a modest gearing level representing
34.3% as at 31 December 2023 of its Gross Asset Value, comprised of an RCF
(EUR 74.7 million drawn, excluding bank guarantees) and non-recourse debt at
the asset level of EUR 120.1 million. The Company (via its subsidiaries, where
applicable) complies with its covenants related to the RCF and non-recourse
debt. The Company negotiated an extension to its RCF in April 2023, which now
expires in April 2025. In January 2024, the Company, via its wholly owned
subsidiaries, entered into a bank debt financing at its Spanish solar PV
portfolio for EUR 50.0 million, the proceeds of which were primarily used to
repay the RCF, which is currently drawn to EUR 26.1 million as of the date of
approval of this document (excluding bank guarantees), representing
approximately 7.0% of its NAV as at 31 December 2023.
The Board, in combination with its advisers, is evaluating a potential
extension of the RCF in 2024, noting that such a decision could be influenced
by the outcome of the current section 110 process, given the RCF is subject to
market standard change of control provisions.
The Company's Investment Adviser has already received proposals from both RCF
lenders to extend the facility, subject to agreeing commercial terms and
credit approval.
The Board has reviewed 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 Q4 2023 (adjusting for
the recent partial repayment of the RCF), forecast cash flows would have to
reduce by over 50% to breach the Company's ICR. Given the factors outlined
above, the Board has a reasonable expectation that the RCF maturity in April
2025 does not jeopardise the Company's ability to operate and meet its
liabilities over the period to 31 December 2028.
The Board has also considered the Company's counterparty banking relations to
ensure they are sufficiently robust. Counterparties to the RCF are ING and
RBSI (equal share), both of which benefit from a strong investment‑grade
credit rating, with S&P assigning a long-term credit rating of A+ to ING
and A to RBSI. Only counterparties with strong investment‑grade credit
ratings are considered for the Company's RCF, reducing the risk that the
Company would be affected by the failure of a bank or financial institution.
The Directors believe the Company is well placed to manage its business risks
successfully over both the short and long term and, accordingly, the Board has
a reasonable expectation that the Company will be able to continue in
operation and to meet its liabilities as they fall due for a period of at
least five years.
The internal control framework of the Company is subject to a formal review on
at least an annual basis. On a regular basis, the Board reviews the risk
report prepared by the AIFM.
The Directors do not expect there to be any material increase in the expenses
of the Company over the Period.
The Company's income from investments provides substantial cover to the
Company's operating expenses and buyback programme, and any other costs likely
to be faced by the Company over the Period of the assessment.
In May 2023, the Company was subject to its first continuation vote, which
passed with 74.12% of proxy votes voting in favour of continuation. The Board
made a commitment that if the continuation vote in 2023 was passed, a
subsequent continuation vote would be held in September 2024. The Board also
made a commitment to continue to explore a number of different initiatives to
address the issues facing the sector and to secure recognition in the
Company's share price of the real underlying value of the Company's portfolio.
The Company announced on 26 February 2024 that the process of identifying a
number of broader options for its future, including the consideration of a
potential combination of the Company with another listed investment company by
way of section 110 of the Insolvency Act 1986 ('s110') had commenced.
Accordingly, the Directors recognise that the outcome of the continuation vote
and section 110 process is not yet known and creates material uncertainty
around going concern, and may cast significant doubt about the Company's
viability.
Outlook
The outlook for the Company, including the future development and performance
of the Company, is discussed in the Chairman's Statement and the Investment
Adviser's Report shown above.
Strategic Report
The Strategic Report, set out in the Annual Report, was approved by the Board
of Directors on 24 April 2024.
For and on behalf of the Board,
David MacLellan
24 April 2024
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL
STATEMENTS
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have prepared the financial
statements in accordance with international accounting standards in conformity
with UK-adopted international accounting standards and with the requirements
of the Company's Act 2006 as applicable to companies reporting under these
standards. Under company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of its profit or loss for that period.
In preparing the financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether they have been prepared in accordance with
UK‑adopted international accounting standards, subject to any material
departures disclosed and explained in the financial statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the financial statements on the going concern basis, unless
it is inappropriate to presume that the Company will continue in business.
The Directors are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps to prevent and detect fraud and other
irregularities.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose, with
reasonable accuracy at any time, the financial position of the Company. The
accounting records should also enable them to ensure the financial statements
and the Directors' Remuneration Report comply with the Companies Act 2006 and
Article 4 of the IAS Regulation.
The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' Confirmations
Each of the Directors, whose names and functions are listed in the Corporate
Governance section, confirm that, to the best of their knowledge:
· the Company financial statements, which have been properly
prepared in accordance with UK-adopted international accounting standards,
give a true and fair view of the assets, liabilities, financial position, and
profit of the Company; and
· the Directors' Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties it faces.
For and on behalf of the Board
David MacLellan
24 April 2024
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Notes (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Unrealised (losses)/gains on investments 4 - (41,675) (41,675) - 41,778 41,778
Net foreign exchange losses - (24) (24) - (13) (13)
Interest income from shareholder loans 5 15,312 - 15,312 15,929 - 15,929
Dividend income 5 1,200 - 1,200 1,200 - 1,200
Investment advisory fees 6 (2,896) - (2,896) (3,150) - (3,150)
Other expenses 7 (1,814) - (1,814) (1,565) - (1,565)
Profit/(loss) on ordinary activities before finance costs and taxation 11,802 (41,699) (29,897) 12,414 41,765 54,179
Finance costs 8 (1) - (1) (75) - (75)
Profit on ordinary activities before taxation 11,801 (41,699) (29,898) 12,339 41,765 54,104
Taxation 9 - - - - - -
(Loss)/profit on ordinary activities after taxation 11,801 (41,699) (29,898) 12,339 41,765 54,104
Return per Ordinary Share undiluted (cents) 10 3.03 (10.72) (7.69) 3.02 10.24 13.26
Return per Ordinary Share undiluted (cents) 10 3.03 (10.72) (7.69) 3.02 10.24 13.26
The notes shown below are an integral part of these financial statements.
The total column of the 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 year.
Return on ordinary activities after taxation is also the "Total comprehensive
income for the year".
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
Notes As at As at
31 December 2023 (EUR '000) 31 December 2022 (EUR '000)
Fixed assets
Investments at fair value through profit or loss 4 372,403 428,641
Current assets
Trade and other receivables 11 96 5,630
Cash and cash equivalents 1,532 19,893
1,628 25,523
Current liabilities
Trade and other payables 12 (1,490) (2,514)
(1,490) (2,514)
Net current assets 138 23,009
Net assets 372,541 451,650
Capital and reserves: equity
Share capital 13 4,082 4,082
Share premium 255,643 255,643
Special reserve 14 87,717 125,082
Capital reserve 23,919 65,618
Revenue reserve 1,180 1,225
Total shareholders' funds 372,541 451,650
Net assets per Ordinary Share (cents) 15 98.52c 110.64c
The notes shown below are an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 24 April
2024 and signed on its behalf by:
David MacLellan
Company number 11932433
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Share
Share premium Special Capital Revenue
capital account reserve reserve reserve Total
Notes (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Opening equity as at 4,082 255,643 125,082 65,618 1,225 451,650
1 January 2023
Share buybacks 13 - - (27,964) - - (27,964)
Profit/(loss) for the year - - - (41,699) 11,801 (29,898)
Dividend paid 16 - - (9,401) - (11,846) (21,247)
Closing equity as at 4,082 255,643 87,717 23,919 1,180 372,541
31 December 2023
Share
Share premium Special Capital Revenue
capital account reserve reserve reserve Total
Notes (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Opening equity as at 4,069 254,388 134,393 23,853 740 417,443
1 January 2022
Shares issued during the year(1) 13 13 1,313 - - - 1,326
Share issue costs - (58) - - - (58)
Profit for the year - - - 41,765 12,339 54,104
Dividend paid 16 - - (9,311) - (11,854) (21,165)
Closing equity as at 4,082 255,643 125,082 65,618 1,225 451,650
31 December 2022
The notes shown below are an integral part of these financial statements.
1. During the year, the Company did not issue any new Ordinary Shares
(2022: 1,286,293 shares with gross aggregate proceeds of EUR 1.33 million).
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
Notes Year ended 31 December 2023 Year ended 31 December 2022
(EUR '000) (EUR '000)
Operating activities
(Loss)/profit on ordinary activities before finance costs and taxation (29,897) 54,179
Adjustment for:
Unrealised losses/(gains) on investments 41,675 (41,778)
Decrease in trade and other receivables 5,534 3,668
(Decrease)/increase in trade and other payables (1,024) 859
Net cash flow from operating activities 16,288 16,928
Investing activities
Purchase of investments 4 - (71,369)
Repayments during the year 4 14,563 1,459
Payment of contingent consideration - (1,428)
Net cash flow from/(used in) investing activities 14,563 (71,338)
Financing activities
Proceeds of share issues - 1,326
Share issue costs - (58)
Share buybacks 13 (27,964) -
Dividend paid 16 (21,247) (21,165)
Finance costs 8 (1) (75)
Net cash flow used in financing activities (49,212) (19,972)
Decrease in cash (18,361) (74,382)
Cash and cash equivalents at start of year 19,893 94,275
Cash and cash equivalents at end of year 1,532 19,893
The notes shown below are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1. General Information
Aquila European Renewables Plc ('Aquila European Renewables' or 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 its
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 financial statements have been prepared in accordance with UK-adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006, as applicable to companies reporting under those
standards.
The financial statements have also been prepared, as far as is relevant and
applicable to the Company, in accordance with the Statement of Recommended
Practice issued by the AIC in April 2021.
The financial statements are prepared on the historical cost basis, except for
the revaluation of certain financial instruments at fair value through profit
or loss. The principal accounting policies adopted are set out below. These
policies are consistently applied.
The functional currency of the Company is euros, as this is the currency of
the primary economic environment in which the Company operates. Accordingly,
the financial statements are presented in euros, rounded to the nearest
thousand euros, unless otherwise stated. The EUR/GBP exchange rate as of 31
December 2023 was 0.8669 (2022: 0.8853).
Accounting for Subsidiary
The Company owns 100% of its subsidiary Tesseract Holdings Limited ("HoldCo"
or "THL"). The Company has acquired Renewable Energy Infrastructure
Investments 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' or "SHL")
provided by the Company to HoldCo. The Company meets the definition of an
investment entity as described by IFRS 10. Under IFRS , an investment entity
is required to hold subsidiaries at fair value through profit or loss, and
therefore does not consolidate the subsidiary.
The HoldCo is an investment entity and, as described under IFRS 10, values its
SPV investments at fair value through profit or loss. SPV investments are
investments held at HoldCo. Further details of the HoldCo and SPV structure
and investments can be found in note 20, below.
Characteristics of an Investment Entity
Under the definition of an investment entity, the Company should satisfy all
three of the following tests:
i. the Company obtains funds from one or more investors for the
purpose of providing those investors with investment management services;
ii. the Company commits to its investors that its business purpose is
to invest funds solely for returns from capital appreciation, investment
income, or both; and
iii. the Company measures and evaluates the performance of substantially
all its investments on a fair value basis.
In assessing whether the Company meets the definition of an investment entity
set out in IFRS 10, the Directors note that:
i. the Company has multiple investors and obtains funds from a
diverse group of shareholders who would otherwise not have access individually
to investing in renewable energy infrastructure investments due to high
barriers to entry and capital requirements;
ii. the Company intends to hold these renewable energy infrastructure
investments, via the HoldCo, for the remainder of their useful life for the
purpose of capital appreciation and investment income. The renewable energy
infrastructure investments are expected to generate renewable energy output
for 25 to 30 years from their relevant commercial operation date; the
Directors believe the Company is able to generate returns to the investors
during that period; and
iii. the Company measures and evaluates the performance of all its
investments, held via HoldCo, on a fair value basis, which is the most
relevant for investors in the Company. Management use fair value information
as a primary measurement to evaluate the performance of all the investments
and in decision making.
The Directors are of the opinion that the Company meets all the typical
characteristics of an investment entity and therefore meets the definition set
out in IFRS 10. The Directors are satisfied that investment entity accounting
treatment appropriately reflects the Company's activities as an investment
trust.
The Directors have also satisfied themselves that Tesseract Holdings Limited
meets the characteristic of an investment entity. Tesseract Holdings Limited
has one investor, Aquila European Renewables Plc; however, in substance
Tesseract Holdings Limited is investing the funds of the investors of Aquila
European Renewables Plc on its behalf and is effectively performing investment
management services on behalf of many unrelated beneficiary investors.
The Directors believe the treatment outlined above provides the most relevant
information to investors.
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 Company continues to meet its day-to-day liquidity needs through its cash
resources and RCF. In reaching this conclusion, the Directors have considered
its cash position, income, expense flows, and compliance with the RCF
covenants. The Company's net assets as at 31 December 2023 equated to EUR
372.5 million (2022: EUR 451.7 million). As at 31 December 2023, the Company
and its wholly owned subsidiary held EUR 9.9 million (2022: EUR 24.7 million)
in cash, which excludes any additional cash held within the Company's
investments.
The Company and its subsidiaries have a modest level of debt, representing
34.3% of its Gross Asset Value as of 31 December 2023, comprised of an RCF
(EUR 74.7 million drawn, excluding bank guarantees) and non-recourse debt at
the asset level (EUR 120.1 million). In January 2024, the Company, via its
wholly owned subsidiaries, entered into a bank debt financing at its Spanish
solar PV portfolio for EUR 50.0 million, the proceeds of which were primarily
used to repay the RCF, which is currently drawn to EUR 26.1 million as of the
date of approval of this document (excluding bank guarantees), representing
approximately 7.0% of its NAV as at 31 December 2023.
The Company is in compliance with its covenants related to the RCF. The Board
and its advisers have analysed the covenants of the RCF, and significant
headroom exists in relation to both the Interest Coverage Ratio ("ICR") and
Loan to Value covenant versus actual ratios based on 31 December 2023. For
example, based on the Company's RCF compliance certificate for Q4 2023
(adjusting for the recent partial repayment of the RCF), forecast cash flows
would have to reduce by over 57% in order to breach the Company's ICR.
The Company's RCF is due to expire in April 2025 and whilst an extension has
not been agreed, the Company would expect to extend the facility with the
existing lenders, on the basis that:
- the Company and its Investment Adviser have a strong relationship
with the RCF lenders;
- RCF lenders have already put forward proposals to extend the
facility, subject to agreeing commercial terms and credit approval;
- the Company and its subsidiaries have a modest level of debt, of
approximately 34.3%; and
- the Company is in compliance with its RCF covenants and benefits
from a significant buffer compared to the actual ratios observed as at 31
December 2023.
Outside of the RCF, the Company and its HoldCo have no other noteworthy
liabilities.
The Company and its HoldCo's total expenses for the year ended 31 December
2023 were EUR 10.4 million, inclusive of RCF interest and fees (2022: EUR 6.4
million), which represented approximately 2.6% (2022: 1.5%) of average net
assets during 2023. At the date of approval of this document, based on the
aggregate of investments and cash held, the Company has substantial operating
expenses cover.
The 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. As part of the assessment, the Directors have
reviewed the operating cash flow forecast prepared by the Investment Adviser
under base case and downside scenarios. The forecast highlights that the
Company is able to meet its obligations without running into any liquidity
shortages, noting it also has access to a partially undrawn RCF (EUR 68.2
million available) and other sources of liquidity, should the need arise. In
addition, the Directors are satisfied that any refinancing risks associated
with the RCF are low. The Company's portfolio benefits from contracted
revenues in the form of Power Purchase Agreements and Government-regulated
tariffs, providing significant visibility of income and downside protection,
with 52.0% of revenue contracted over the next five years. For example, the
Company expects its 2024 target dividend to be fully covered even if forecast
power prices decline by 37%.
As discussed in the Chairman's Statement above, the Company announced on 14
December 2023 that, together with its advisers, it continues to explore a
number of different initiatives to address the issues facing the sector and to
secure recognition, in the Company's share price, of the real underlying value
of the Company's portfolio. On 26 February 2024, following the receipt and
review of a number of indications of interest in a potential combination of
the Company with another listed investment company by way of a section 110 of
the Insolvency Act 1986 ("section 110 combination"), the Board instructed its
advisers, Deutsche Numis, to commence a process of mutual due diligence with
multiple interested parties. The engagement with parties interested in a
section 110 combination with the Company is still ongoing and therefore there
can be no certainty that this process will result in a combination on terms
which the Board considers to be in the best interests of shareholders as a
whole. Any section 110 combination would be subject to shareholder approval.
On 30 May 2023, the Board announced that shareholders should have a further
opportunity to vote on the continuation of the Company during the course of
the financial year ending 31 December 2024, expected to be around September
2024. With the support of the Company's brokers, the Board has consulted with
the Company's shareholders who have expressed their high regard for the
Investment Adviser and the Company's portfolio of assets, although it is
recognised that the sector as a whole has faced challenges during recent
months as discounts have widened and liquidity issues persist. Shareholders
have also raised concerns about the ability for the Company to grow in the
current climate, given the sustained discount in the share price versus the
NAV. As a result, the Directors acknowledge that there is uncertainty as to
whether the continuation vote would pass or fail.
If the continuation vote is not passed, then according to the Company's
Articles, the Directors shall within six months put proposals to shareholders
for the reconstruction, reorganisation or liquidation of the Company.
Any such proposal would have to take into consideration the outcome (if any)
of the section 110 process, which was announced on 26 February 2024. As a
result, the Directors believe that, in the absence of a section 110
transaction taking place, the Directors expect that if the continuation vote
is not passed, formulating and implementing any such proposals would require
the Company to continue operations for a period of at least 12 months from the
date of approval of the Company's financial statements.
Accordingly, while the Directors recognise that these conditions indicate the
existence of material uncertainty which may cast significant doubt about the
Company's ability to continue as a going concern, based on the assessment and
considerations above, the Directors have concluded that the financial
statements of the Company should be prepared on a going concern basis. The
financial statements do not include the adjustments that would result if the
Company were unable to continue on a going concern basis.
Critical Accounting Judgements, Estimates and Assumptions
The preparation of financial statements in accordance with IFRS requires
management to make judgements, estimates and assumptions in certain
circumstances that affect reported amounts. These are judgements, estimates
and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities.
Key Judgements
As disclosed above, the Directors have concluded that the Company and HoldCo
meet 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 IFRS 10.
The Company classifies its investments based on its business model for
managing those financial assets and the contractual cash flow characteristics
of the financial assets. The portfolio of assets is managed, and performance
is evaluated, on a fair value basis.
The Company is primarily focused on fair value information and uses that
information to assess the assets' performance and to make decisions.
The contractual cash flows of the Company's shareholder loans are solely
principal and interest. However these securities are not held for the purpose
of collecting contractual cash flows.
The collection of contractual cash flows is only incidental to achieving the
Company's business model's objective. Consequently, all investments are
measured at fair value through profit or loss. The Company considers the
equity and shareholder loan investments to share the same investment
characteristics and risks, and they are therefore treated as a single unit of
account for fair value purposes (IFRS 13) and a single class for financial
instrument disclosure purposes (IFRS 9).
As a result, the evaluation of the performance of the Company's investments is
done for the entire portfolio on a fair value basis, as is the reporting to
the key management personnel and investors. In this case, all equity and
shareholder loan investments form part of the same portfolio, for which the
performance is evaluated on a fair value basis together and reported to the
key management personnel in its entirety.
Uncertainty: Investments at Fair Value Through Profit or Loss
The key assumptions that have a significant impact on the carrying value of
the Company's underlying investments in SPVs are the discount rates, useful
lives 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 rates are subjective and therefore it is feasible that a
reasonable alternative assumption may be used, resulting in a different value.
The discount rates applied to the cash flows are reviewed annually by the
Investment Adviser to ensure they are at the appropriate level. The Investment
Adviser will take into consideration market transactions, which are of similar
nature, when considering changes to the discount rates used.
The weighted average discount rate applied in the December 2023 valuation was
7.2% (2022: 7.2%).
Useful lives are based on the Investment Adviser's estimates of the period
over which the assets will generate revenue, which are periodically reviewed
for continued appropriateness.
The assumption used for the useful life of the wind assets 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 lives of hydropower assets are estimated in accordance
with their expected concession terms.
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. Long-term power price forecasts are provided by leading
market consultants, updated quarterly.
Specifically commissioned external reports are used to estimate the expected
electrical output from the wind and hydropower farm and solar PV assets,
taking into account the expected average wind speed at each location and
generation data from historical operation. The actual electrical output may
differ considerably from that estimated in such a report, mainly due to the
variability of actual wind to that modelled in any one period. Assumptions on
electrical output will be reviewed only if there is good reason to suggest
there has been a material change in this expectation.
The P50 level of output is the estimated annual amount of electricity
generation (in MW) that has a 50.0% probability of being exceeded, both in any
single year and over the long term, and a 50.0% probability of being
underachieved.
Climate risks can also affect the carrying value of the Company's underlying
investments. The Company relies (via the HoldCo or relevant SPVs) on
third-party technical advisers to consider the impact of climate risks when
assessing P50 production forecasts.
The operating costs of the SPV companies are frequently partly or wholly
subject to inflation, and an assumption is made that inflation will increase
at a long-term rate. The SPVs' valuation assumes long-term inflation of 2.0%
(2022: 2.0%). The impact of physical and transition risks associated with
climate change is assessed on a project-by-project basis and factored into the
underlying cash flows as appropriate.
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 4 to
the financial statements under sensitivities.
New Standards, Interpretations and Amendments Adopted from 1 January 2023
A number of new standards and amendments to standards are effective for the
annual periods beginning after 1 January 2023. None of these have a
significant effect on the measurement of the amounts recognised in the
financial statements of the Company.
New Standards and Amendments Issued but not yet Effective
The relevant new and amended standards and interpretations that are issued,
but not yet effective, up to the date of issuance of the Company's financial
statements are disclosed below. These standards are not expected to have a
material impact on the Company in future reporting periods, or on foreseeable
future transactions.
Amendments to IAS 1 Presentation of Financial Statements - Classification of
Liabilities as Current or Non-current
The amendments to IAS 1 clarify that the classification of liabilities as
current or non-current is based on rights that are in existence at the end of
the reporting period. The amendments also specify that classification is
unaffected by expectations about whether an entity will exercise its right to
defer settlement of a liability, and they explain that rights are in existence
if covenants are complied with at the end of the reporting period. They also
introduce a definition of 'settlement' to make clear that settlement refers to
the transfer to the counterparty of cash, equity instruments, other assets or
services. The amendments are applied retrospectively for annual periods
beginning on or after 1 January 2024, with early application permitted.
Amendments to IAS 1 Presentation of Financial Statements - Non‑current
Liabilities with Covenants
The amendments specify that only covenants that an entity is required to
comply with, on or before the end of the reporting period, affect the entity's
right to defer settlement of a liability for at least twelve months after the
reporting date (and therefore must be considered in assessing the
classification of the liability as current or non-current). Such covenants
affect whether the right exists at the end of the reporting period, even if
compliance with the covenant is assessed only after the reporting date (e.g. a
covenant based on the entity's financial position at the reporting date that
is assessed for compliance only after the reporting date). The amendments are
applied retrospectively for annual reporting periods beginning on or after 1
January 2024. Earlier application of the amendments is permitted.
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures - Supplier Finance Arrangements
The amendments add a disclosure objective to IAS 7, or stating that an entity
is required to disclose information about its supplier finance arrangements
that enables users of financial statements to assess the effects of those
arrangements on the entity's liabilities and cash flows. In addition, IFRS 7
was amended to add supplier finance arrangements as an example within the
requirements to disclose information about an entity's exposure to
concentration of liquidity risk. The amendments, which contain specific
transition reliefs for the first annual reporting period in which an entity
applies the amendments, are applicable for annual reporting periods beginning
on or after 1 January 2024. Earlier application is permitted.
3. Material Accounting Policies
Financial Instruments
Financial Assets
The Company's financial assets principally comprise of investments held at
fair value through profit (shareholder loan and equity investments) cash and
trade and other receivables.
The Company's shareholder loan and equity investments in HoldCo are held at
fair value through profit or loss. Gains or losses resulting from the
movements in fair value are recognised in the Company's Statement of
Comprehensive Income at each measurement point. Where there is sufficient
value within HoldCo, the Company's shareholder loans are fair valued at their
redeemable amounts and the residual fair value reflected within the Company's
equity investments.
Trade and other receivables are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest rate
method.
Financial Liabilities
The Company's financial liabilities include trade and other payables, and
other short-term monetary liabilities which are initially recognised at fair
value and subsequently measured at amortised cost using the effective interest
rate method.
Recognition, Derecognition and Measurement
Financial assets and financial liabilities are recognised in the Company's
Statement of Financial Position when the Company becomes a party to the
contractual provisions of the instrument. Financial assets and financial
liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial liabilities
at fair value through profit or loss) are added to or deducted from the fair
value of the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in profit or loss.
A financial liability (in whole or in part) is derecognised when the Company
has extinguished its contractual obligations, it expires or is cancelled.
Financial assets are derecognised when the rights to receive cash flows from
the investments have expired or the Company has transferred substantially all
risks and rewards of ownership.
Subsequent to initial recognition, financial assets at fair value through
profit or loss are measured at fair value. Gains and losses resulting from the
movement in fair value are recognised in the Statement of Comprehensive
Income. Financial liabilities are subsequently measured at amortised cost
using the effective interest rate method.
Taxation
Investment trusts which have approval under section 1158 of the Corporation
Tax Act 2010 are not liable for taxation on capital gains. Shortly after
listing, the Company received an approval as an investment trust by HMRC.
Current tax is the expected tax payable on the taxable income for the period,
using tax rates that have been enacted or substantively enacted at the date of
the Statement of Financial Position.
Deferred Taxation
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled, or the asset is realised. Deferred tax
is charged or credited to the Statement of Comprehensive Income, except when
it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off tax assets against tax liabilities. They are also
offset when they relate to income taxes levied by the same taxation authority
and the Company intends to settle its current tax assets and liabilities on a
net basis.
Segmental Reporting
The Chief Operating Decision Maker ("CODM"), 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 whilst preserving capital. The financial information used by the CODM
to manage the Company presents the business as a single segment.
Income
Income includes investment income from financial assets at fair value through
profit or loss and finance income.
Investment income from financial assets at fair value through profit or loss
is recognised in the Statement of Comprehensive Income within investment
income when the Company's right to receive income is established.
Interest earned on shareholder loans is recognised on an accruals basis.
Dividend income is recognised when the right to receive it is established, and
is reflected in the Statement of Comprehensive Income as investment income.
Expenses
All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the Statement of
Comprehensive Income, all expenses are presented as revenue as they are
directly attributable to the operations of the Company.
Payment of Investment Advisory Fees in Shares
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, Ordinary Shares and, as announced on 6 August 2021, this
arrangement was extended by an additional two years to 30 June 2023. 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 the fee due in the relevant period. This arrangement has now lapsed
and the Board has decided not to extend it further. Where shares are trading
at a premium to NAV, Ordinary Shares are issued in lieu of the Investment
Adviser's fees; and the fair value of the investment advisory services
received in exchange for shares is recognised as an expense at the time at
which the investment advisory fees are earned, with a corresponding increase
in equity. The fair value of the investment advisory services is calculated by
reference to the definition of investment advisory fees in the Investment
Advisory Agreement. During the year, no shares were issued to the Investment
Adviser in lieu of its fees (2022: 1,286,293 Ordinary Shares were issued).
Where the shares have been trading at a discount to NAV, the Board will
instruct the Company's brokers to purchase shares in the market for the
Investment Adviser in lieu of its fees. Fees paid by way of a purchase of
shares will be treated as a capital expense at the time of purchase. During
the year, a total of 2,503,736 Ordinary Shares were purchased on behalf of the
Investment Adviser in lieu of its fees (2022: 1,788,559 Ordinary Shares were
purchased).
The Board has decided not to extend this agreement further.
Further details on the payment of investment advisory fees in shares are
disclosed in note 6 to the financial statements.
Foreign Currency
Transactions denominated in foreign currencies are translated into euros at
actual exchange rates as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the period end are reported
at the rates of exchange prevailing at the period end. Any gain or loss
arising from a change in exchange rates subsequent to the date of the
transaction is included as an exchange gain or loss to capital or revenue in
the Statement of Comprehensive Income as appropriate. Foreign exchange
movements on investments are included in the Statement of Comprehensive Income
within gains on investments.
Cash and Cash Equivalents
Cash and cash equivalents include deposits held at call with banks and other
short-term deposits, with original maturities of three months or less.
Share Capital, Special Reserve and Share Premium
Ordinary Shares are classified as equity. Costs directly attributable to the
issue of new shares (that would have been avoided if there had not been a new
issue of new shares) are recognised against the value of the Ordinary Share
premium account.
Repurchases of the Company's own shares are recognised and deducted directly
in equity. No gain or loss is recognised in profit or loss on the purchase,
sale, issue or cancellation of the Company's own equity instruments.
4. Investments Held at Fair Value Through Profit or Loss
As at As at
31 December 31 December
2023 2022
Investments at fair value through profit Investments at fair value through profit
or loss or loss
(EUR '000) (EUR '000)
(a) Summary of valuation
Analysis of closing balance:
Investments held at fair value through profit or loss 372,403 428,641
Total investments 372,403 428,641
(b) Movements during the year
Opening balance of investments, at cost 362,978 293,068
Purchases at cost - 71,369
Repayments during the year (14,563) (1,459)
Cost of investments 348,415 362,978
Revaluation of investments to fair value:
Unrealised movement in fair value of investments 23,988 65,663
Balance of capital reserve - investments held 23,988 65,663
Fair value of investments 372,403 428,641
(c) (Loss)/gains on investments in year (per Statement of Comprehensive
Income)
Movement in unrealised revaluation of investments held (41,675) 41,778
(Loss)/gains on investments (41,675) 41,778
The fair value of the Company's 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 explained in note 2,
the Company has made a judgement to fair value of both the equity and
shareholder loan investments together. As such, the Company's equity and the
shareholder loan investments in HoldCo have been classified as Level 3 in the
fair value hierarchy.
Fair Value Measurements
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following three levels:
Level 1
The unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable
(i.e. developed using market data) for the asset or liability, either
directly or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the
asset or liability.
The classification of the Company's investments held at fair value is detailed
in the table below:
As at 31 December 2023 As at 31 December 2022
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Investments at fair value - - 372,403 372,403 - - 428,641 428,641
through profit or loss
- - 372,403 372,403 - - 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
year ended 31 December 2023.
The movement on the Level 3 unquoted investments during the year is shown
below:
Year ended Year ended
31 December 31 December
2023 2022
(EUR '000) (EUR '000)
Opening balance 428,641 316,953
Additions during the year - 71,369
Repayments during the year (14,563) (1,459)
Unrealised (losses)/gains on investments adjustments (41,675) 41,778
Closing balance 372,403 428,641
Valuation Methodology
The Company owns 100% of its subsidiary Tesseract Holdings Limited. The
Company meets the definition of an investment entity as described by IFRS 10;
as such, its investment in the HoldCo is valued at fair value. HoldCo's cash,
working capital balances and fair value of investments are included in
calculating fair value of the HoldCo.
The Company 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 31 December 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 held at fair value through profit or loss and are
valued using the IFRS 13 framework for fair value measurement. The following
economic assumptions were used in the valuation of the SPVs.
Valuation Assumptions
As at 31 December 2023
Discount rates The discount rate used in the valuations is calculated according to
internationally recognised methods.
Typical components of the discount rate are risk-free rates, country-specific
and asset-specific risk premia.
The latter comprise the risks inherent to the respective asset class, as well
as specific premia for other risks such as development and construction.
Power price Power prices are based on captured power price forecasts from leading market
analysts. The forecasts are independently sourced from providers with
coverage in almost all European markets, as well as providers with regional
expertise. The approach applied to all asset classes (wind energy, solar PV
and hydropower) remains unchanged with the first two using a blend of
two power price curve providers and the third using a blend of three power
price curve providers.
Energy yield/load factors Estimates are based on third-party energy yield assessments, which consider
historic production data (where applicable) and other relevant factors.
Inflation rates Long-term inflation is based on the monetary policy of the European Central
Bank. Short-term inflation assumptions are based on the first three years
being sourced from Refinitiv and an interpolation for another two years to the
long-term rate.
Asset life Life of 25 to 30 years for onshore wind energy and 40 years for solar
PV is assumed. The operating lives of hydropower assets are estimated in
accordance with their expected concession terms.
Operating expenses Operating expenses are primarily based on respective contracts and, where not
contracted, on the assessment of a technical adviser.
Taxation rates Underlying country-specific tax rates are derived from due diligence reports
from leading tax consulting firms.
Valuation Sensitivities
The fair value of the Company's investment in HoldCo is ultimately determined
by the underlying fair values of the SPV investments. As such, sensitivity
analysis is produced to show the impact of changes in key assumptions adopted
to arrive at the SPV valuation.
For each of the sensitivities, it is assumed that potential changes occur
independently of each other with no effect on any other base case assumption,
and that the number of investments in the SPVs remains static throughout the
modelled life.
The NAV per share impacts from each sensitivity are shown below:
(i) Discount Rates
The DCF valuation of the SPV investments represents the largest component of
the NAV of the Company and the key sensitivities are considered to be the
discount rate used in the DCF valuation and assumptions.
The weighted average valuation discount rate applied to calculate the SPV
valuation is 7.2% at 31 December 2023. An increase or decrease in this rate by
0.5% at project level has the following effect on valuation:
NAV per -0.5% Total NAV +0.5% NAV per
share impact change value change share impact
Discount rate in (EUR cents) (EUR '000) (EUR '000) (EUR '000) in (EUR cents)
Valuation as of 31 December 2023 5.7 394,093 372,541 352,697 (5.2)
(ii) Power Price
Long-term power price forecasts are provided by leading market consultants and
are updated quarterly. The sensitivity below assumes a 10% increase or
decrease in merchant power prices relative to the base case for every year of
the asset life.
The sensitivity considers a flat 10% movement in power prices for all years,
i.e. the effect of adjusting the forecast electricity price assumptions in
each of the jurisdictions applicable to the SPV down by 10% and up by 10% from
the base case assumptions for each year throughout the operating life of the
SPV.
Note the Company intends to renew power price hedges (e.g. in the form of PPAs
or other mechanisms) before the existing contracts (PPAs and Government
regulated tariffs) expire. This rolling hedge strategy is not reflected in the
sensitivities illustrated above. When renewing the existing hedges, the
Company's power price exposure and, therefore, its sensitivity towards power
prices, decreases.
A change in the forecast electricity price assumptions by plus or minus 10%
has the following effect on valuation:
NAV per Total NAV NAV per
share impact -10.0% value +10.0% share impact
Power price (EUR cents) (EUR '000) (EUR '000) (EUR '000) (EUR cents)
Valuation as of 31 December 2023 (11.3) 329,931 372,541 415,083 11.2
(iii) Energy Yield
The base case assumes a 'P50' level of output. The P50 output is the estimated
annual amount of electricity generation (in MW) that has a 50% probability of
being exceeded both in any single year and over the long term and a 50%
probability of being underachieved. Hence the P50 is the expected level of
generation over the long term. The sensitivity illustrates the effect of
assuming 'P90 10 years' (a downside case) and 'P10 10 years' (an upside case)
energy production scenarios. A P90 10 years downside case assumes the average
annual level of electricity generation that has a 90% probability of being
exceeded over a ten-year period. A P10 10 years upside case assumes the
average annual level of electricity generation that has a 10% probability of
being exceeded over a ten-year period. This means that the SPV aggregate
production outcome for any given ten-year period would be expected to fall
somewhere between these P90 and P10 levels with an 80% confidence level, with
a 10% probability of it falling below that range of outcomes and a 10%
probability of it exceeding that range. The sensitivity does not include the
portfolio effect which would reduce the variability because of the
geographical diversification. The sensitivity is applied throughout the next
ten years.
The table below shows the sensitivity of the SPV value to changes in the
energy yield applied to cash flows from project companies in the SPV as per
the terms P90, P50 and P10 explained above.
NAV per P90 Total P10 NAV per
share impact 10 years NAV value 10 years share impact
Energy yield (EUR cents) (EUR '000) (EUR '000) (EUR '000) (EUR cents)
Valuation as of 31 December 2023 (7.9) 342,743 372,541 402,792 8.0
(iv) Inflation Rates
The projects' income streams are principally a mix of Government regulated
tariffs, fixed-price PPAs and merchant revenues. Government regulated tariffs
and fixed-price PPAs tend not to be inflation linked, whilst merchant revenues
are generally subject to inflation. The current contractual life of Government
regulated tariffs and fixed-price PPAs are shorter than their respective asset
lives, meaning, from a valuation perspective, the assets are more exposed to
merchant revenues in the late asset life. As described earlier, the Company
intends to renew power price hedges (e.g. in the form of PPAs or other
mechanisms) before the existing contracts (PPAs and Government regulated
tariffs) expire. This rolling hedge strategy is not reflected in the
sensitivities illustrated above. The projects' management and maintenance
expenses typically move with inflation; however, debt payments are fixed. This
results in the SPV returns and valuation being positively correlated to
inflation. The SPV's valuation assumes long-term inflation of 2.0% p.a.
The sensitivity illustrates the effect of a 0.5% decrease and a 0.5% increase
from the assumed annual inflation rates in the financial model for each year
throughout the operating life of the SPV.
NAV per Total NAV per
share impact -0.5% NAV value +0.5% share impact
(EUR cents) (EUR '000) (EUR '000) (EUR '000) (EUR cents)
Inflation rates
Valuation as of 31 December 2023 (4.6) 355,169 372,541 391,084 4.9
(v) Asset Life
In general, an operating life of 25 to 30 years for onshore wind energy and 40
years for solar PV is assumed. The operating lives of hydropower assets are
estimated in accordance with their concession term.
The sensitivity below shows the valuation impact from a one-year adjustment to
the asset life across the portfolio.
NAV per Total NAV per
share impact -1 year NAV Value +1 year share impact
Asset life (EUR cents) (EUR '000) (EUR '000) (EUR '000) (EUR cents)
Valuation as of 31 December 2023 (1.6) 366,336 372,541 378,100 1.5
(vi) Operating Expenses
The sensitivity shows the effect of a 10.0% decrease and a 10.0% increase to
the base case for annual operating costs for the SPV, in each case assuming
that the change to the base case for operating costs occurs with effect from 1
January 2024 and that change is applied for the remaining life of the assets.
An increase or decrease in operating expenses by 10% at SPV level has the
following effect on valuation:
NAV per Total NAV NAV per
share impact -10.0% value +10.0% share impact
Operating expenses (EUR cents) (EUR '000) (EUR '000) (EUR '000) (EUR cents)
Valuation as of 31 December 2023 4.6 389,973 372,541 355,121 (4.6)
5. Income from Investments
For the For the
year ended year ended
31 December 31 December
2023 2022
Income from investments (EUR '000) (EUR '000)
Interest income from shareholder loans 15,257 15,929
Dividend income 1,200 1,200
Bank interest income 55 -
Total income 16,512 17,129
6. Investment Advisory Fees
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
(EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Investment advisory fees 2,896 - 2,896 3,150 - 3,150
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
million;
b) 0.65% per annum of NAV (plus VAT) of the Company between EUR 300
million and EUR 500 million; and
c) 0.55% per annum of NAV (plus VAT) of the Company above EUR 500
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, 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 the fee due in respect of the relevant
period. The current Investment Adviser fee arrangement with Aquila Capital
Investmentgesellschaft allowed the Investment Adviser fee to be fully paid in
the shares of the Company 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 and/or travel expenses.
Share-Based Payments
The Company settled investment advisory fees by issuing or purchasing Ordinary
Shares. The Company has issued and purchased the following shares to settle
investment advisory fees in respect of the year under review:
In respect of the year ended 31 December 2023 Investment advisory fees (EUR) Fair value of issue/ purchase price (cents) Number of shares Date of transaction Issued/ Purchased
31 March 2023 767,841 98.86 771,695 18 May 2023 Purchased
30 June 2023 728,290 87.00 831,701 7 August 2023 Purchased
Investment advisory fees (EUR) Fair value of issue/ purchase price (cents) Number of shares Date of transaction Issued/ Purchased
In respect of the year ended 31 December 2022
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
30 September 2022 812,545 94.73 852,206 9 November 2022 Purchased
31 December 2022 810,308 90.00 900,340 3 February 2023 Purchased
7. Other Expenses
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
(EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Secretary and administrator fees 218 - 218 254 - 254
Tax compliance 10 - 10 132 - 132
Directors' fees 181 - 181 169 - 169
Directors' other employment costs 35 - 35 12 - 12
Broker retainer 68 - 68 87 - 87
Audit fees - statutory(1,2) 385 - 385 352 - 352
AIFM fees 122 - 122 147 - 147
Registrar's fees 16 - 16 23 - 23
Marketing fees 106 - 106 67 - 67
FCA and listing fees 215 - 215 61 - 61
Legal fees 202 - 202 162 - 162
ESG rating fees 38 - 38 33 - 33
AIC and other regulatory fees 44 - 44 30 - 30
Other expenses 174 - 174 36 - 36
Total expenses 1,814 - 1,814 1,565 - 1,565
1. There are no non-audit services in relation to the current year.
2. The GBP equivalent of the statutory audit fees was GBP 333,700 (2022:
GBP 295,200) including VAT of GBP 55,600 (2022: GBP 49,200).
8. Finance Costs
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
(EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Interest charges - - - 72 - 72
Bank charges 1 1 2 3 - 3
Total 1 1 2 75 - 75
9. Taxation
(a) Analysis of Tax Charge in the Year
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
(EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Total tax charge for the year (see note 9(b)) - - - - - -
(b) Factors Affecting Total Tax Charge for the Year
The effective UK corporation tax rate applicable to the Company for the year
is 23.5% (2022: 19%). The tax charge differs from the charge resulting from
applying the standard rate of UK corporation tax for an investment trust
company.
The differences are explained below:
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
(EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
Profit/(loss) on ordinary activities before taxation 11,801 (41,699) (29,898) 12,339 41,765 54,104
Corporation tax at 23.52% (2022: 19%) 2,776 (9,808) (7,032) 2,344 7,935 10,279
Effects of:
(Loss)/gain on investments held at fair value not (taxable)/allowable - 9,802 9,802 - (7,937) (7,937)
Foreign exchange loss not allowable - 6 6 - 2 2
Dividend income not taxable (282) - (282) (228) - (228)
Expenditure not deductible for tax purposes 66 - 66 13 - 13
Movement in management expenses not utilised/deferred tax not recognised (28) - (28) 19 - 19
Impact of tax-deductible interest distributions (2,532) - (2,532) (2,148) - (2,148)
Total tax charge for the year - - - - - -
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.
The Company has unrelieved excess management expenses of EUR 1,157,548 (2022:
EUR 1,273,191). It is unlikely that the Company will generate sufficient
taxable profits in the future to utilise these expenses and therefore no
deferred tax asset has been recognised. The unrecognised deferred tax asset
calculated using a tax rate of 25% (2022: 25%) amounts to EUR 289,387 (2022:
EUR 318,298). The March 2021 Budget announced an increase to the main rate of
corporation tax to 25% from 1 April 2023.
10. Return per Ordinary Share
For the For the
year ended year ended
31 December 31 December
Income from investments 2023 2022
Revenue return after taxation (EUR '000) 11,801 12,339
Capital return after taxation (EUR '000) (41,699) 41,765
Total net return (EUR '000) (29,898) 54,104
Weighted average number of Ordinary Shares 388,998,468 407,926,535
Number of shares
For the For the
year ended year ended
31 December 31 December
Weighted average number of shares used as the denominator 2023 2022
Weighted average number of Ordinary Shares used as the denominator in 388,998,468 407,926,535
calculating basic earnings per share
11. Trade and Other Receivables
As at As at
31 December 31 December
2023 2022
(EUR '000) (EUR '000)
Interest due from shareholder loans - 5,542
Pre-paid expenses 96 88
Total 96 5,630
12. Trade and Other Payables
As at As at
31 December 31 December
2023 2022
(EUR '000) (EUR '000)
Accrued expenses 1,383 1,291
Intercompany payable - 645
Deferred consideration payable 107 578
Total 1,490 2,514
13. Share Capital
As at 31 December 2023 As at 31 December 2022
No. of shares (EUR '000) No. of shares (EUR '000)
Allotted, issued and fully paid:
Ordinary Shares of 1 cent each ('Ordinary Shares') 378,122,130 3,781 408,225,705 4,082
Total 378,122,130 3,781 408,225,705 4,082
The Ordinary Shares shall carry the right to receive the profits of the
Company available for distribution and determined to be distributed by way of
interim or final dividends at such times as the Directors may determine in
accordance with the Articles of the Company. The holders of Ordinary Shares
have the right to receive notice of, and to attend and vote at, General
Meetings of the Company.
During the year, the Company did not issue any new Ordinary Shares (2022:
1,286,293 Ordinary Shares with gross aggregate proceeds of
EUR 1.33 million).
During the year, the Company purchased for treasury a total of 30,103,575
Ordinary Shares at an aggregate cost of EUR 27,964,000 (including stamp duty
and other fees). There were no shares purchased for treasury in the prior
year.
For the year ended 31 December 2023 Shares in issue at the beginning of the year Shares subscribed Shares bought back and held in treasury Shares in issue at the end of the year
Ordinary Shares 408,225,705 - 30,103,575 378,122,130
For the year ended 31 December 2022 Shares in issue at the beginning of the year Shares subscribed Shares redeemed Shares in issue at the end of the year
Ordinary Shares 406,939,412 1,286,293 - 408,225,705
During the year to 31 December 2022, the Company issued 1,286,293 new Ordinary
Shares with gross proceeds of EUR 1.33 million, relating to the settlement of
the Investment Advisers fees. The Company has not issued any further Ordinary
Shares to the Company's Investment Adviser since the agreement ended on 30
June 2023 (note 6).
14. Special Reserve
As indicated in the Company's prospectus dated 10 May 2019, following
admission of the Company's Ordinary Shares to trading on the London Stock
Exchange, the Directors applied to the Court and obtained a judgment on 30
July 2019 to cancel the amount standing to the credit of the share premium
account of the Company. The amount of the share premium account cancelled and
credited to a special reserve was EUR 149,675,608.
15. Net Assets per Ordinary Share
Net assets per Ordinary Share as at 31 December 2023 are based on EUR
372,541,000 (2022: EUR 451,650,000) of net assets of the Company attributable
to the 378,122,130 (2022: 408,225,705) Ordinary Shares in issue as at 31
December 2023.
16. Dividend Paid
The Company has paid the following interim dividends in respect of the year
under review:
For the year ended 31 December 2023 For the year ended 31 December 2022
Total dividends paid in the year Cents per Total Cents per Total
Ordinary Share (EUR '000) Ordinary Share (EUR '000)
31 December 2022 interim - paid 17 March 2023 (2022: 11 March 2022) 1.3125c 5,334 1.25c 5,096
31 March 2023 interim - paid 26 May 2023 (2022: 17 June 2022) 1.3775c 5,376 1.3125c 5,351
30 June 2023 interim - paid 18 August 2023 (2022: 2 September 2022) 1.3775c 5,310 1.3125c 5,353
30 September 2023 interim - Paid 17 November 2023 (2022: 2 December 2022) 1.3775c 5,227 1.3125c 5,365
Total 5.4450c 21,247 5.1875c 21,165
The dividend relating to the year ended 31 December 2023, which is the basis
on which the requirements of section 1159 of the Corporation Tax Act 2010 are
considered, is detailed below:
For the year ended 31 December 2023 For the year ended 31 December 2022
Total dividends declared in the year Cents per Total Cents per Total
Ordinary Share (EUR '000) Ordinary Share (EUR '000)
31 March 2023 interim - paid 26 May 2023 (2022: 17 June 2022) 1.3775c 5,376 1.3125c 5,351
30 June 2023 interim - paid 18 August 2023 (2022: 2 September 2022) 1.3775c 5,310 1.3125c 5,353
30 September 2023 interim - paid 17 November 2023 (2022: 2 December 2022) 1.3775c 5,227 1.3125c 5,365
31 December 2023 interim - paid 18 March 2024 (2022: 17 March 2023)(1) 1.3775c 5,211 1.3125c 5,334
Total 5.5100c 21,124 5.2500c 21,403
1. Not included as a liability in the year ended 31 December 2023
financial statements.
17. Financial Risk Management
The Investment Adviser, AIFM, and the Administrator, report to the Board on a
quarterly basis and provide information to the Board which allows it to
monitor and manage financial risks relating to its operations. The Company's
activities expose it to a variety of financial risks: market risk (including
price risk, interest-rate risk and foreign-currency risk), credit risk and
liquidity risk. These risks are monitored by the AIFM. Each risk and its
management is summarised below.
Market Risk
The value of the investments will be a function of the discounted value of
their expected future cash flows, and as such will vary with, inter alia,
movements in interest rates, market prices and the competition for such
assets. The Investment Adviser carries out a full valuation on a quarterly
basis, which takes into account market risks. The sensitivity of the
investment valuation due to market risk is shown in note 4 above.
(i) Currency Risk
Foreign-currency risk is defined as the risk that the fair values of future
cash flows will fluctuate because of changes in foreign exchange rates. The
Company's financial assets and liabilities are denominated in euros and
substantially all of its revenues and expenses are in euros. The Company is
not considered to be materially exposed to foreign-currency risk.
(ii) Interest Rate Risk
The Company's interest rate risk on interest-bearing financial assets is
limited to interest earned on shareholder loans. The Board considers that, as
shareholder loan bear interest at a fixed rate, they do not carry any
interest-rate risk.
The Company's interest and non-interest-bearing assets and liabilities as at
31 December 2023 are summarised below:
Interest Non-interest
bearing bearing Total
Assets (EUR '000) (EUR '000) (EUR '000)
Cash and cash equivalents - 1,532 1,532
Trade and other receivables - 96 96
Investments at fair value through profit or loss 233,888 138,515 372,403
Total assets 233,888 140,143 374,031
Liabilities
Creditors - (1,490) (1,490)
Total liabilities - (1,490) (1,490)
The Company's interest and non-interest-bearing assets and liabilities as at
31 December 2022 are summarised below:
Interest Non-interest
bearing bearing Total
Assets (EUR '000) (EUR '000) (EUR '000)
Cash and cash equivalents - 19,893 19,893
Trade and other receivables - 5,630 5,630
Investments at fair value through profit or loss 248,451 180,190 428,641
Total assets 248,451 205,713 454,164
Liabilities
Creditors - (2,514) (2,514)
Total liabilities - (2,514) (2,514)
(iii) Price Risk
Price risk is defined as the risk that the fair value of a financial
instrument held by the Company will fluctuate. Investments are measured at
fair value through profit or loss. As of 31 December 2023, the Company held
investments with an aggregate fair value of EUR 372,403,000 (2022: EUR
428,641,000). All other things being equal, the effect of a 10% increase or
decrease in the share prices of the investments held at the year end would
have been an increase or decrease of EUR 37,240,000 (2022: EUR 42,864,000)
in the profit after taxation for the year ended 31 December 2023 and the
Company's net assets at 31 December 2023. The sensitivity of the investment
valuation due to price risk is shown further in note 4 above.
Credit Risk
Credit risk is the risk of loss due to the failure of a borrower or
counterparty to fulfil its contractual obligations. The Company is exposed to
credit-risk in respect of trade and other receivables, cash at bank and
shareholder loan investments. The Company's credit-risk exposure is minimised
by dealing with financial institutions with investment-grade credit ratings
and making shareholder loan investments which are equity in nature. The
Company's shareholder loan investments in HoldCo are secured by underlying
renewable investments and as such these shareholder loans are not exposed to
credit risk. No balances are past due or impaired.
As at As at
31 December 31 December
2023 2022
(EUR '000) (EUR '000)
Investments at fair value through profit or loss - shareholder loan 233,888 248,451
investments
Trade and other receivables 96 5,630
Cash and cash equivalents 1,532 19,893
Total 235,516 273,974
In the table above, the value for investments at fair value through profit or
loss relates to the face value of debt investments.
The table below shows the cash balances of the Company and the credit rating
for each counterparty:
As at As at
31 December 31 December
2023 2022
Rating (EUR '000) (EUR '000)
Royal Bank of Scotland A-1/A+ (S&P Rating) 1,414 2,170
EFG International AG-Daily liquid fund A (Fitch Rating) 115 15,183
Royal Bank of Scotland International A-1/A (S&P Rating) 3 2,540
Total 1,532 19,893
Liquidity Risk
Liquidity risk is the risk that the Company may not be able to meet a demand
for cash or fund an obligation when due. The Investment Adviser, AIFM, and
the Board, continuously monitor forecast and actual cash flows from operating,
financing and investing activities to consider payment of dividends, repayment
of the Company's shareholder loans or further investing activities.
Financial assets and liabilities by maturity as at 31 December 2023 are shown
below:
Less than
1 year 1-5 years 5+ years Total
(EUR '000) (EUR '000) (EUR '000) (EUR '000)
Trade and other payables (1,490) - - (1,490)
Total (1,490) - - (1,490)
Financial assets and liabilities by maturity as at 31 December 2022 are shown
below:
Less than
1 year 1-5 years 5+ years Total
(EUR'000) (EUR'000) (EUR'000) (EUR'000)
Trade and other payables (2,514) - - (2,514)
Total (2,514) - - (2,514)
As at 31 December 2023, across the Company's investment portfolio, there is
approximately EUR 120.1 million (2022: EUR 131.2 million) of non-recourse,
project debt (on a proportional basis) at the SPV level. Additionally, the
Company's subsidiary has a Revolving Credit Facility ("RCF") with a limit of
EUR 100.0 million. At year, EUR 80.4 million was drawn down from the facility
(31 December 2022: EUR 34.9 million).
Capital and Risk Management
The Company's capital management objectives are to ensure that the Company
will be able to continue as a going concern while maximising the return to
equity shareholders.
In accordance with the Company's investment policy, the Company's principal
use of cash (including the proceeds of the IPO and placings) is to invest in a
diversified portfolio of Renewable Energy Infrastructure Investments, as well
as expenses related to the share issue when they occur, ongoing operational
expenses and payment of dividends and other distributions to shareholders in
accordance with the Company's dividend policy.
The Company considers its capital to comprise Ordinary Share capital,
distributable reserves and retained earnings. The Company is not subject to
any externally imposed capital requirements. The Company's share capital and
reserves, which are shown in the Statement of Financial Position, total EUR
372,541,000 (2022: EUR 451,650,000).
The Board, with the assistance of the Investment Adviser, monitors and reviews
the Company's capital on an ongoing basis. Use of distributable reserves is
disclosed in note 19.
Share capital represents the 1 cent nominal value of the issued share capital.
The share premium account arose from the net proceeds of new shares.
The capital reserve reflects any increases and decreases in the fair value of
investments which have been recognised in the capital column of the Statement
of Comprehensive Income.
18. Transactions with the Investment Adviser and Related Party Transactions
AIFM fees for the year ended 31 December 2023 amount to EUR 122,000 (2022: EUR
147,000). As at 31 December 2023, the fee outstanding to the AIFM was EUR
8,794 (2022: EUR 30,734).
The Company Secretary and Administrator fees for the year ended 31 December
2023 amount to EUR 218,000 (2022: EUR 254,000) and the total fees paid to
Apex Group amount to EUR 340,000 (2022: EUR 401,000).
Fees payable to the Investment Adviser are shown in the Statement of
Comprehensive Income. As at 31 December 2023, the fee outstanding to the
Investment Adviser was EUR 685,971 (2022: EUR 815,581).
Fees are payable to the Directors, effective from 1 April 2021, 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.
Year ended Year ended
31 December 31 December
2023 2022
(EUR) (EUR)
Ian Nolan 75,000 75,000
David MacLellan 52,500 50,000
Kenneth MacRitchie 45,150 43,000
Patricia Rodrigues 45,150 43,000
Myrtle Dawes(1) 15,040 -
1. Myrtle Dawes was appointed to the Board on 1 September 2023.
During the year, the Company advanced shareholder loans to HoldCo of EUR
233,888,000 (2022: EUR 248,451,000). During the year, the Company received
total dividend income of EUR 1,200,000 (2022: EUR 1,200,000) and total
shareholder loan interest income of EUR 15,257,000 (2022: EUR 15,929,000) from
the HoldCo.
The accrued interest and shareholder loans outstanding at the year end were
EUR 233,888,000 (2022: EUR 253,993,000).
The Directors had the following shareholdings in the Company, all of which
were beneficially owned.
Ordinary Shares Ordinary Shares
31 December 31 December
2023 2022
Ian Nolan 150,000 100,000
David MacLellan 125,000 75,000
Kenneth MacRitchie 50,000 50,000
Patricia Rodrigues 50,000 50,000
Myrtle Dawes - -
19. 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 1,180,000 as at 31 December
2023 (2022: EUR 1,225,000).
20. Unconsolidated Subsidiaries, Joint Venture and Associate
The following tables show subsidiaries, the joint venture and the associate 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 for the year Total assets Total assets
ended ended balances as at balances as at
Effective 31 December 31 December 31 December 31 December
Subsidiary entity ownership Country of 2023 2022 2023 2022
Name and registered address % 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 (41.7) 43.0 447.6 458.5
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.
Subsidiary entity Effective ownership % Investment Country of incorporation Profit/(loss) for the year ended 31 December 2023 (EUR million) Profit/(loss) for the year ended 31 December 2022 (EUR million) Total assets balances as at 31 December 2023 (EUR million) Total assets balances as at 31 December 2022 (EUR million)
Name and registered address
Holmen II Wind Park ApS Københavnsvej 81 4000 Roskilde Denmark 100.0 Subsidiary entity, owns investment in Holmen II Denmark 1.5 4.3 23.6 27.2
Aalto Wind No 2 Ltd. Oy c/o Intertrust (Finland) Oy Bulevardi 1, 6th floor 100.0 Subsidiary entity, owns investment in Olhava Finland (0.0) (0.0) 45.4 53.0
FI-00100 Helsinki, Finland
Prettysource Lda Avenida Fontes Pereira de Melo, n.º 14 11.º floor, 1050 121 100.0 Subsidiary entity, owns investment in Benfica III Portugal 0.0 0.1 4.1 4.2
Lisbon
Astros Irreverentes Unipessoal Lda Avenida Fontes Pereira de Melo, n.º 14 100.0 Subsidiary entity, owns investment in Benfica III Portugal 0.0 0.1 4.1 4.2
11.º floor, 1050 121 Lisbon
Contrate o Sol Unipessoal Lda Rua Filipe Folque no. 10J, 2 Dto, 1050-113 100.0 Subsidiary entity, owns investment in Benfica III Portugal 0.0 0.2 2.1 2.1
Lisbon
Argeo Solar S.L. Paseo de la Castellana 259D, 14S-15, Madrid Spain 100.0 Subsidiary entity, owns investment in Albeniz Spain (2.2) (1.7) 37.2 40.2
Vector Aioliki Desfinas S.A. Salaminos Str. 20 15124 Maroussi Attica, Greece 89.0 Subsidiary entity, owns equity investment in Desfina Greece 2.5 2.2 53.3 56.7
Ega Suria S.L. Paseo de la Castellana 259D Floors 14 and 15 28046 Madrid 100.0 Subsidiary entity, owns investment in Tiza Spain (0.6) 0.4 33.0 24.1
Azalent Investment SL Paseo de la Castellana 259D Floors 14 and 15 28046 100.0 Subsidiary entity, owns investment in Greco Spain 0.6 (0.4) 97.4 52.4
Madrid
Svindbaek Vindkraft HoldCo ApS Gyngemose Parkvej 50 2860 Søborg Denmark 100.0 Subsidiary entity, owns investment in Svindbaek Denmark (1.4) 2.1 35.9 37.5
Svindbaek Vindkraft GP ApS Gyngemose Parkvej 50 2860 Søborg Denmark 100.0 Subsidiary entity Genera partner to Svindbaek Vindkraft HoldCo ApS Denmark (0.0) 0.0 0.0 0.0
The following table shows the joint venture and the associate of the Company.
The Company's investments in associates are held through HoldCo.
Joint venture and associate entities Effective ownership % Investment Country of incorporation Profit/(loss) for the year ended 31 December 2023 (EUR million) Profit/(loss) for the year ended 31 December 2022 (EUR million) Total assets balances as at 31 December 2023 (EUR million) Total assets balances as at 31 December 2022 (EUR million)
Name and registered address
Palea Solar Farm Ourique S.A. Avenida Fontes Pereira de Melo no. 14, 11. Andar 50.0 Joint venture entity, owns equity investment in Ourique Portugal (0.0) (0.4) 42.8 51.3
1050-121 Lisbon Portugal
Midtfjellet Vindkraft AS Sandvikvågvegen 45 N-5419 Fitjar, Norway 25.9 Associate entity, owns equity investment in Tesla Norway (35.0) NOK 132.0 NOK 905.9 NOK 1,069.7 NOK
As disclosed in note 4, the Company finances the HoldCo through a mix of
shareholder loans and equity. During the year, a new Master Shareholder Loan
was agreed between the Company and its subsidiary with an interest rate of
6.2% (2022: range of 2.0% to 10.375%).
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 Company's subsidiaries, joint
venture and associate's entities to transfer funds in the form of interest and
dividends.
21. Post Balance Sheet Events
Spanish Solar PV Debt Financing
On 8 January 2024, the Company, via its wholly owned subsidiary, announced
that it had entered into a EUR 50.0 million, five-year non-recourse debt
facility with ING Bank N.V. Sucursal en España. The debt facility is secured
by AER's wholly owned Spanish solar PV portfolio.
ALTERNATIVE PERFORMANCE MEASURES ("APMS")
In reporting financial information, the Company presents 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 Company's APMs are set out below and are
cross-referenced where relevant to the financial inputs used to derive them as
contained in other sections of the Annual Report. Additional total return
calculations have been added to show how the Company has performed since IPO,
in terms of annualised return and aggregate return.
(Discount)/Premium
The amount, expressed as a percentage, by which the share price is more than
the NAV per Ordinary Share.
As at As at
31 December 31 December
2023 2022
NAV per Ordinary Share (cents) a 98.5 110.6
Share price (cents) b 78.5 92.3
Discount (b÷a)-1 (20.3%) (16.6%)
Ongoing Charges
A measure, expressed as a percentage of average net assets (quarterly net
assets averaged over the year), of the regular, recurring annual costs of
running an investment company.
Year ended Year ended
31 December 31 December
2023 2022
Average NAV (EUR '000) a 399,571 438,421
Annualised expenses (EUR '000)(1) b 4,220 4,715
Ongoing charges (b÷a) 1.1% 1.1%
1. Expenses consist of investment advisory fees of EUR 2,896,000 (2022:
EUR 3,150,000) and other recurring expenses of EUR 1,814,000 (2022: EUR
1,025,000) in accordance with the AIC methodology.
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 31 December 2023 Share price NAV
Opening at 1 January 2023 (cents) a 92.3 110.6
Dividend adjustment (cents) b 5.4 5.4
Closing at 31 December 2023 (cents) c 78.5 98.5
Total return ((c+b)÷a)-1 (9.0%) (6.0%)
As at 31 December 2022 Share price NAV
Opening at 1 January 2022 (cents) a 102.00 102.6
Dividend adjustment (cents) b 5.19 5.2
Closing at 31 December 2022 (cents) c 92.25 110.6
Total return ((c+b)÷a)-1 (4.5%) 12.9%
As at 31 December 2023 Share price NAV
Opening at IPO (cents) a 100.00 98.0
Dividend adjustment (cents) b 19.9 19.9
Closing at 31 December 2023 (cents) c 78.5 98.5
Total return since IPO ((c+b)÷a)-1 (1.6%) 20.8%
As at 31 December 2022 Share price NAV
Opening at IPO (cents) a 100.00 98.0
Dividend adjustment (cents) b 14.4 14.4
Closing at 31 December 2022 (cents) c 92.3 110.6
Total return since IPO ((c+b)÷a)-1 6.7% 27.6%
As at 31 December 2023 Share price NAV
Opening at IPO (cents) a 100.00 98.0
Closing at 31 December 2023 (cents) c 78.5 98.5
Dividend adjustment (cents) b 19.9 19.9
Annualised total return since IPO (((b+c)/a)^(1/years since IPO))-1¹ (0.4%) 4.3%
As at 31 December 2022 Share price NAV
Opening at IPO (cents) a 100.00 98.0
Closing at 31 December 2022 (cents) c 92.3 110.6
Dividend adjustment (cents) b 14.4 14.4
Total return since IPO (((b+c)/a)^(1/years since IPO))-1¹ 1.8% 7.1%
1. Years since IPO: 4.5 in 2023 and 3.5 in 2022.
Dividend Cover
Dividend cover ratio calculation is based on net result generated at the SPVs,
adjusted for the Company-level expenses during the year.
Year ended Year ended
31 December 31 December
2023 2022
Net result generated at the SPVs (EUR '000) a 22,334 29,093
Dividend paid (EUR '000) b 21,247 21,165
Dividend cover ratio a÷b 1.1x 1.4x
Dividend cover ratio calculation is based on the revenue account of the
Company.
Year ended Year ended
31 December 31 December
2023 2022
Profit on ordinary activities (EUR'000) a 11,801 12,339
Dividend paid (EUR '000) b 21,247 21,165
Dividend cover ratio a÷b 0.6x 0.6x
Dividend cover ratio calculation based on the consolidated cash flow of the
Company and its HoldCo.
Year ended Year ended
31 December 31 December
2023 2022
Adjusted net cash flow from operating activities (EUR'000) a 31,213 23,999
Dividend paid (EUR '000) b 21,247 21,165
Dividend cover ratio a÷b 1.5x 1.1x(1)
Gross Asset Value
The Company's gross assets comprise the net asset values of the Company's
Ordinary Shares and the debt at the underlying SPV level, with the breakdown
as follows.
31 December 2023 31 December 2022
Net Asset Value (EUR '000) a 372,541 451,650
Debt at the SPV level (EUR '000) b 120,126 131,203
RCF drawn (EUR '000)(1) c 74,716 24,000
Gross Asset Value (EUR '000) a+b+c 567,383 606,853
Gearing
The Company's gearing is calculated as total debt as a percentage of the Gross
Asset Value.
31 December 2023 31 December 2022
Gross Asset Value (EUR '000) a 567,383 606,853
Debt at the SPV level (EUR '000) b 120,126 131,203
RCF drawn (EUR '000) c 74,716 24,000
Gearing ratio (b+c)÷a 34.3% 25.6%
1. The deviation in the cash dividend cover ratio for 2022 compared to
the Annual Report 2022 is due to the inclusion of RCF interest and fees.
PUBLICATION OF ANNUAL REPORT AND FINANCIAL STATEMENTS
This announcement does not constitute the Company's statutory accounts as
defined in the Companies Act 2006. The financial information for the year to
31 December 2023 will be filed with the Registrar of Companies.
The figures shown above for the year to 31 December 2022 was derived from the
2022 statutory accounts which was approved on 25 April 2023 and delivered to
the Registrar of Companies. The auditors reported on the 2022 statutory
accounts; their reports were unqualified and did not include a statement under
Section 498(2) or (3) of the Companies Act 2006.
The Annual Report for the year ended 31 December 2023 was approved on 24 April
2024. It will be made available on the Company's website at
https://www.aquila-european-renewables.com/.
The Annual Report will be submitted to the National Storage Mechanism and will
shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
This announcement contains regulated information under the Disclosure Guidance
and Transparency Rules of the FCA.
ANNUAL GENERAL MEETING
In line with the requirements of the Companies Act 2006, the Company will hold
an Annual General Meeting of Shareholders to consider the resolutions laid out
in the Notice of Meeting. Notice is hereby given that the Annual General
Meeting of Aquila European Renewables Plc will be held at the offices of CMS
Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon Street, London
EC4N 6AF on 20 June 2024 at 1 p.m.
Company Secretary and registered office:
Apex Listed Companies Services (UK) Limited
Tel : 020 3327 9720
6th Floor, 125 London Wall
London
EC2Y 5A
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