REG - Asian Energy Impact Asian Energy - AEIT Asian Energy - AEIP - 30 September 2023 Unaudited NAV and Company Update

Asian Energy Impact TrustAnnouncement

13/12/2023 07:15

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RNS Number : 5609W  Asian Energy Impact Trust PLC  13 December 2023

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT MAY CONSTITUTE INSIDE
INFORMATION AS STIPULATED UNDER THE UK'S MARKET ABUSE REGULATION. UPON THE
PUBLICATION OF THIS ANNOUNCEMENT, SUCH INSIDE INFORMATION IS NOW CONSIDERED TO
BE IN THE PUBLIC DOMAIN.

 

LEI: 254900V23329JCBR9G82

 

13 December 2023

Asian Energy Impact Trust plc

(the "Company" or "AEIT")

30 September 2023 unaudited Net Asset Value

and COMPANY UPDATE

Asian Energy Impact Trust plc, the renewable energy investment trust providing
direct access to sustainable energy infrastructure in fast-growing and
emerging economies in Asia, announces an update on its financial position and
portfolio.

As previously announced, the Company and Octopus Energy Generation (the
"Transitional Investment Manager") are working to complete and publish the
2022 Annual Report and 2023 Interim Report and restore share trading as soon
as possible. A further update on this process is provided below. In the
meantime, the Company is now publishing its net asset value ("NAV") at 30
September 2023 in order to provide investors with the most recent information
at the earliest possible time.

key points

·    Net assets at 30 September 2023 of US$88.5 million (NAV of 50.4 cents
per share),  underpinned by a robust independent valuation process.

                                30 September 2023  30 September 2022 1   IPO

                                                                         (14 December 2021)
 Net assets - US$ million        88.5              142.5                 113.1
 NAV per share - cents           50.4              100.8                 98.0
 NAV total return per share 2    -47.5%            3.8%                  n/a

·       NAV as at 30 September 2023 (relative to 30 September 2022)
reflects the significant reduction of US$78.9 million in the fair value of the
Company's investment portfolio, in particular driven by: (i) the negative net
present value ("NPV") associated with completing the 200 MW DC solar
construction project in Rewa Ultra Mega Solar Park in India (the "RUMS
Project"); (ii) a reduction in the Philippines wholesale electricity spot
market ("WESM") price forecasts; (iii) updated generation, operating cost and
tax assumptions; (iv) methodology and modelling updates; (v) removal of carbon
credits; and (vi) higher discount rates across the portfolio. Further details
of the movement in the fair value of the investment portfolio and of the
valuation process are set out below.

·      In the nine months ended 30 September 2023, after adjusting for
weather-related underperformance, the operating assets held by the Company's
Indian investment platform ("SolarArise") and the Company's Philippines
investment platform ("NISPI") performed broadly in line with the revised
generation expectations reflected in the updated valuation models. One of the
recently acquired Vietnamese solar rooftop assets is significantly
underperforming against expectations. Where specific asset issues exist,
remediation and optimisation plans are being developed by the Transitional
Investment Manager to seek to create value within the portfolios.

·         At 30 September 2023, the Company had cash balances of US$63.6
million and held US$1.7  million in its UK subsidiary, AEIT Holdings Limited
("AEIT Holdings"), which is included within the fair value of the Company's
investment portfolio. Since 30 September 2023, the Company has invested a
further US$20.0 million in SolarArise to fund the equity required for
constructing the RUMS Project (as announced on 11 October 2023).

·        As at 30 September 2023, gearing in AEIT's investment
portfolio represented 54.6% of the  Group's Adjusted GAV. Gearing is not used
at the Company level.

·        The audit of the Company's financial statements for the
financial period ended 31 December 2022 is progressing and the Company now
expects to publish its 2022 Annual Report and 2023 Interim Report by 19
January 2024 and to apply to the FCA for the restoration of its listing as
soon as possible thereafter.

Unless otherwise noted, the information provided in this announcement is
unaudited.

NET ASSETS

Net assets as at 30 September 2023 were US$88.5 million, with a NAV total
return since IPO of

-47.5%. NAV per share decreased to 50.4 cents at 30 September 2023. The
following tables reconcile the movements from IPO and from the last published
NAV as at 30 September 2022.

 Net assets bridge - US$'000s except as noted                     IPO to

30 September 2023
 IPO cash proceeds                                                115,393
 IPO expenses                                                     (2,308)
 Net assets at IPO                                                113,085
 Shares issued for acquisition of 43% interest in SolarArise      30,186
 Gross proceeds raised in November 2022 placing                   35,306
 Consideration share issue and placing expenses                   (1,310)
 Net assets following IPO, share issuance and subsequent placing  177,267
 Change in fair value of investment portfolio                      (76,236)
 Dividends paid to shareholders                                    (5,522)
 Investment management fees                                        (2,296)
 Other PLC costs (net)                                            (1,121)
 Additional professional fees following suspension                 (3,634)
 Net assets at 30 September 2023                                  88,458
 Number of shares in issue                                        175,684,705
 NAV per share - cents                                             50.4
 Decrease in NAV per share since IPO 3                             48.6%

 

 Net assets bridge - US$'000s                       30 September 2022 to 30 September 2023
 Net assets at 30 September 2022                    142,541
 Gross proceeds raised in November 2022 placing     35,306
 Placing expenses                                   (706)
 Change in fair value of investment portfolio        (78,850)
 Dividends paid to shareholders                      (4,392)
 Investment management fees                          (1,103)
 Other PLC costs (net)                              (704)
 Additional professional fees following suspension   (3,634)
 Net assets at 30 September 2023                     88,458

Capital Raised

In November 2022, the Company raised US$35.3 million of additional capital
from both existing and new investors. When combined with the IPO proceeds and
the seed asset share capital issued, total capital raised to date is US$180.9
million.

Asset Acquisitions

Acquisitions to date total US$99.8 million comprising:

NISPI: The acquisition of a 40% economic interest in seed asset NISPI, the 80
MW Philippines investment platform with three operating solar plants,
completed for a cash consideration of US$25.4 million on 17 December 2021.

SolarArise: The 43% acquisition of SolarArise, the other seed asset, completed
in August 2022 for a total consideration of US$32.9 million. This comprised a
cash tax payment of US$2.7 million and US$30.2 million settled through the
issue of AEIT consideration shares. On 20 June 2022 the Company committed to
acquire the remaining 57% interest in SolarArise from the remaining
shareholders, including the founders of SolarArise, for a cash consideration
of US$38.5 million. This acquisition completed on 13 January 2023 and, at 30
September 2023, the Company owned 100% of SolarArise, which comprises six
operating assets with an aggregate generating capacity of 234MW, the 200 MW DC
RUMS Project and a 150 MW DC solar development project with a signed PPA (the
"TT8 Project").

Vietnam: On 1 November 2022, the Company, through its subsidiary AEIT
Holdings, made its first investment in Vietnam through a contractual agreement
to acquire for US$4.6 million Viet Solar System Company Limited ("VSS"), a
privately-owned company which holds 6.12 MW of rooftop solar assets. This
reported price was the total value of the investment, including the debt, and
represented a net US$3.0 million equity investment. The acquisition completed
on 31 May 2023 and represents a 99.8% interest in VSS.

Fair Value of Investment Portfolio

The most significant movements in the fair value from 30 September 2022 to 30
September 2023 are summarised in the table below.

 Fair value of investments bridge - US$'000s                                 30 September 2022 to 30 September 2023
 Fair value of investments at 30 September 2022                              60,496
 Acquisition of 57% of SolarArise                                            38,494
 Acquisition of 99.8% of VSS                                                 3,093
 Fair value of investments at 30 September 2022 and subsequent acquisitions  102,083
 Inflation, FX and discount rate unwind                                      7,278
 RUMS Project                                                                 (24,737)
 Adjustments to modelling methodology                                        (19,361)
 Power prices                                                                 (23,143)
 Generation                                                                  (5,858)
 Discount rates                                                              (2,275)
 Carbon credits                                                              (4,728)
 Other adjustments                                                                            (3,765)
 Fair value at 30 September 2023                                             25,494

Inflation, FX and discount rate unwind: For inflation, the approach is to
blend two inflation forecasts from reputable third-party sources and apply
this consistently to assumptions. For FX, valuations are converted from local
currency at the relevant spot rate. The discount rate unwind includes the NPV
of future cashflows being brought forward from the valuation date to 30
September 2023 as well as the inclusion of actual performance figures during
the period.

RUMS Project: Based on the updated model, the negative NPV associated with
completing the project was US$14.6 million as at 30 September 2023. The total
negative movement of US$24.7 million represents the movement from the positive
value attributed to the project in the 30 September 2022 valuation of US$4.9
million plus the additional paid in capital over the period. In total, as at
30 September 2023, US$10.1 million has been invested into the RUMS Project
funded from surplus cash and operational cashflow recycling within SolarArise.

Adjustments to modelling methodology: There has been a change in the
SolarArise holding company valuation methodology which now uses a discounted
cashflow ("DCF") methodology to reflect the ongoing liabilities and asset
management fees required to operate the underlying assets which are paid from
the holding company, taxation on distributions from the operating portfolio
and other model corrections. Additionally, the capital structure and lack of
distributable reserves in NISPI, SolarArise and VSS result in a requirement to
undertake capital restructurings before cash can be extracted, negatively
impacting their valuations which are based on free cashflows. These are now
modelled with assumptions that action is taken to mitigate the restrictions
within the next year.

Power prices: In determining the forecast for power prices, the approach taken
is to blend at least two price curves as prepared by third-party independent
market forecasters that are reputable in the relevant markets. Prior period
valuations relied on the assumptions of the Company's former investment
manager (the "Former Investment Manager"), which were not based on independent
market forecasts. The Former Investment Manager's assumed price curve as at 31
December 2022 was materially higher than independent market forecasters'
forecasted prices utilised, particularly in the long term. In addition, during
2023 significant further reductions in the WESM forecasts, particularly in the
short term, have been observed with the independent market forecasters
highlighting sharply falling commodity prices (with delivered coal and LNG
being two of these major commodities) as the key drivers for the forecast
decrease.

Generation: Each asset's valuation assumes a "P50" level of electricity output
based on yield assessments prepared by technical advisors and is the market
standard assumption to utilise in valuation models. There is observed
historical underperformance of the Company's operational assets when compared
with the level of generation assumed at the time of acquisition. A technical
advisor has been appointed to provide updated P50 yield assessments which are
expected to be lower than these original assumptions. In lieu of receiving
these, an estimated reduction has been applied.

Discount rates: To determine the reasonable ranges, the applicable cost of
equity for the solar market was estimated considering data points from
transactional and other valuation benchmarks, disclosures in broker reports,
other public disclosures and broader market experience of investors in the
market. The Transitional Investment Manager compared the range to its own
risk-adjusted discount rate analysis and determined the appropriate discount
rates to apply. The discount rates applied are in the range of 10.0% - 12.5%
(30 September 2022: range of 10.0% - 11.2%).

Carbon credits: For the SolarArise portfolio, carbon credit revenue was
previously included in the base case. These revenues are now treated as an
upside as opposed to a base case assumption and, therefore, have been removed.

Other adjustments: This refers to the balance of valuation movements in the
period excluding the factors noted above. In addition, a number of other
assumptions that were either inaccurate, or incongruent with standard market
practice for the Company's assets, have been adjusted. These include updating
lease and other operational costs to reflect contractual terms and inclusion
of capex for inverter replacements.

Dividends

The Board has already declared a third interim dividend in respect of the year
ending 31 December 2023 (the "Q3 2023 Dividend") of 0.44 cents per ordinary
share in respect of the quarter ended 30 September 2023 (total cost: US$0.8
million). The Q3 2023 Dividend was paid on 11 December 2023 to shareholders on
the register at the close of business on 17 November 2023. The Q3 2023
Dividend was funded out of the Company's distributable capital reserves and
this outflow will be reflected in the 31 December 2023 NAV.

Total dividends declared since September 2022 through to 30 September 2023,
being the dividends declared for Q3 2022, Q4 2022, Q1 2023 and Q2 2023 which
were also funded out of the Company's distributable capital reserves, reduced
the NAV by US$4.4 million.

Expenses

In the 12-month period ended 30 September 2023, based on the updated quarter
end NAVs, fees which may be claimed by the Former Investment Manager were
US$1.1 million, of which US$0.5 million had been paid in respect to the
quarter ending 30 December 2022. Accrued unpaid fees are not being paid whilst
the Board evaluates all available options. No fees were paid during the period
to the Transitional Investment Manager, which was appointed with effect from 1
November 2023.

Since the material uncertainty arose during the preparation of the December
2022 accounts and audit, additional professional fees have been incurred to
provide an in-depth examination of the valuations, to audit and validate the
valuation models, to undertake an extensive review into the tax and cash
extraction positions, to undertake a comprehensive review of the RUMS Project
and seek advice with regard to the likely abort liabilities and to provide
advice associated with the share suspension, shareholder meeting requisitions
by funds managed by the Former Investment Manager, the changes to the
investment policy, effecting the change in investment manager and the Board's
ongoing strategic review. Additional professional fees incurred since
suspension of listing in the Company's shares total US$3.6 million. The Board
is intending to investigate the Company's right to seek compensation for these
additional professional fees whilst reserving all the Company's other rights.

Valuation procedure

The Company's valuation process follows International Private Equity Valuation
Guidelines, typically  using a DCF methodology. In a DCF analysis, the fair
value of the investee companies is the present value of the expected future
cash flows, based on a range of operating assumptions for revenues, costs,
leverage and any distributions, before applying an appropriate discount rate.
The assets held in the Company's UK subsidiary, AEIT Holdings, substantially
comprise cash and working capital balances and therefore the Directors
consider the fair value of AEIT Holdings to be equal to its book value.

Following the material uncertainty surrounding the portfolio valuations as at
31 December 2022, the Board, the Transitional Investment Manager and the
Company's AIFM, Adepa Asset Management S.A., have undertaken various steps to
arrive at the 30 September 2023 valuation, including the following:

·           PricewaterhouseCoopers LLP ("PwC") was appointed to
assist the Company with a detailed review of models for the Company's
operational assets in India and the Philippines which had been prepared by the
Former Investment Manager for the purpose of the 31 December 2022 valuation.
As previously announced, following this review, the Company identified several
areas for concern, including assumptions regarding revenues, operating costs,
tax projections and cash extraction which were either inaccurate or considered
to be unrealistically optimistic.

·           PwC was also appointed to provide tax advice on cash
repatriation.

·           Following the PwC review and tax report, the
operational asset models have been re-worked by the Transitional Investment
Manager. This included updating the basis of the macro assumptions in the
models, utilising leading third-party market forecasters for power prices in
the Philippines and Vietnam and a number of other material changes based on
the Transitional Investment Manager's experience.

·           The Transitional Investment Manager reviewed and
updated the new model for the in-construction RUMS Project which had been
built subsequent to the share listing suspension by an external specialist
modelling firm and audited by a model audit company, all under the supervision
of the Former Investment Manager.

·           The holding company model was revised to accurately
reflect asset management costs, cash extraction and tax assumptions in respect
of SolarArise.

·           An updated valuation policy reflecting the change in
assumption methodologies and review process has been adopted.

PwC was engaged to provide a private independent opinion on the reasonableness
of the valuations of SolarArise, NISPI and VSS as at 30 September 2023 which
were prepared by the Transitional Investment Manager, and adopted by
the Board and AIFM when they approved the 30 September 2023 valuations.

A similar process has been adopted in the preparation of the unreleased
valuation of the Company's underlying portfolio as at 30 June 2023 and as at
31 December 2022, the latter of which is currently being audited by Deloitte
LLP (audit in progress) as part of its audit of financial statements for the
financial period ended 31 December 2022.

CASH BALANCE

At 30 September 2023, the Company and its UK subsidiary, AEIT Holdings, had
cash balances of US$65.3 million. Since 30 September 2023, the Company has
invested a further US$20.0 million in SolarArise to fund the equity required
for constructing the RUMS Project.

GEARING

Gearing is not used at the Company level.  As at 30 September 2023,
SolarArise had external borrowings of US$102.8 million and VSS had external
borrowings of US$1.3 million, whilst NISPI was ungeared. At 30 September 2023,
gearing in the investment portfolio represented 54.6% of the Group's Adjusted
GAV. Since 30 September 2023, there have been no amounts drawn under the
US$54.9 million project finance facility for construction of the RUMS Project.

UPDATE ON OPERATING ASSETS

The Transitional Investment Manager has commenced its review of the Company's
portfolio as part of the strategic review being undertaken by the Board.
Operational performance data of the assets from 1 January 2023 to 30 September
2023 has been examined.

Adjusting for weather-related underperformance, the SolarArise and NISPI
portfolios performed broadly in line with the revised generation expectations
reflected in the valuation models used to calculate the NAV as at 30 September
2023. This supports the assumed generation reduction against the P50 yield
assumptions. Where specific asset issues exist, remediation and optimisation
plans are being developed to seek to create value within the portfolios.

With respect to the newly acquired VSS portfolio, one of the assets is
significantly underperforming against expectations. The Transitional
Investment Manager is undertaking an investigation to understand the key
drivers behind the underperformance and will identify strategies to be adopted
for additional value recovery. Further information will be provided as part of
the Board's strategic review.

UPDATE ON CONSTRUCTION AND DEVELOPMENT PROJECTS

Construction of the RUMS Project is underway, and the first shipment of
modules has arrived in India. A further update will be provided in the coming
weeks.

Following its detailed review, the Transitional Investment Manager has
determined that moving forward with the development of the TT8 Project may not
be the best option for the Company at this particular time in light of the
strategic review of the options for the Company's future. All options for this
project, including offering it for sale, are being considered, subject to the
terms of the signed PPA.

2022 ANNUAL REPORT, 2023 INTERIM REPORT AND LIFTING SUSPENSION

The audit of the Company's financial statements for the financial period ended
31 December 2022 is progressing. The Company now expects to publish its annual
report and accounts for the financial period ended 31 December 2022 and its
interim report and accounts for the six months ended 30 June 2023 by 19
January 2024 and to apply to the FCA for the restoration of its listing as
soon as possible thereafter.

Q3 2023 FACTSHEET

The Company's factsheet for the quarter ended 30 September will be available
shortly on its website, www.asianenergyimpact.com
(https://url.avanan.click/v2/___http:/www.asianenergyimpact.com___.YXAxZTpzaG9yZWNhcDphOm86Mjc3YWRiNjllOGU4MmM0MzgwMDBmYzRkOTRjMTYzMjc6NjpkYjBjOjc3Y2IwN2Y2Yjc1OWRmZjJkMmIyMGZmZjVmOTE3ZjJiMjQ3YWNmYzc4MjQ1ZWVkNTRjZTNiYmU0N2JlMWIwMzY6cDpU)
.

Sue Inglis, Chair of Asian Energy Impact Trust plc, said: "As a Board we are
very disappointed by the results announced today. We are, however, pleased
that, due to the work carried out by the Transitional Investment Manager since
it was appointed, we have been able to take this step forward in updating our
investors. Focus remains on completing the Company's immediate priorities,
including completing the 2022 audit and publishing our 2022 Annual Report and
2023 Interim Report to enabling the lifting of the suspension of the listing
of the Company's shares, and developing plans to optimise value in the
Company's portfolio."

The person responsible for arranging the release of this announcement on
behalf of the Company is Uloma Adighibe of JTC (UK) Limited, the Company
Secretary

Enquiries

 Asian Energy Impact Trust plc                                      Tel: +44 (0)20 3757 1892

Sue Inglis, Chair
 Octopus Energy Generation (Transitional Investment Manager)        Tel: +44 (0)20 4530 8369
 Press Office                                                       aeit@octopusenergygeneration.com
 Shore Capital (Joint Corporate Broker)                             Tel: +44 (0)20 7408 4050
 Robert Finlay / Rose Ramsden (Corporate)

Adam Gill / Matthew Kinkead / William Sanderson (Sales)

Fiona Conroy (Corporate Broking)
 Peel Hunt LLP (Joint Corporate Broker)                             Tel: +44 (0)20 7418 8900
 Luke Simpson / Huw Jeremy (Investment Banking Division)

Alex Howe / Richard Harris / Michael Bateman / Ed Welsby (Sales)
 Smith Square Partners LLP (Financial Advisor)                      Tel: +44 (0)20 3696 7260
 John Craven / Douglas Gilmour
 Camarco (PR Advisor)                                               Tel: +44 (0)20 3757 4982
 Louise Dolan / Eddie Livingstone-Learmonth / Phoebe Pugh           asianenergyimpacttrust@camarco.co.uk
                                                                    (mailto:asianenergyimpacttrust@camarco.co.uk)

About Asian Energy Impact Trust plc

Asian Energy Impact Trust plc listed on the premium segment of the main market
of the London Stock Exchange in December 2021 and was awarded the Green
Economy Mark upon admission. The Company is an Article 9 fund under the EU
Sustainable Finance Disclosure Regulation.

With effect from 1 November 2023, the Company appointed Octopus Energy
Generation as its transitional investment manager until 30 April 2024 (the
"Transitional Investment Management Period"). The Transitional Investment
Management Period will allow the Board with its advisers to complete the
strategic review of options for the Company's future.

Further information on the Company can be found on its website at
www.asianenergyimpact.com
(https://url.avanan.click/v2/___http:/www.asianenergyimpact.com___.YXAxZTpzaG9yZWNhcDphOm86Mjc3YWRiNjllOGU4MmM0MzgwMDBmYzRkOTRjMTYzMjc6NjpkYjBjOjc3Y2IwN2Y2Yjc1OWRmZjJkMmIyMGZmZjVmOTE3ZjJiMjQ3YWNmYzc4MjQ1ZWVkNTRjZTNiYmU0N2JlMWIwMzY6cDpU)
.

About Octopus Energy Generation

Octopus Energy Generation ("OEGEN") is driving the renewable energy agenda by
building green power for the future. Its London-based, leading specialist
renewable energy fund management team invests in renewable energy assets and
broader projects helping the energy transition, across operational,
construction and development stages. The team was set up in 2010 based on the
belief that investors can play a vital role in accelerating the shift to a
future powered by renewable energy. It has a 13-year track record with
approximately £6 billion of assets under management (AUM) (as of
September 2023) across 16 countries and total 3.2GW. These renewable projects
generate enough green energy to power 2.3 million homes every year, the
equivalent of taking over 1.2 million petrol cars off the road. Octopus Energy
Generation is the trading name of Octopus Renewables Limited. 

Further details can be found at  www.octopusenergygeneration.com
(https://url.avanan.click/v2/___http:/www.octopusenergygeneration.com/___.YXAxZTpzaG9yZWNhcDphOm86YWU5MjAzMTY0ODg2OGJjYzQ1NDUwNTU1OGVmZTc0ZmY6NjoyOTI1OmQyNWZmZDNlNzk1MmRhMGYxNTFmYzFkZjgyMmE2OWRiODBjZGQ5MmZmYTg2YTBjNzBjY2JmZGExZDhiNDM1N2M6cDpU)
.

 1  30 September 2022 is the last published NAV prior to this announcement.

 2  NAV total return per share represents the total return to shareholders,
being the combined effect of the rise or fall in the NAV per share over the
relevant period and assumes dividends paid in the relevant period are
reinvested immediately in the Company at the prevailing NAV per share, in
comparison to the NAV per share at the IPO.

 3  Based on opening NAV per share of 98.0 cents, being the IPO price net of
expenses.

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