REG - Asian Energy Impact Asian Energy - AEIT Asian Energy - AEIP - Audited Results to 31 December 2023
14/05/2024 07:00
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RNS Number : 2495O Asian Energy Impact Trust PLC 14 May 2024
LEI: 254900V23329JCBR9G82
14 May 2024
Asian Energy Impact Trust plc
(the "Company" or "AEIT")
AUDITED RESULTS for year ended 31 DECEMBER 2023
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 its audited results for the year ended
31 December 2023 ("2023 Annual Report").
Following this announcement, the 2023 Annual Report will be uploaded to the
National Storage Mechanism immediately. On the same day, the Company will
apply to the FCA for the restoration of the listing and will make a further
announcement in due course.
FINANCIAL HIGHLIGHTS
As at As at
31 December 2023
31 December 2022
(audited)
(audited)
GAAP Measures
Net assets - US$ million 81.5 86.6
Fair value of investment portfolio - US$ million 42.1 11.5
Cash held at AEIT - US$ million 41.2 115.8
Dividends declared in respect of the period - cents per share 1.3 2.5
Alternative Performance Measures
NAV per share - cents 46.4 49.3
NAV total return per share since IPO -51.5% -49.2%
Gearing (as a % of Adjusted GAV) 57% 27%
Ongoing charges ratio 3.58% 2.50%
IMPACT HIGHLIGHTS
As at As at
31 December 2023 31 December 2022
Alternative Performance Measures
Total installed capacity 271MW 132MW
Renewable energy generated in the period 391,683 MWh 85,199 MWh
Estimated tonnes of carbon avoided from generated electricity 311,752 tCO(2)e 62,770 tCO(2)e
Jobs supported (full time equivalents) 197 148
Investments qualifying as sustainable in line with the EU Taxonomy 100% 100%
key points
· As announced on 11 April 2024, having undertaken a comprehensive
strategic review of the options for the Company's future and after
consultation with its advisers and having taken into account feedback from
investors representing a significant proportion of AEIT's issued share
capital, the Board concluded that it is in the best interests of shareholders
as a whole to put forward a proposal for the orderly realisation of AEIT's
assets. The proposal will seek to achieve a balance between maximising the
value of AEIT's investments and progressively returning cash to shareholders
in a timely manner. Details of this proposal, which is subject to shareholder
approval at a general meeting of the Company expected to be held in Q2 2024,
will be set out in a separate circular to be sent to shareholders. For this
reason, the Financial Statements have been prepared on a basis other than that
of a going concern.
· Net assets at 31 December 2023 of US$81.5 million (2022: US$86.6
million), being a NAV of 46.4 cents per share (2022: 49.3 cents per
share).
· The unaudited NAV as at 31 December 2023, which was announced
on 13 March 2024, assumed commissioning of the 200MW solar project that
forms part of the Rewa Ultra Mega Solar Park (the "RUMS project") would occur
in March 2024 based on the information known regarding the project as at 31
December 2023. In the announcement on 13 March 2024, it was noted that
commissioning was now expected to happen in May 2024 and that there would be a
further reduction in NAV of up to US$2.1 million in the event that
commissioning did not occur until June 2024. The audited NAV at 31 December
2023 reflects a downward movement of US$3.5 million from the unaudited NAV as
a result of an increased contingency, principally due to the delays in
construction in January and February 2024, which were not within the control
of SolarArise. The increased contingency is based on commissioning now
occurring in June 2024 and does not impact the additional funding of up to
US$4.5 million for the RUMS project referred to below.
· As at 31 December 2023, the Company had cash reserves of
US$41.2 million (2022: US$115.8 million). During the 12 months ended
31 December 2023 the Company: acquired the remaining 57% of SolarArise for
US$38.5 million and 99.8% of Viet Solar System Company Limited for US$3.1
million; funded the construction of the RUMS project, via a US$20 million
loan; paid dividends of US$4.4 million (2022: US$1.9 million); and paid
recurring and exceptional running costs of the Company. In March 2024, the
Board agreed additional cash funding of up to US$4.5 million to fund RUMS
project delays and additional costs.
· The annualised ongoing charges ratio for the year was 3.6%
(2022: 2.5%).
· As at 31 December 2023, gearing in AEIT's investment
portfolio represented 57% (2022: 27%) of the Adjusted GAV.
Copies of the 2023 Annual Report will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) and on the Company's
website www.asianenergyimpact.com (http://www.bankersinvestmenttrust.com/)
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
Mark Percy / Gillian Martin / Rose Ramsden (Corporate)
Peel Hunt LLP (Joint Corporate Broker) Tel: +44 (0)20 7418 8900
Luke Simpson / Huw Jeremy (Investment Banking Division)
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.
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 £6.7 billion of assets under management (AUM) (as of
December 2023) across 19 countries and total 3.7GW. These renewable projects
generate enough green energy to power 2.4 million homes every year, the
equivalent of taking over 1.4 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)
.
Overview
About the Company
Asian Energy Impact Trust plc ("AEIT" or the "Company", formerly ThomasLloyd
Energy Impact Trust plc) is a closed‑ended investment company incorporated
in England and Wales. The Company's ordinary shares were admitted to the
premium listing segment of the Official List of the Financial Conduct
Authority and to trading on the main market of the London Stock Exchange on 14
December 2021.
Having undertaken a comprehensive strategic review of the options for the
Company's future and after consultation with its advisers and having taken
into account feedback from investors representing a significant proportion of
AEIT's issued share capital, the Board has concluded that it is in the best
interests of shareholders as a whole to put forward a proposal for the orderly
realisation of AEIT's assets. The proposal will seek to achieve a balance
between maximising the value of AEIT's investments and progressively returning
cash to shareholders in a timely manner. Details of this proposal, which is
subject to shareholder approval at a general meeting of the Company expected
to be held in Q2 2024, will be set out in a separate circular to shareholders
and will be made available on the Company's website in due course.
This Annual Report and the Company's website may contain certain
'forward-looking statements' with respect to the Company's financial
condition, results of its operations and business, and certain plans,
strategies, objectives, goals and expectations with respect to these items and
the markets in which the Company invests. Forward-looking statements are
sometimes, but not always, identified by their use of a date in the future or
such words as 'aims', 'anticipates', 'believes', 'estimates', 'expects',
'intends', 'targets', 'objective', 'could', 'may', 'should', 'will' or 'would'
or, in each case, their negative or other variations or comparable
terminology. Forward-looking statements are not guarantees of future
performance. By their very nature forward-looking statements are inherently
unpredictable, speculative and involve risk and uncertainty because they
relate to events and depend on circumstances that will occur in the future.
Many of these assumptions, risks and uncertainties relate to factors that are
beyond the Company's ability to control or estimate precisely. There are a
number of such factors that could cause the Company's actual investment
performance, results of operations, financial condition, liquidity, dividend
policy and financing strategy to differ materially from those expressed or
implied by these forward-looking statements. These factors include, but are
not limited to: changes in the economies and markets in which the Company
operates; changes in the legal, regulatory and competition frameworks in which
the Company operates; changes in the markets from which the Company raises
finance; the impact of legal or other proceedings against or which affect the
Company; changes in accounting practices and interpretation of accounting
standards under IFRS; and changes in power prices and interest, exchange and
discount rates. Any forward-looking statements made in this Annual Report or
the Company's website, or made subsequently, which are attributable to the
Company, or persons acting on its behalf (including the Investment Manager),
are expressly qualified in their entirety by the factors referred to above.
Each forward-looking statement speaks only as of the date it is made. Except
as required by its legal or statutory obligations, the Company does not intend
to update any forward-looking statements. Nothing in this Annual Report or the
Company's website should be construed as a profit forecast or an invitation to
deal in the securities of the Company.
2023 Performance Metrics
As at 31 December 2023
Financial
Capital raised to date Net asset value ("NAV") Gross asset value ("GAV")(1,2)
US$180.9m US$81.5m US$83.3m
(December 2022: US$180.9m) (December 2022: US$86.6m) (December 2022: US$127.3m)
NAV per share(2,3) Dividend per share(4) Fair value of investment portfolio
46.4 cents 1.32 cents US$42.1m
(December 2022: 49.3 cents) (December 2022: 2.5 cents) (December 2022: US$11.5m)
NAV total return per share in the year(2) NAV total return per share since IPO(2) Adjusted gross asset value
("Adjusted GAV")(2,5)
(3.6)% (51.5)%
US$193.1m
(December 2022: (49.2)%) (December 2022: (49.2)%)
(December 2022: US$173.3m)
Market capitalisation(2) Cash held at AEIT Gearing ratio(2,6)
Shares suspended(7) US$41.2m 57%
(December 2022: US$207.3m) (December 2022: US$115.8m) (December 2022: 27%)
Impact(8)
Total installed capacity Renewable energy generated in the year Estimated tonnes of carbon avoided from generated electricity
271 MW 391,683 MWh 311,752 tCO(2)e
(December 2022: 132 MW) (December 2022: 85,199 MWh) (December 2022: 62,770 tCO(2)e)
GHG intensity of investee companies tCO(2)e/USDm(9) Jobs supported (full time equivalents) Investments qualifying as sustainable (EU Taxonomy)
82.6 197 100%
(December 2022: 35.9) (December 2022: 148) (December 2022: 100%)
(1) GAV is the value of all assets of the Company, being the sum
of all investments held in the investment portfolio at the balance sheet date
together with any cash and cash equivalents.
(2) An alternative performance measure ("APM").
(3) Calculated on the basis of 175,684,705 ordinary shares in
issue.
(4) Total dividends declared in relation to the year ended 31
December 2023.
(5) Adjusted GAV is GAV plus proportionate share of asset level
debt.
(6) Group debt and non-Group investment debt (calculated on a
proportionate basis) as a % of Adjusted GAV.
(7) As at 31 December 2023, the Company's shares were temporarily
suspended. The suspension was lifted on 6 March 2024 and at close on that day
the market capitalisation was US$52.7 million.
(8) These metrics have been proportioned to account for AEIT's
share of its investment portfolio during the reporting period.
(9) In 2023, the GHG intensity of AEIT's investee companies has
been calculated using Scope 1 and market-based Scope 2 emissions. In 2022,
this KPI was calculated using Scope 1 and location-based Scope 2 emissions.
Using a location-based method, the GHG intensity of AEIT's investee companies
in 2023 was 42.76 tCO(2)e/$m revenue.
Investment Portfolio at a Glance
As at 31 December 2023
The Company has investments in three countries across 11 solar operating
assets, one construction asset and one development project.
Strategy Technology Country Sites Revenue type Capacity Average remaining Economic ownership
asset life
NISPI Solar Philippines 3 operational Wholesale electricity market 80MW 19 years 40%
SolarArise Solar India 6 operational 25-year fixed-price PPA 233MW 21 years 100%
1 construction 200MW
1 development 150MW
VSS Solar Vietnam 2 operational 20-year PPA 6MW 17 years 99.8%
Strategic Report
Chair's Statement
I am pleased to present the Annual Report for Asian Energy Impact Trust plc
for the year ended 31 December 2023. The difficulties of the past year,
notably navigating the complexities of the RUMS project (a 200 MW
construction-ready asset in our SolarArise investment in India), valuation
uncertainties, the breakdown in the relationship with the Former Investment
Manager, resulting general meetings and wind-up resolution, have been
significant. However, they have been instrumental in establishing a firmer
foundation from which we can assess this year's performance. The resolution of
these issues, particularly the resolution regarding the RUMS project and the
transition to a new Investment Manager, marked a crucial step in realigning
our operational focus and governance. As outlined below, the suspension of
listing of the Company's shares was lifted on 6 March 2024. Due to a small
number of outstanding points in respect of the Company's Annual Report and
audit for the year ended 31 December 2023 we were not able to publish the
Annual Report by the required regulatory deadline of 30 April 2024, resulting
in the suspension of the listing of and trading in the Company's shares since
7.30am on 1 May 2024. Now that the Annual Report has been published in
accordance with the Company's obligations, we will move expeditiously to apply
to the FCA for a restoration of the Company's listing.
Against the backdrop of the issues referred to above, the Board undertook a
comprehensive strategic review of the options for the Company's future. The
Board announced that, after consultation with its advisers and having taken
into account feedback from investors representing a significant proportion of
AEIT's issued share capital, the Board had concluded that it is in the best
interests of shareholders as a whole to put forward a proposal for the orderly
realisation of AEIT's assets. The proposal will seek to achieve a balance
between maximising the value of AEIT's investments and progressively returning
cash to shareholders in a timely manner. This proposal is subject to
shareholder approval at a general meeting of the Company expected to be held
in Q2 2024.
What follows below is a review of the year ended 31 December 2023 and the
outlook for the Company in light of the outcome of the strategic review.
Impact
Despite the challenges there are some positives to reflect upon. The Company
was launched in response to investor interest in an impact-led investment
trust focused solely on fast-growing and emerging economies in Asia where
greenhouse gas emissions ("GHG") continue to grow rapidly. At IPO, the Company
was the first, and it continues to be the only, London-listed investment
company focused on Asia, being the region with the most urgent need for
investment in sustainable energy infrastructure and where capital invested can
have the greatest impact.
A significant highlight is our investment in NISPI. This project is enabling
real social impact through its many projects that include gardening and
livelihood programmes, health and wellness and educational outreach to name
but a few. These projects are enabling us to extend our United Nations
Sustainable Development Goals ("UN SDGs") impact to contribute to nine goals
in total. In aggregate, the Company's investments generated clean energy that
avoided 311,752 tCO(2)e of greenhouse gas emissions and supported 197 full
time equivalent jobs. Once the RUMS project becomes operational, the avoided
greenhouse gas emissions are expected to increase to 564,624 tCO(2)e.
Investment activity
The Company completed two transactions during the year. The first involved
increasing our stake in SolarArise India Projects Private Limited
("SolarArise"), an Indian solar energy platform with a total capacity of 433
MW, including six operating plants totalling 233 MW, one construction-ready
200 MW project and one 150 MW development project. We acquired an initial 43%
interest in August 2022 for US$32.9 million, followed by the acquisition of
the remaining 57% for US$38.5 million on 13 January 2023, having committed to
acquire this stake in June 2022. As at 31 December 2022, the Company had
identified an onerous contract in respect of the committed 57% acquisition
since the fair value of that interest was lower than the US$38.5 million
consideration to be paid to acquire it, primarily due to potential abandonment
liabilities relating to the RUMS project. This provision was utilised
following acquisition during 2023. The Company is now the sole owner of
SolarArise.
On 1 November 2022, we committed to acquiring Viet Solar System Company
Limited ("VSS"), which owns 6.12 MW of rooftop solar assets, for US$3.1
million. This acquisition, finalised on 31 May 2023, resulted in a 99.8%
ownership interest in VSS, marking our entry into the Vietnamese solar market.
Following the suspension of trading in the Company's shares in April 2023, the
Board suspended all new investment activity. The suspension of new investment
activity will become permanent if shareholders approve the Board's recommended
orderly realisation proposal. Further investment or capital expenditure into
existing assets will be permitted in order to meet existing commitments,
preserve or enhance the value of such investments or to facilitate an orderly
disposal.
In terms of pre-operational investments, on 11 October 2023, the Board decided
to proceed with the construction of the RUMS project, considering it the most
viable option to minimise value erosion for our shareholders. We committed up
to US$20 million in funding for this project through an INR-denominated
external commercial borrowings loan from AEIT to SolarArise, with US$19.8
million disbursed on 18 October 2023. In March 2024, the Board approved
additional funding of up to US$4.5 million to fund RUMS project delays and
additional costs. In addition, on 1 August 2023, our only development project
(the "TT8 project"), a 150 MW DC solar PV project held by a SPV of SolarArise,
signed a 25-year power purchase agreement with Maharashtra State Electricity
Distribution Company Limited, having successfully participated in the relevant
auction in November 2022.
Portfolio performance
The electricity generation across our portfolio totalled 391,683 MWh, falling
short of our budgeted projections, which included haircuts to original
forecasted generation. SolarArise and NISPI experienced generation decreases
more significant than anticipated, notably due to lower than forecast
irradiance and site-specific issues, whereas VSS outperformed expectations.
The financial outcomes were also less favourable, with turnover and EBITDA
being below budgets primarily due to government rebates forecasted in the
SolarArise operational SPVs which were not realised, as well as additional
unbudgeted costs incurred by the SolarArise holding company.
Construction of the RUMS project commenced in November 2023. The solar modules
have arrived on site, alongside most of the other equipment needed to build
the solar farm. Installation of the module mounting structure for the panels
is in progress. After initial construction progress, post the year end, issues
between the landowner of the Rewa Ultra Mega Solar Park and the surrounding
farmers, which were outside of the control of the Company, in January and
February 2024 delayed construction work. While these delays pose potential
cost implications, our Transitional Investment Manager, technical adviser and
local asset manager are working tirelessly with the contractors to mitigate
risks to project delivery. It is expected that commissioning will now occur
in June 2024.
Results
The NAV of the Company at 31 December 2023 was US$81.5 million, a reduction of
US$5.1 million in the year.
The unaudited NAV as at 31 December 2023, which was announced on 13 March
2024, assumed commissioning of the RUMS project would occur in March 2024
based on the information known regarding the project as at 31 December 2023.
In the announcement on 13 March 2024, it was noted that commissioning was now
expected to happen in May 2024 and that there would be a further reduction in
NAV of up to US$2.1 million in the event that commissioning did not occur
until June 2024. The audited NAV at 31 December 2023 reflects a downward
movement of US$3.5 million from the unaudited NAV as a result of an increased
contingency, principally due to the delays in construction in January and
February 2024, which were not within the control of SolarArise. The
increased contingency is based on commissioning now occurring in June 2024 and
does not impact the additional funding of up to US$4.5 million for the RUMS
project referred to above.
The Company had a cash balance of US$41.2 million at the year end. The Company
had no gearing and gearing on a 'look-through' basis to its underlying
investments was 57% of Adjusted GAV at 31 December 2023.
The annualised ongoing charges ratio was 3.6% at the year end. In view of the
Company's substantially reduced size, we are endeavouring to reduce costs
wherever possible. Of course, the ongoing charges ratio does not include the
substantial additional professional costs that the Company has incurred over
the last 12 months as a result of the challenges it faced. The Board is
currently investigating the Company's right to seek compensation for these
additional professional costs, as well as material asset value loss that it
has suffered, whilst reserving all of the Company's other rights.
The Company's revenue for the year was US$5.7 million, giving rise to a loss
for the period of US$0.6 million. This was mainly driven by a positive
valuation movement on investments during the year, details of which can be
found in the 'Portfolio Valuation' section of the Strategic Report, which were
offset by total costs of US$7.3 million of which US$4.2 million were
exceptional costs incurred following the temporary share suspension.
Dividends totalling 1.32 cents per share have been paid in respect of the
period 1 January 2023 to 30 September 2023. All dividends were paid out of the
Company's distributable capital reserves. Upstreaming cash back to the UK from
some of the underlying assets is either subject to restrictions, currently not
legally possible or subject to significant tax leakage under the current
structures. A core priority for 2024 will be to undertake capital
restructurings to mitigate the current issues. EBITDA from the Company's
operational assets over the year, including costs within the SolarArise
holding company, was US$29.0 million(10) compared to the aggregate cost of
dividends paid to shareholders in respect of the year of US$2.3 million. A
quarterly dividend has not been paid or proposed in respect of the quarter
ended 31 December 2023.
Temporary share suspensions
Following the publication on 22 January 2024 of both the annual report and
accounts for the period ended 31 December 2022 and the interim report for the
period ended 30 June 2023, as well as the publication of the Company's updated
key information document on 5 March 2024, the suspension of the listing of the
Company's shares was lifted and trading restored with effect from 6 March
2024. Disappointingly, due to a small number of outstanding points in respect
of the Company's Annual Report and audit for the year ended 31 December 2023
we were not able to publish the Annual Report by the required regulatory
deadline of 30 April 2024, resulting in the suspension of the listing of and
trading in the Company's shares since 7.30am on 1 May 2024. Now that the
Annual Report has been published in accordance with the Company's obligations,
we will move expeditiously to apply to the FCA for a restoration of the
Company's listing.
Status of strategic review
As stated above, following a comprehensive strategic review, we have concluded
that an orderly realisation of AEIT's assets to be effected in a manner that
seeks to achieve a balance between maximising the value of its investments and
progressively returning cash to shareholders in a timely manner, is in the
best interests of shareholders as a whole.
It is intended that, subject to shareholders approving the orderly realisation
proposal, the Transitional Investment Manager, will be appointed to continue
to manage AEIT's investments and their orderly realisation.
If the orderly realisation proposal is approved by shareholders, it is
currently expected that surplus cash will be returned to shareholders from
time to time in the form of capital rather than dividends and that dividends,
if any, will be paid on an ad hoc basis.
Details of the orderly realisation proposal, which is subject to shareholder
approval at a general meeting of the Company expected to be held in Q2 2024,
will be set out in a separate circular to shareholders and will be made
available on the Company's website in due course.
Outlook
Subject to shareholders approving the proposal for the realisation of AEIT's
assets, the Company's focus will be to conduct an orderly realisation of the
Company's assets in a manner that seeks to achieve a balance between
maximising the value of its investments and progressively returning cash to
shareholders in a timely manner. In the meantime, our Transitional Investment
Manager will continue to provide the active management needed, including
pursuing portfolio optimisation opportunities.
In addition, the Company will continue to investigate its right to seek
compensation for the material asset value loss that is has suffered and the
additional professional fees that it has incurred over the last 12 months
whilst reserving all the Company's other rights.
On behalf of the Board, I thank shareholders for their continued support of
the Board throughout the numerous general meetings held in 2023 and also for
their levels of engagement with the Board during the last 12 months.
Sue Inglis
Chair
13 May 2024
(10) EBITDA generated from 1 January 2023 for NISPI and SolarArise and
date of ownership (31 May 2023) for VSS, pro rated for economic ownership.
Our Operating Model
AEIT was incorporated as a public company limited by shares and carries on
business as an investment trust within the meaning of section 1158 of the
Corporation Tax Act 2010. The Company's shares were admitted to trading on the
premium segment of the main market of the London Stock Exchange on 14 December
2021.
The Company invests in sustainable energy infrastructure assets, with a
geographic focus on fast-growing and emerging economies in Asia. Assets within
the investment portfolio are held through locally incorporated holding
companies or special purpose vehicles ("SPVs"). Following the suspension of
trading in the Company's shares in April 2023, the Board suspended all new
investment activity. The suspension of new investment activity will become
permanent if shareholders approve the Board's recommended orderly realisation
proposal.
At 31 December 2023, the Company owned, in India, six solar assets with 233MW
is the total of all assets, but this is specifically for India 233 MW of
operational capacity, one 200 MW construction-ready asset (the "RUMS project")
and one 150 MW development project (the "TT8 project") (held across nine SPVs)
and, in the Philippines, a 40% interest in three operational solar assets
(held within one SPV) with 80 MW of operational capacity. In addition, the
Company owned indirectly through its UK intermediate holding company, AEIT
Holdings Limited ("AEIT Holdings"), a 99.8% interest in two Vietnamese solar
assets with 6 MW of operational capacity (held across five SPVs).
External debt financing is only at locally incorporated holding company or SPV
levels. At 31 December 2023, this comprised outstanding principal amounts of
US$109.8 million in the Indian and Vietnamese solar portfolios, representing a
gearing ratio of 57%(11).
The Company has a 31 December financial year end . The Company initially paid
dividends quarterly, targeting payments in March, June, September and December
each year. A dividend has not been paid or proposed in respect of the quarter
ended 31 December 2023 and, subject to shareholders approving the orderly
realisation proposal at a general meeting of the Company expected to be held
in Q2 2024, the Company's priority will be to achieve a balance between
maximising the value of its investments and progressively returning cash to
shareholders in a timely manner. It is currently expected that surplus cash
will be returned from time to time in the form of capital rather than
dividends and that any dividends will be paid on an ad hoc basis.
The Company has an independent board of non-executive directors and has
appointed Adepa Asset Management S.A as its Alternative Investment Fund
Manager (the "AIFM") to provide portfolio and risk management services to the
Company. The AIFM has delegated the provision of portfolio management services
to the Investment Manager. For the period from IPO to 31 October 2023, the
Investment Manager was ThomasLloyd Global Asset Management (Americas) LLC (the
"Former Investment Manager"). From 1 November 2023, Octopus Renewables
Limited, trading as Octopus Energy Generation ("OEGEN" or "Octopus Energy
Generation"), was appointed as a transitional Investment Manager (the
"Transitional Investment Manager") for the Company and assumed all day-to-day
portfolio management responsibilities for the Company from this date. OEGEN
has been appointed for an initial six-month term until 30 April 2024.
Following the end of the initial term, OEGEN's appointment will be extended to
the date of the general meeting of the Company at which shareholders will be
asked to vote on the orderly realisation proposal, which is expected to be
held in Q2 2024. It is intended that, subject to shareholders approving the
orderly realisation proposal, the Transitional Investment Manager, will be
appointed to continue to manage AEIT's investments and their orderly
realisation.
As an investment trust, the Company does not have any employees and is reliant
on third-party service providers for its operational requirements. With the
exception of NISPI, the SPVs do not have any direct employees and services are
provided through third-party service providers. The AEIT Management Engagement
Committee (the "MEC") reviews the service levels and performance of the
Company's key service providers at least annually, as described in the
Management Engagement Committee Report. In the previous period, the MEC
identified the top priorities for improving the performance of the Former
Investment Manager during 2023, including improving the robustness of the
Former Investment Manager's internal processes, significantly enhancing the
quality, transparency and timeliness of management and other information and
continuing to add strength in depth to the teams responsible for the Company.
During the year, a decision was taken to terminate the appointment of the
Former Investment Manager and Octopus Energy Generation was appointed as the
Transitional Investment Manager from 1 November 2023. Following the end of the
initial term, OEGEN's appointment will be extended to the date of the general
meeting of the Company at which shareholders will be asked to vote on the
orderly realisation proposal, which is expected to be held in Q2 2024.
(11) See APM calculation.
Objectives and KPIs
During the year under review (and until the proposed realisation strategy has
been approved by shareholders), the Company had a triple return investment
objective which consists of: (i) financial return; (ii) environmental return;
and (iii) social return.
Objective KPI Performance commentary
Financial return(12) 1.32 cents per share dividend paid in respect of the year ended 31 December The Company generated loss of US$0.6 million in the year, driven largely by an
2023, equivalent to a yield of 1.3% based on the IPO price increase in the fair value of investments since 31 December 2022, offset by
· Target annual dividend yield (based on the IPO price) of 2-3% for
exceptional costs of US$4.2 million incurred as a result of the temporary
2022, 5-6% for 2023 and at least 7% for 2024, with the aim of progressively NAV per share of 46.4 cents at 31 December 2023, a -3.6% return in the year share suspension.
increasing the nominal target thereafter and a -51.5% return based on the IPO price
The NAV total return since IPO is extremely disappointing and reflects the
· Target 10-12% NAV return per annum (based on the IPO price) once EBITDA from the Company's investment portfolio over the year, was US$18.0 material decline in the Company's investment portfolio valuation since IPO.
the investment portfolio is fully operational on a fully invested and geared million(13) compared to the aggregate cost of dividends paid to shareholders
basis in respect of the period of US$2.3 million The Transitional Investment Manager is exploring ways to optimise value
throughout the investment portfolio and the Board is seeking to reduce costs
· Over the medium term (from IPO), target annual dividends fully 391,683 MWh clean energy generated at the Company level.
covered by EBITDA from the operational assets that results from the MWh of
clean energy generated; in the short term, the Directors may determine to pay A dividend has not been paid or proposed in respect of the quarter ended 31
all or part of any dividend from capital reserves December 2023 and, subject to shareholders approving the orderly realisation
proposal at a general meeting of the Company expected to be held in Q2 2024,
the Company's priority will be to achieve a balance between maximising the
value of its investments and progressively returning cash to shareholders in a
timely manner. It is currently expected that surplus cash will be returned
from time to time in the form of capital rather than dividends and that any
dividends will be paid on an ad hoc basis.
Environmental return
· Protecting natural resources and the environment with significant 271 MW installed operational capacity (AEIT's share) The 271 MW of installed capacity avoids GHG emissions through the generation
greenhouse gas avoidance
of clean energy.
311,752 tCO(2)e(14)
The 311,752 tonnes of GHG emissions avoided is equivalent to avoiding the
100% EU Taxonomy alignment amount of emissions associated with 158,265 cars on the road in the UK(15).
100% of investments substantially contribute to climate change mitigation in
line with the EU Taxonomy criteria.
Social return
· Delivering economic and social progress, helping build resilient 197 FTEs (employment directly supported full time equivalent jobs(16)) The portfolio provided social returns through the creation and support of
communities and supporting purposeful activity - aligned with the UN
quality jobs. As at 31 December 2023 the portfolio directly supported 197 full
Sustainable Development Goals Alignment with 9 SDGs time equivalent jobs, helping to ensure the Just Transition.
Investments made purposeful contributions to SDGs 7 (affordable and clean
energy), 8 decent work and economic growth), 13 (climate action) and 15 (life
on land). Impact initiatives contributed to SDGs 2 (zero hunger), 3 (good
health and well‑being), 11 (sustainable cities and communities), 12
(responsible consumption and production) and 17 (partnerships for the goals).
(12) Having undertaken a strategic review of the options for the
Company's future, the Board is recommending a proposal for the orderly
realisation of assets and liquidation of the Company. Details of this
proposal, which is subject to shareholder approval at a general meeting of the
Company expected to be held in Q2 2024, will be set out in a circular to
shareholders and will be made available on the Company's website in due
course.
(13) EBITDA generated from 1 January 2023 for NISPI and SolarArise and
31 May 2023 for VSS, pro-rated for economic ownership where applicable.
(14) Carbon avoided calculated using the International Financial
Institution's approach for harmonised GHG accounting.
(15) Equivalent cars calculated using a factor for displaced cars
derived from the UK government GHG Conversion Factors for Company Reporting.
(16) Total FTE jobs supported as at 31 December 2023 through AEIT's
proportional share of the NISPI, SolarArise and VSS portfolios.
Investment Strategy and Policy(17)
The Company seeks to achieve its investment objective by investing directly,
predominantly via equity and equity-like instruments, in a diversified
portfolio of unlisted sustainable energy infrastructure assets in the areas of
renewable energy power generation, transmission infrastructure, energy storage
and sustainable fuel production ("Sustainable Energy Infrastructure Assets"),
with a geographic focus on fast-growing and emerging economies in Asia.
The Company aims to adopt a socially and environmentally responsible
investment approach that is geared towards sustainable business values and
which reduces investment risk through diversification across countries,
sectors and technologies.
Investment restrictions
The Investment Manager will ensure that the Company's portfolio is
diversified, so as to ensure a sufficient diversification of investment risk,
while also taking into account ESG criteria in making its investment
decisions.
The following specific investment restrictions apply to the Company:
· the Company will only invest in sustainable energy infrastructure
assets situated in fast-growing and emerging countries in Asia;
· in relation to: (i) the Company's investments in sustainable
energy infrastructure assets situated in any single country; (ii) the
Company's investment in any single sustainable energy infrastructure asset;
and (iii) the Company's investments in sustainable energy infrastructure
assets under contract with any single governmental or quasi‑governmental
offtaker, the relevant investment restriction will vary depending on the
Company's NAV, as follows:
% of Company's GAV
Exposure Exposure
to single to single
sustainable governmental
energy or quasi-
Exposure to infrastructure governmental
Company's NAV single country asset offtaker
Up to and including 50% 25% 25%
US$1 billion
Above US$1 billion and up to and including US$3 billion 40% 20% 20%
Above US$3 billion 30% 15% 15%
· due to the exceptional circumstances of avoiding the greater
value destruction associated with abandoning the RUMS project rather than
proceeding with construction, assessment of the single country limit will
exclude any funds invested in the RUMS project up to completion of
commissioning. The Company's assessment of the single country limit as set out
in the table above will otherwise apply and, from the point of making the
decision to commit to construct the RUMS project, no further sustainable
energy infrastructure assets shall be acquired, or projects committed to, with
exposure to India until the Company is in compliance with that limit;
· the Company's investments in sustainable energy infrastructure
assets under contract with any single private offtaker will not exceed 20% of
GAV for investment grade offtakers and 10% of GAV for non-investment grade
offtakers;
· the Company will only invest in countries which the Investment
Manager considers as having a stable political system and a transparent and
enforceable legal system and which recognise the rights of foreign investors;
· the Company will only invest in operational assets, or in
construction phase assets where: (i) an offtake agreement has been entered
into; (ii) the land on which the sustainable energy infrastructure asset is
situated is identified or contractually secured where appropriate; and (iii)
all relevant permits have been granted;
· the Company will only invest in technologies, such as solar
panels, wind turbines, boilers and steam turbine generators, the commercial
use of which has already been proven;
· the Company will only hold investments that are denominated in
currencies which are freely transferable;
· the Company will not invest in other externally managed
investment companies or collective investment schemes; and
· the Company will not typically provide funding for development or
pre-construction projects and any such funding will, in any event, not exceed
5% of GAV in aggregate and 2.5% of GAV per development or pre-construction
project and would only be undertaken when supported by customary security.
The investment restrictions and limits set out above will be measured at the
time of the relevant investment. These investment restrictions and limits
apply to the Group (comprising the Company and its proportionate interest in
investments, intermediate holding companies and project SPVs) as a whole on a
'look-through' basis. Where the Company holds its interest in sustainable
energy infrastructure assets through a project SPV, the investment
restrictions and limits will apply directly to the underlying sustainable
energy infrastructure asset as if it was held directly by the Company, save
where the relevant project SPV is part of a co-obligor group with other
project SPVs in which case any co‑obligor group will be assessed on an
aggregated basis as set out below under 'Gearing'.
The Company will not be required to dispose of any investment or to rebalance
the investment portfolio as a result of a change in the respective valuations
of its assets. However, in such circumstances, the Investment Manager will
take such steps as it considers appropriate to enable the Company to comply
with its investment restrictions, unless the Investment Manager reasonably
believes that doing so would be prejudicial to the interests of the Company
and its shareholders as a whole.
(17) Having undertaken a strategic review of the options for the
Company's future, the Board is recommending a proposal for the orderly
realisation of assets and liquidation of the Company. Details of this
proposal, which is subject to shareholder approval at a general meeting of the
Company expected to be held in Q2 2024, will be set out in a circular to
shareholders and will be made available on the Company's website in due
course.
Gearing
Subject to the limits set out below, the Company will maintain gearing at a
level which the Directors and the Investment Manager consider to be
appropriate in order to enhance returns and to provide flexibility to make
investments and for cash management purposes.
Gearing will not be employed at the level of the Company and will generally be
employed at the level of the relevant project SPV or intermediate holding
company. The level of long-term gearing to be employed in relation to any
project SPV or intermediate holding company will be assessed so that it is
commensurate with the terms of the offtake agreement for the underlying
sustainable energy infrastructure asset. Gearing, save for construction
projects where the guarantee of the intermediate holding company is required,
will generally be structured as non-recourse finance, typically at the level
of the relevant project SPV or intermediate holding company, including but not
limited to bank borrowings, public bond issuance or private placement
borrowings, provided that aggregate borrowings across all project SPVs and
intermediate holding companies will not exceed 65% of the sum of: (i) the
Company's GAV; (ii) the aggregate borrowings of the Company's intermediate
holding companies; and (iii) the Company's proportionate share of borrowings
at the level of its sustainable energy infrastructure assets (the "Adjusted
GAV"), with the Company targeting below 50% in the medium term. This limit
will be measured based on the Adjusted GAV at the time any project SPV or
intermediate holding company enters into the relevant facility.
Although co-obligor guarantee arrangements between multiple SPVs will normally
be avoided, any such arrangements will be considered as bringing the SPVs
concerned into a single asset and, therefore, subject to the single
sustainable energy infrastructure asset restriction referred to in the table
above at the time that such arrangement is entered into.
No financing arrangements on a cross border basis between the Company's
subsidiaries will be entered into, so keeping the Company's various pools of
assets and liabilities insulated within their own geographies.
The Company expects all borrowings to be denominated in the currency of the
relevant sustainable energy infrastructure asset or US Dollars to help offset
any foreign currency exposure. In addition, borrowings will typically be
amortising over the term of the associated offtake agreement.
For the avoidance of doubt, any investments by the Company in project SPVs or
intermediate holding companies which are structured as debt will not be
considered gearing for these purposes and, therefore, will not be subject to
the restrictions set out above.
Cash management policy
Whilst it is the intention of the Company to be fully or near fully invested
or contractually committed in normal market conditions, the Company may in its
absolute discretion decide to hold cash on deposit or invest in cash
equivalent investments, which may include short-term investments in money
market funds and tradeable debt securities ("Cash and Cash Equivalents").
There is no restriction on the amount of Cash and Cash Equivalents that the
Company may hold and there may be times when it is appropriate for the Company
to have significant holdings of Cash and Cash Equivalents instead of being
fully or near fully invested or contractually committed. No financial
transactions are permitted with counterparties with a credit rating of less
than BBB- from Standard & Poor's or Baa3 from Moody's.
Changes to investment policy
No material change will be made to the Company's investment policy without the
prior approval of shareholders by ordinary resolution and the prior approval
of the FCA. Any changes to the Company's investment policy are also required
to be notified to HMRC in advance of the filing date for the accounting period
in which the investment policy is amended (together with details of why the
change does not impact the Company's status as an investment trust).
Timeline of Key Events in the Year
Date Event
13 January 2023 Completion of the acquisition of the remaining 57% economic interest in
SolarArise.
25 April 2023 Temporary share suspension at the Company's request due to a material
uncertainty regarding the fair value of its assets and liabilities, in
particular with regard to the RUMS project.
31 May 2023 Decision not to proceed with construction of the RUMS project, predominantly
due to high solar panel prices.
Completion of the acquisition of the 99.8% economic interest in VSS and its
two solar power projects.
30 June 2023 Annual General Meeting held.
Alongside the standard annual resolutions to re-elect the Board, which were
passed, in accordance with the commitment in the Company's IPO prospectus, a
Continuation Resolution was due to be proposed as 75% of the net IPO proceeds
had not been deployed within 12 months of admission to trading. The AGM was
adjourned prior to the Continuation Resolution being proposed.
12 July 2023 Company announced that the final portfolio valuation as at 31 December 2022
could reflect a material downward movement that would be in addition to the
costs written off and potential abandonment liabilities associated with not
proceeding with the RUMS project.
1 August 2023 AEIT's only development project (the "TT8 project"), a 150 MW DC solar PV
project held by an SPV of SolarArise, signed a power purchase agreement with
Maharashtra State Electricity Distribution Company Limited.
15 August 2023 Company announced receipt of new information under protections of its
whistleblowing policy revealing that the Former Investment Manager was aware
of material information relating to the RUMS project by August 2022 and,
therefore, it appeared that key information had been withheld from the Board,
and misleading information given to it, over a protracted period of time.
24 August 2023 Shareholders representing 58% of the votes cast (and a majority of the issued
share capital) voted against the Continuation Resolution, in line with the
Board's recommendation. As a result, the Board was required to bring forward
proposals for the reconstruction, reorganisation or winding-up of the Company
for shareholder approval within four months.
Strategic review of options for the Company's future commenced.
15 September 2023 Company served notice terminating ThomasLloyd Global Asset Management
(Americas) LLC's appointment as Investment Manager with effect from 31 October
2023.
25 September 2023 Shareholders representing approximately 54% of the Company's total issued
share capital supported the current Board and the resolutions to replace the
current Board were not passed.
11 October 2023 Decision to proceed with the RUMS project due to it now being the least value
destructive option for shareholders, predominantly due to a material fall in
solar panel prices.
27 October 2023 Company changed its name to Asian Energy Impact Trust plc.
31 October 2023 Shareholders representing 91% of the issued share capital voted in favour of
changes to the Company's investment policy (to avoid any potential breach of
the single country limit as a consequence of proceeding with the RUMS project
and make clarificatory changes to the gearing policy), in line with the
Board's recommendation.
Termination of the Former Investment Manager's appointment effective.
1 November 2023 Octopus Energy Generation appointed as Transitional Investment Manager.
AEIT launched a new corporate website.
13 December 2023 Unaudited NAV as at 30 September 2023 announced of US$88.5 million (50.4 cents
per share).
Company announced that moving forward with the development of the TT8 project
whilst the strategic review was underway may not be the best option for the
Company.
19 December 2023 Shareholders representing 83% of the votes cast (and 69% of the issued share
capital) voted against a resolution to wind up the Company, in line with the
Board's recommendation.
Material events post year end
22 January 2024 Company published its 2022 Annual Report and its unaudited 2023 Interim
Report.
27 February 2024 Accounts General Meeting held.
6 March 2024 Share suspension lifted and trading in shares recommenced.
13 March 2024 Unaudited NAV of US$85.0 million (48.4 cents per share) as at 31 December 2023
announced.
11 April 2024 Result of the strategic review announced. Following consultation with
advisers, and having taken into account feedback from investors representing a
significant proportion of AEIT's issued share capital, the Board concluded
that it is in the best interests of shareholders as a whole to put forward a
proposal for the orderly realisation of AEIT's assets and progressive return
of surplus cash to shareholders in a timely manner.
22 April 2024 It was announced that Kirstine Damkjaer will resign from her directorship with
effect from 30 April 2024. Following her appointment to a full-time position,
she intends to step down from all her non-executive positions as soon as
practicable.
30 April 2024 Kirstine Damkjaer resigned as a director of the Company, in line with the
announcement on 22 April 2024.
1 May 2024 Temporary suspension of the Company's shares due to the Company being unable
to publish its annual report and accounts for the year ended 31 December 2023
by the required regulatory deadline of 30 April 2024.
Further information on the most material events are outlined below.
Temporary share suspensions
On 25 April 2023 the Company announced a temporary suspension in the listing
of, and trading in, the Company's shares (the "temporary share suspension").
The temporary share suspension was at the Company's request due to a material
uncertainty regarding the fair value of its assets and liabilities, in
particular with regard to the 200 MW construction-ready RUMS project, which
was acquired as part of the SolarArise portfolio. Further work was required to
assess the quantum of the liabilities and commercial viability of the project.
Due to this, the Company was unable to finalise its 2022 Annual Report within
four months after the accounting period end date, as required by the FCA's
Disclosure Guidance and Transparency Rules. Following publication of the
Company's 2022 Annual Report, unaudited 2023 Interim Report and updated key
information document, the temporary share suspension was lifted, and trading
in AEIT's shares recommenced, on 6 March 2024.
Due to a small number of outstanding points in respect of the Company's Annual
Report and audit for the year ended 31 December 2023 the Company was not able
to publish the Annual Report by the required regulatory deadline of 30 April
2024, resulting in the suspension of the listing of and trading in the
Company's shares since 7.30am on 1 May 2024. Now that the Annual Report has
been published in accordance with the Company's obligations, the Board will
move expeditiously to apply to the FCA for a restoration of the Company's
listing.
The RUMS project
Following the temporary share suspension, the Board appointed independent
advisors to undertake detailed reviews of the liabilities associated with
abandoning the RUMS project and the Company's options for the project
(including proceeding with constructing it or abandoning it). In parallel, the
Former Investment Manager re-evaluated the options for the RUMS project,
including the funding requirement in the event of proceeding with
construction. Based on the reviews undertaken at that time, and the
information provided to the Board on 31 May 2023 by the Former Investment
Manager, the Board concluded that it would not be in the interests of
shareholders to proceed with the construction of the RUMS project. As well as
being commercially unviable, predominantly due to the high solar panel prices
at that time, proceeding would breach the Company's investment policy
restrictions.
On 11 October 2023 the Board announced its decision to proceed with the RUMS
project due to it having become the least value destructive option for
shareholders. This was based on the advice received from the Former Investment
Manager that:
· panel prices had fallen by 30% which meant that the negative NPV
was significantly less than at 31 December 2022 and also at 31 May 2023 when
the Board took the decision not to proceed with construction of the RUMS
project;
· aborting the RUMS project would: (i) crystallise an immediate
write off of US$8.9 million of costs incurred in respect of the project as at
30 September 2023; (ii) result in the encashment of US$1.2 million of
performance bank guarantees; (iii) potentially indirectly expose SolarArise to
abandonment liabilities (net of the performance bank guarantees) of up to
US$32.3 million and likely protracted associated litigation; and (iv) lead to
reputational damage that could adversely impact the value of the SolarArise
platform; and
· whilst the RUMS project was clearly not value accretive,
proceeding to construct it would: (i) allow SolarArise to better manage its
liabilities in respect of the RUMS project, providing greater certainty
compared to a very uncertain process of aborting it, both in terms of the
value of any potential abandonment liabilities and the expected timeline for
settlement; and (ii) add a further 200 MW of capacity to the SolarArise
platform and, once operational as part of a wider portfolio, may facilitate a
more attractive exit of SolarArise in any future liquidity event.
To proceed with the RUMS project, the Board put forward a resolution to amend
the single country limit in the Company's investment policy to avoid any
potential breach of that limit as a consequence of proceeding with the RUMS
project (and also to make clarificatory changes to the gearing policy), which
was passed at a general meeting held on 31 October 2023.
Construction of the RUMS project is underway.
General meetings
At the Annual General Meeting held on 30 June 2023, alongside the standard
annual resolutions to re-elect the Board which were passed and in accordance
with the commitment in the Company's IPO prospectus, a Continuation Resolution
was due to be proposed as 75% of the net IPO proceeds had not been deployed
within 12 months of admission to trading. If the Continuation Resolution did
not pass, the Directors would be required by the Company's Articles of
Association to put forward proposals for the reconstruction, reorganisation or
winding up of the Company to shareholders for their approval within four
months of the date of the meeting at which the Continuation Resolution was
proposed. Given the uncertainty of the Company's financial situation, the
Board recommended that shareholders abstain from voting on the Continuation
Resolution and adjourned the AGM ahead of the shareholder vote on the
Continuation Resolution.
On 11 July 2023, the Company received a notice from certain entities and funds
affiliated with the Former Investment Manager (the "Requisitioners"), which
held 14.8% of the Company's issued share capital, requisitioning a general
meeting of the Company's shareholders to vote on, amongst other things, the
Continuation Resolution.
On 31 July 2023 in the notices for the requisitioned general meeting and
adjourned Annual General Meeting (the "August Meetings"), the Board
recommended shareholders to vote against the Continuation Resolutions to be
proposed at those meetings as shareholders would be unable to form a
considered view of the Company as, at that time: (i) its valuation was
uncertain; (ii) the RUMS project was believed to be commercially unviable and
the non-completion liabilities were expected to be substantial; (iii) the
audit of its financial statements for the period ended 31 December 2022 and
associated annual report could not be completed; (iv) its shares were
suspended from listing; and (v) there was no clear strategy for the future of
the Company.
Prior to the August Meetings a second notice from the Requisitioners was
received by the Company requisitioning a further general meeting to consider
ordinary resolutions that the current Board be removed from office as
directors of the Company and replaced with new directors nominated by the
Requisitioners with immediate effect.
Ahead of the August Meetings that were held on 24 August 2023, the Board
continued to provide updates to shareholders on material new information in
support of its recommendation to vote against the Continuation Resolutions. At
the August Meetings, shareholders representing 58% of the votes cast (and a
majority of the issued share capital) voted against the Continuation
Resolutions in line with the Board's recommendation. The Board immediately
commenced an evaluation of the options for the Company's future in view of its
obligation, under the Company's Articles of Association, to put proposals to
shareholders for the reconstruction, reorganisation or winding-up of the
Company by 24 December 2023. The second requisitioned general meeting was held
on 25 September 2023. Shareholders representing approximately 54% of the
Company's total issued share capital supported the current Board and the
resolutions to replace the current Board were not passed.
In accordance with its obligation to put forward proposals for the
reconstruction, reorganisation or winding-up of the Company to shareholders
for their approval within four months of the Continuation Resolutions not
having been passed, the Board convened a further general meeting on 19
December 2023 to consider a resolution to wind up the Company and appoint
liquidators.
The Board had considered possible options for a reconstruction or
reorganisation of the Company but, given, in particular, the concentrated and
illiquid nature of the Company's portfolio and the current size of the
Company, the Board concluded that a reorganisation or reconstruction was not
viable or in the best interests of shareholders as a whole. Accordingly, in
order to comply with its obligation under the Articles, the Board's only
option was to put forward a winding up proposal, but recommend shareholders
vote against the resolution principally for the following reasons: (i) if the
resolution was passed, it was expected that the listing of the Company's
shares would be permanently suspended; and (ii) if the resolution was not
passed (in-line with the Board's voting recommendation), the Board would have
the additional time needed to complete the strategic review of the options for
the Company's future and shareholders would have the opportunity to vote on
the outcome of the strategic review. Shareholders representing 83% of the
votes cast (and 69% of the issued share capital) voted against the winding-up
resolution, in line with the Board's recommendation.
Due to the delay in the completion and publication of the Company's 2022
Annual Report, certain matters of business usually dealt with at an annual
general meeting could not be dealt with at the Company's 2023 Annual General
Meeting or at the adjourned Annual General Meeting held on 24 August 2023.
Following the publication of the Company's 2022 Annual Report on 22 January
2024 and as required by the Companies Act 2006, the Board convened a general
meeting on 27 February 2024 to lay the 2022 Annual Report before the Company's
shareholders and carry out certain other related business. All resolutions
proposed at that general meeting were passed, although there was a significant
minority vote (being just over 20%) against the resolutions to receive the
2022 Annual Report, approve the Directors' Remuneration Report and approve the
Directors' remuneration policy. The Board has sought to engage with those
shareholders who voted against those resolutions to discuss any views they may
have and will take into account any feedback around their concerns.
Change of Investment Manager
As the Continuation Resolutions were not passed at the August Meetings, the
Company was entitled to terminate its investment management agreement with the
Former Investment Manager summarily at any time and without further payment in
respect of the Former Investment Manager's initial five-year term of
appointment. Due to, amongst other things, the deteriorated relationship with
the Former Investment Manager and concerns about performance, the Board
determined it would be in the best interests of shareholders to terminate the
Former Investment Manager's appointment as the Investment Manager. Following a
competitive tender process, the Board announced on 28 September 2023 that it
had agreed heads of terms to appoint Octopus Energy Generation as the
Transitional Investment Manager for an initial term expiring on 30 April 2024.
Following completion of the customary take-on and regulatory procedures,
Octopus Energy Generation's appointment with immediate effect was subsequently
confirmed on 1 November 2023. The Company's existing investment management
arrangements, which are due to terminate on 30 April 2024, will roll over
until the orderly realisation proposal is approved by shareholders.
The Board expects that, subject to shareholders approving the orderly
realisation proposal, the Company's Transitional Investment Manager, will be
appointed to continue to manage AEIT's investments and their orderly
realisation.
Re-evaluation of the portfolio valuations
Due to the ongoing material uncertainties regarding the Company's financial
position and in support of progressing the audit and associated annual report
and financial statements for the period ended 31 December 2022, the Board
appointed, in May 2023, PricewaterhouseCoopers LLP ("PwC") to undertake a
detailed review of the key assumptions included in the financial models and
the valuation methodology of the operational assets within the portfolio,
namely the SolarArise and NISPI assets, as at 31 December 2022 proposed by the
Former Investment Manager. On 12 July 2023, the Board announced it had
received a draft report from PwC and that the Board anticipated the final
portfolio valuation as at 31 December 2022 could reflect a material downward
movement that would be in addition to the costs written off and potential
abandonment liabilities associated with not proceeding with the RUMS project.
One of the key priorities of the Transitional Investment Manager was to
re-evaluate the portfolio valuations as at each valuation date. The valuations
for 31 December 2022 and 30 June 2023 were an integral part of the respective
Annual and Interim Reports that were published on 22 January 2024. However,
ahead of that date, on 13 December 2023, the Board announced the unaudited NAV
as at 30 September 2023 in order to provide investors with the most recent
financial information at the earliest possible time. Unaudited net assets at
30 September 2023 were US$88.5 million (NAV of 50.4 cents per share), a
marginal increase on the net assets (and NAV per share) as at 31 December
2022.
Result of the strategic review
Having undertaken a comprehensive strategic review of the options for the
Company's future and after consultation with its advisers and having taken
into account feedback from investors representing a significant proportion of
AEIT's issued share capital, the Board has concluded that it is in the best
interests of shareholders as a whole to put forward a proposal for the orderly
realisation of AEIT's assets.
The proposal will seek to achieve a balance between maximising the value of
AEIT's investments and progressively returning cash to shareholders in a
timely manner. Details of this proposal, which is subject to shareholder
approval at a general meeting of the Company expected to be held in Q2 2024,
will be set out in a separate circular to shareholders and will be made
available on the Company's website in due course.
Investments
No. of individual assets held Total investment portfolio value(18) Adjusted GAV
13 US$42.1m US$193.1m
On 13 January 2023 the Company completed its acquisition of the remaining 57%
economic interest in SolarArise, owning 100% of SolarArise from this date.
The acquisition was made for a cash consideration of US$38.5 million. As at
31 December 2022, the Company had recognised an onerous contract provision in
respect of this commitment as the fair value of the investment was deemed to
be lower than the consideration paid to acquire the investment, primarily due
to potential liabilities relating to aborting the 200 MW construction-ready
RUMS project.
On 31 May 2023 the Company, through its subsidiary AEIT Holdings, completed
the acquisition of 99.8% of VSS, a privately-owned company which holds 6.12 MW
of rooftop solar assets for US$3.1 million. The gross value of the assets was
US$4.6 million including external debt.
Summary of deployment
Proportion AEIT proportion AEIT proportion
Date of acquired/ project Amounts paid Total operational of operational of ready to build
Investment investment funded (US$m) capacity capacity capacity
August 22 43.0% 32.9 100 MW 86 MW
SolarArise January 23 57.0% 38.5 233 MW 133 MW 114 MW
October 23 RUMS project 19.8
NISPI December 21 40.0% 25.4 80 MW 32 MW n/a
VSS May 23 99.8% 3.1 6 MW 6 MW n/a
Total 119.7 319 MW 271 MW 200 MW
On 1 August 2023, the Company's only development project (the "TT8 project"),
a 150 MW solar PV project, held by a special purpose vehicle of SolarArise,
signed a power purchase agreement with Maharashtra State Electricity
Distribution Company Limited. This required the Company to put in place a
performance bank guarantee for US$1.7 million in line with the terms of the
PPA funded from existing cash reserves within SolarArise.
On 11 October 2023, the Board announced its decision to proceed with the RUMS
project due to it having become the least value destructive option for
shareholders and agreed to provide funding of up to US$20 million by way of an
INR denominated external commercial borrowings loan from the Company to
SolarArise. Accordingly, a loan of US$19.8 million was provided on 18 October
2023. The RUMS project's budget did not initially include provisions for the
installation of dynamic reactive power equipment. The responsibility for this
additional infrastructure, as mandated by Central Electricity Authority
regulations, was unclear. In January 2024, in a meeting with the owner of the
Rewa Ultra Mega Solar Park ("RUMSL"), SolarArise and other significant
developers were informed that the dynamic reactive power equipment would need
to be self-funded by those constructing them. RUMSL is also now behind
schedule in constructing the transmission line and other infrastructure
required for commissioning the RUMS project. It is expected that commissioning
the RUMS project will not occur until June 2024.
For the purpose of the unaudited NAV as at 31 December 2023, announced on 13
March 2024, a US$2.8 million contingency was included in the modelled RUMS
project costs. Delays to the commissioning date beyond 31 March 2024 impacts
the RUMS project costs. Every month of delay beyond 31 March 2024 will have a
negative impact of US$0.5 million - US$0.7 million on NAV. The unaudited NAV
assumed commissioning of the RUMS project would occur in March 2024, based on
the information held as at 31 December 2023. It was noted in the announcement
of the unaudited NAV that commissioning was now expected to happen in May 2024
and that there would be a further reduction in NAV of up to US$2.1 million in
the event that commissioning did not occur until June 2024. An increased
contingency of US$6.3 million has been included in the audited NAV, resulting
in a downward movement of US$3.5 million from the unaudited NAV. The increased
contingency is principally due the delays in construction in January and
February 2024, which were not within the control of SolarArise, and is based
on commissioning now occurring in June 2024. The contractual avenues to recoup
additional costs will be explored.
The Board has approved additional cash funding of up to US$4.5 million to fund
the RUMS project delays and additional costs. The NAV impacts presented above
assume this cash injection has taken place.
As at 31 December 2023, the Company had invested US$119.7 million, 66% of
total capital raised. Following the temporary share suspension, the Board
suspended acquisitions of, or commitments to, new investments without
consultation with the Board. Subject to shareholders approving the proposal
for the orderly realisation proposal at a general meeting of the Company
expected to be held in Q2 2024, the Company will not make any further
acquisitions or commitments to new investments.
(18) The value of the Company's operational investment portfolio.
Portfolio Breakdown
Total
Total renewable
renewable energy
energy generating Average
generating capacity remaining
capacity on based on life of asset
a 100% basis economic share modelled Economic
Plant or site Technology Country Revenue type (MWp) (MWp) (years) ownership
NISPI 80 32
Islasol IA Solar Philippines Wholesale electricity market 18 7 17.0 40%
Islasol IB Solar Philippines Wholesale electricity market 14 6 17.0 40%
Islasol II Solar Philippines Wholesale electricity market 48 19 17.0 40%
SolarArise 433 433
Telangana I ("TT") Solar India 25 year fixed price PPA 12 12 17.5 100%
Telangana II ("TT6") Solar India 25 year fixed price PPA 12 12 17.5 100%
Karnataka I ("TT1") Solar India 25 year fixed price PPA 40 40 19.0 100%
Karnataka II ("TT2") Solar India 25 year fixed price PPA 27 27 21.0 100%
Maharashtra ("TT4") Solar India 25 year fixed price PPA 67 67 19.0 100%
Uttar Pradesh ("TT5") Solar India 25 year fixed price PPA 75 75 22.5 100%
Total operating generating capacity 233 233
Madhya Pradesh In construction ("RUMS project") Solar India 25 year fixed price PPA 200 200 n/a 100%
Maharashtra In development ("TT8 project") Solar India 25 year fixed price PPA 150 150 n/a 100%
Total 'in construction' or 350 350
'in development' generating capacity
VSS 6 6
Mo Cay Solar Vietnam 20 year PPA 2 2 17.0 99.8%
Hoang Thong Solar Vietnam 20 year PPA 4 4 17.0 99.8%
Total generating capacity 319 271
Total 'in construction' generating capacity 200 200
Total 'in development' generating capacity 150 150
The following charts are representative of the pro-rata share of the assets
owned at 31 December 2023(19).
Geographical diversification - Asset phase - Revenue structure -
as a % of generating capacity (MWp)
as a % of generating capacity (MWp) as a % of generating capacity (MWp)
(19) All charts exclude development projects.
Portfolio Performance
Portfolio performance for NISPI and SolarArise has been compared to the
budgeted performance expected in the year as per the 31 December 2022
valuation models. The assumptions that drove the cashflows of those models are
detailed in the 2022 Annual Report available on the Company's website and
included 'haircuts' to the expected generation from the P50 generation
profiles.
A P50 generation profile for solar assets is a statistical measure used to
estimate the expected energy production of a solar power project. The term
'P50' refers to the median probability scenario for the energy output of a
solar asset. It means that there is a 50% chance that the actual energy
production will exceed the P50 estimate and a 50% chance that it will fall
below. This is considered a 'best estimate' scenario, balancing optimism and
conservatism.
A technical advisor was appointed in September 2023 to provide updated P50
yield assessments. Reports for SolarArise were received in January 2024, with
the results being incorporated into the valuation of the assets at 31 December
2023. Reports for the Philippine and Vietnamese assets were received in March
2024 and will be incorporated into the 31 March 2024 valuations. Material
deviations from generation assumptions already modelled in the 31 December
2023 valuations are not anticipated.
Output generated by Revenue generated by EBITDA generated by
underlying operating assets(20) underlying operating assets(20) underlying operating assets(20)
391,683 MWh US$24.1m US$18.0m
During the year ended 31 December 2023, the investment portfolio's electricity
generation was 391,683 MWh, 6% below the original P50 generation profile, and
3% below the anticipated generation following the 'haircuts' to the P50
generation estimates. The reported figures reflect the proportionate share of
the electricity generated by investments from the date of acquisition and
therefore consider 100% of SolarArise from 13 January 2023, the date on which
AEIT purchased the remaining 57% stake, and 99.8% of VSS from 31 May 2023.
(20) Pro-rated for economic ownership from the date of acquisition if
after 1 January 2023. These are not IFRS measures and are KPIs used to monitor
the performance of the underlying assets.
Philippines
The Philippine portfolio comprises NISPI, an investee company with three
operating solar plants with a total capacity of 80 MW situated on the island
of Negros, Philippines. All three solar plants export electricity to the grid
at the wholesale electricity spot market ("WESM") price.
The 2023 budgets for ISLASOL II and ISLASOL III anticipated decreases in
energy generation of 3.4% and 3.7%, respectively, aligning with past
deviations from the established P50 generation forecasts. This year's actual
performance was 1% below the adjusted P50, with ISLASOL II and ISLASOL III
underperforming by 3% and 0.1% below the amended P50. A portion of this
discrepancy, amounting to 1%, was attributed to lower solar irradiation
levels. The remainder of the underperformance was linked to site-specific
challenges, which had been factored into our budget forecasts. In addition,
ISLASOL II faced a series of technical difficulties which were not anticipated
and have since been resolved.
Over the 12 months ended 31 December 2023 NISPI generated revenues of PHP
731.2 million (US$13.2 million), a 2.5% decrease to budgeted revenues of PHP
749.7 million (US$13.5 million). This was primarily due to the lower
generation explained above and slightly lower than expected WESM prices being
achieved of 6.6PHP/kWh compared to a budgeted price of 6.7PHP/kWh. EBITDA for
the year was PHP 572.0 million (US$10.3 million), 1.2% above budget, boosted
by the sale of unbudgeted carbon credits.
As at 31 December 2023, on a 100% basis, NISPI held PHP 1,078 million of cash
reserves, equivalent to US$19.5 million. NISPI has no debt.
India
The 2023 budgets accounted for a 5% reduction in generation based on
historical observed underperformance from the existing P50 generation
expectations. After accounting for weather effects, the overall performance
matched our expectations. However, as we predicted, some specific sites did
not perform as well as anticipated in our budgets. Two of the sites had
specific issues that impacted generation; TT2 experienced issues with
pollution in the area and TT6 experienced issues with flooding and the control
system. The Transitional Investment Manager is continuing to work with the
technical advisor and the SolarArise asset manager to further understand the
root causes of the underperformance of the SolarArise assets and evaluate
possible optimisation options.
Over the year the operational portfolio of SolarArise generated a turnover of
INR 1,534 million (US$18.4 million), an underperformance compared to the
budgeted figure of INR 1,649 million (US$19.8 million) by 7.0%. This
underperformance is driven by government rebates budgeted but not received of
INR 149 million (US$1.8 million), offset in part by the receipt of carbon
credit income, amounting to INR 51 million (US$0.6 million). As a result,
EBITDA for the year was INR 1,131 million (US$13.6 million), below the
budgeted INR 1,380 million (US$16.6 million) by INR 249 million (US$3.0
million). Throughout the year, operational SPVs paid management fees totalling
INR 61 million (US$0.7 million) to the SolarArise holding company.
In the year, the SolarArise holding company incurred expenses of INR 169
million (US$2.0 million), compared to expected expenditure per the December
2022 valuation model (which assumed normalised costs for this structure) of
INR 58 million. The actual expenditure for the year included asset
management fees (INR 99.5 million) and other operating costs (INR 69.8
million) and were covered by management fees, interest income and loan
repayments from the operational SPVs. The Transitional Investment Manager is
working with the SolarArise asset management team to agree new budgets for the
year ending 31 March 2025 (SolarArise's year end) and reduce holding company
costs as much as possible.
As at 31 December 2023, SolarArise's cash reserves, including the underlying
SPVs, were INR 964 million (US$11.6 million). Of this balance, US$8.1 million
was held to fund the ongoing construction of the RUMS project. SolarArise had
approximately US$108.6 million of borrowings at 31 December 2023.
Construction progress of the 200 MW RUMS project
The RUMS project is held by a wholly owned special purpose subsidiary,
Talettutayi Solar Projects Nine Private Limited ("TT9"), of SolarArise.
Construction of the RUMS project commenced in November 2023. The solar modules
have arrived on site, alongside most of the other equipment needed to build
the solar farm. Installation of the module mounting structure for the panels
is in progress.
Post the year end, despite initial progress, construction faced delays due to
farmers from the surrounding land temporarily restricting access to the
construction site in early to mid-January, and limiting on-site activities
from mid-January 2024 to mid-February. This stemmed from land-related issues
between the owner of the land, RUMSL(21), and the neighbouring farmers.
Resolution between these two parties was outside of the Company's control. The
local asset manager of SolarArise escalated the issue within the relevant
Indian government departments and local authorities. Following resolution,
construction recommenced in the third week of February.
Additionally, the project's budget did not initially include provisions for
the installation of dynamic reactive power equipment. The responsibility for
this additional infrastructure, as mandated by Central Electricity Authority
(CEA) regulations, was unclear. In a January 2024 in a meeting with RUMSL,
SolarArise and other significant developers were informed that the cost would
need to be self-funded. RUMSL is also now behind schedule in constructing the
transmission line and other infrastructure required for commissioning. It is
expected that this will not be delivered until June 2024.
The audited NAV as at 31 December 2023 includes a contingency of US$6.3
million principally due the delays in construction in January and February
2024. The contingency is based on commissioning now occurring in June 2024.
All contractual avenues to recoup costs will be explored.
The Board has approved additional cash funding of up to US$4.5m to fund the
project delays and addition costs. The NAV impacts referred to above assume
this cash injection has taken place.
Vietnam
On 31 May 2023, AEIT completed the acquisition of a 99.8% stake in VSS and its
four subsidiaries, incorporating 6.12 MW of rooftop solar assets, for a total
of US$3.1 million.
Following the acquisition, the portfolio's performance was 12% lower than the
initial investment projections, primarily due to the Hoang Thong system's
output, which fell 27% short of expectations. This shortfall was largely
attributed to sawdust from the adjacent facility, which compromised the solar
panels' efficiency by accumulating on their surfaces. As a result, the 2023
budgets were updated as part of the valuation update conducted in September
2023. The budgets accounted for a reduction in generation based on a PVsyst
report completed in June 2023 which encompasses issues identified on the
sites.
In relation to the updated budget, the portfolio has outperformed the
generation expectations by 5%. This uplift in performance is attributed to the
cleaning regime adopted on the solar panels and inverters in addition to
rectification of some sections of the DC cables touching the roof in the Hoang
Thong project. The asset manager, Solar Electric Vietnam, has provided a
proposal of further rectification works to resolve the identified issues. The
improvement in performance observed is a good indication of some upside
expected to be recovered following the completion of the rectification works.
During the period since acquisition, VSS has generated revenue of VND 8.2
billion (US$0.33 million), and generated EBITDA of VND 6.8 billion (US$0.27
million).
At 31 December 2023, VSS had VND 6.8 billion (US$0.3 million) of cash reserves
and approximately US$1.2 million of borrowings.
(21) RUMSL is a joint venture between Madhya Pradesh UrjaVikas Nigam
Limited and Solar Energy Corporation of India. Solar Energy Corporation of
India Ltd is a company of the Ministry of New and Renewable Energy, Government
of India.
Portfolio Valuation
Valuation process
Regular valuations are undertaken for the Company's portfolio of assets. The
process follows International Private Equity Valuation ("IPEV") Guidelines,
typically using a discounted cashflow ("DCF") methodology. The DCF methodology
is deemed the most appropriate valuation basis where a detailed projection of
likely future cash flows is possible. Due to the asset class, availability of
market data and the ability to project the asset's performance over the
forecast horizon, a DCF valuation is typically the basis upon which renewable
assets are traded in the market. 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. Key
macroeconomic and fiscal assumptions for the portfolio valuation are set out
in note 9 to the Financial Statements. The assets held in the Company's UK
subsidiary, AEIT Holdings, substantially comprise working capital balances and
therefore the Directors consider the fair value of AEIT Holdings to be equal
to its book value.
In accordance with the Company's valuation policy, the investment portfolio at
31 December 2023 has been valued by the Transitional Investment Manager. PwC
was engaged as an independent valuation expert to provide a private
independent opinion on the reasonableness of the valuations which were
prepared by the Transitional Investment Manager, and adopted by the Board and
AIFM when they approved the 31 December 2023 valuations.
Portfolio valuation as at 31 December 2023
The fair value of the Company's investment portfolio as at 31 December 2023
was USS42.1 million. The movements over the year are detailed in the bridge
below.
Whilst the Company holds its investments at fair value, the final value
realised on disposal of each investment as the Company implements its orderly
realisation strategy may be materially different to its fair value as at 31
December 2023.
Fair value of investments from 31 December 2022 to 31 December 2023 (US$m)
Acquisitions and cash injections
During the year, AEIT announced the following investments:
· In January 2023, the Company completed its acquisition of the
remaining 57% economic interest in SolarArise, bringing ownership to 100%. The
acquisition was made for a cash consideration of US$38.5 million.
· In May 2023, the Company, through its subsidiary AEIT Holdings,
completed the acquisition of a 99.8% stake in VSS and its four subsidiaries,
which hold 6.12 MW of rooftop solar assets. Total funding into AEIT Holdings
was US$5.0 million, of which US$3.1 million was used to fund the acquisition
of VSS. As at 31 December 2023, US$1.8 million remains as cash sitting within
AEIT Holdings and is included within the fair value of the investment
portfolio.
· In October 2023, the Board approved the provision of funding up
to US$20 million through an INR-denominated external commercial borrowings
("ECB") loan from the Company to SolarArise to enable the construction
activities for the RUMS project. Subsequently, a loan amounting to US$19.8
million was disbursed to SolarArise on 18 October 2023.
Utilising onerous contract provision
At 31 December 2022, the Company recognised an onerous contract provision in
respect of the commitment to acquire of the remaining 57% shareholding in
SolarArise as the fair value of the investment was deemed to be lower than the
consideration to be paid to acquire the investment, primarily due to potential
liabilities relating to aborting the 200 MW construction-ready RUMS project.
This provision of US$38.5 million has been utilised during the year and
offsets against the US$38.5 million included as cash paid for the acquisition.
As a result, the impact of the valuation at 31 December 2023 of this
acquisition was neutral.
Discount rate unwind
This bridge step reflects the net present value of future cashflows being
brought forward from 31 December 2022 to 31 December 2023, except for VSS
which is from the date of acquisition to 31 December 2023.
Change in discount rates
A range of discount rates are applied in calculating the fair value of the
investments, considering the location, technology and lifecycle of each asset
as well as leverage and the split of fixed and variable revenues.
In determining the reasonableness of discount rates, these have been estimated
by 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. Discount rates are in the range
10-12.5% across the assets with the construction asset in India being top of
the range and the Vietnamese assets at the bottom of the range. Changes to
discount rates had minimal impact on valuations.
Revaluation of the RUMS project
Falling solar module prices during the year resulted in improving economics
for the RUMS project. Updating the model with the declining panel prices and
other assumption changes reduced the overall negative net present value
("NPV") and on 11 October 2023 the Board announced its decision to proceed
with the RUMS project due to it having become the least value destructive
option for shareholders. As at 31 December 2023, the fair value of the RUMS
project included within the valuation of SolarArise was US$0.7 million after
the capital injection of US$19.8 million provided by AEIT, additional capital
injections made from excess cash within the SolarArise holding company of
US$3.3 million and including a contingency of US$6.3 million. Actual changes
in the underlying project economics from the abort case as at 31 December
2022, which was a negative NPV of US$27.9 million, amounted to a US$5.4
million uplift in value. This is largely as a result of improving economics
for the project, including declining panel prices and updating for
macro-assumptions and other model updates, which were offset slightly by an
increase in interest rate on the signed facility agreements entered into in
October 2023 and an updated budget with additional capex and contingency as
commissioning is not expected to occur until at least June 2024, further
detail for which is shown in the 'Investments' section.
Macroeconomic assumptions
The main economic assumptions used in the portfolio valuation at 31 December
2023 are inflation forecasts and foreign exchange rates. Updating for
assumptions at 31 December 2023 had a small negative impact on the valuation.
· Inflation forecasts: Our approach is to blend two inflation
forecasts from reputable third-party sources.
· Interest rates: Interest rate forecasts are only relevant for the
Indian and Vietnamese portfolios of assets. As existing facility agreements
are in place, we have assumed the current rates at 31 December 2023 as the
fixed rates long term.
· Foreign exchange rates: Underlying valuations are calculated in
local currency and converted back to USD at the spot rate at the relevant
valuation date.
Power price forecasts
Unless fixed under PPAs (such as the Indian portfolio) or otherwise hedged,
the power prices used in the valuations are based on an equal blend of two
independent and widely used market consultants' technology-specific capture
price forecasts for each asset.
Updating the valuations for the most recent power price forecasts available
resulted in a decrease in the valuation over the period from 31 December 2022
to 31 December 2023. A significant fall was seen in the first half of the year
with some recovery seen in the updated forecasts in the second half of 2023.
This is primarily due to reduced market forecasts, particularly commodity
prices in the near term (with delivered coal and liquified natural gas being
two of these major commodities) being key drivers in the expected power prices
in the Philippines.
In Vietnam, while both advisors raised the tariff forecast in the latest
update, they also highlighted that it will mostly follow the trend of the
gradual increase target set by the government rather than any fundamental
factors.
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. At 31 December 2022, as there was
an observed historical underperformance of the Company's operational assets
when compared with the level of P50 generation assumed at the time of
acquisition, an estimated reduction was applied so that the generation
forecasts reflected actual performance.
A technical advisor was appointed to provide updated P50 yield assessments.
These assessments were received in January 2023 for SolarArise. The technical
advisor produced two separate reports for SolarArise; revision one ('worst
case') which included all potential losses (even those that arose from one-off
events) and revision two ('best case') which assumed all losses assumed in
revision one would be fully recoverable. The Transitional Investment Manager
continues to work with the technical advisor to produce a realistic P50 yield
assessment that is expected to fall roughly in the middle of the two reports
received, on the basis that it is unlikely that all of the excluded losses in
revision two would be recoverable. For the 31 December 2023 valuations, in the
absence of a final report from the technical advisor, the midpoint of both
reports has been taken to generate a P50 yield to be included in the valuation
models for SolarArise. The impact on the valuation of this assumption was a
reduction to investment value of US$0.9m. The updated P50 yield assessments
were received in March 2024 in respect of NISPI and VSS. These P50 yield
assessments were not adopted in the 31 December 2023 valuations as actual
performance is expected to be below these, and not material different to the
existing assumptions.
Further, since its acquisition in May 2023, one of the assets within the
Vietnamese portfolio, which is a rooftop solar project on a furniture factory,
is significantly underperforming against expectations at the time of
acquisition. This is a result of the sawdust from the facility below escaping
and settling on the panels. Subsequently, the generation forecasts have been
reduced to account for the underperformance, which is net of a slight
improvement in performance expected to be achieved following completion of an
asset rectification plan.
In line with December 2022, a 3.3%-3.7% 'haircut' to the original P50 yields
based on the observed historical underperformance of NISPI has been taken in
the absence of updated yields.
Updating the valuations for the updated yield assessments in SolarArise and
VSS resulted in a negative impact on the valuations.
Changes to capital structure
As a result of the capital injection into the RUMS project, a reorganisation
of intercompany debt was required within the SolarArise SPVs, resulting in
greater cash traps as distributions are delayed. This resulted in a negative
US$3.2 million impact on the valuation. A review is underway to consider
options for optimising the SolarArise capital structure to mitigate further
delays.
Other movements
This refers to the balance of valuation movements in the period excluding the
factors noted above. The positive value is largely driven by an uplift of
US$2.0 million relating to the inclusion of residual land value where land is
owned within the SolarArise portfolio, US$0.8 million relating to updates to
operating expense assumptions within the SPVs and other updates to
decommissioning and distribution assumptions.
Also within other movements, resulting in a neutral valuation impact, is the
funding of the TT8 project development costs (US$1.9 million) and the RUMS
project construction costs (US$3.3 million) out of excess cash within the
SolarArise holding company.
As at 31 December 2023, total cash injected into the TT8 project was US$1.9
million and, in line with the Company's valuation policy, the fair value of
this development asset at the year-end is deemed to be equal to its cost.
Valuation sensitivities
For each of the sensitivities shown, it is assumed that potential changes
occur independently with no effect on any other assumption. The sensitivity
movements are presented both on a cents per share basis and as a percentage of
the Company's NAV.
Discount rate: A range of discount rates are applied in calculating the fair
value of investments, considering the location, technology and lifecycle stage
of each asset as well as leverage and the split of fixed to variable revenues.
A 100bps increase or decrease in the levered cost of equity for each portfolio
has been applied.
Generation: The sensitivity assumes a 10% decrease or increase in total
forecast generation relative to the base case for each year of the asset life.
Power price curve: The sensitivity assumes a 25% decrease or increase in power
prices relative to the base case for each year of the asset life (excluding
any period covered by a PPA).
Inflation: The sensitivity assumes a 1% decrease or increase in inflation
relative to the base case for each year of the asset life. Where revenue or
cost items have a contractually defined indexation profile, this has not been
sensitised.
Construction delay: The sensitivity assumes a three-month delay in the
completion of construction of the RUMS project from the current assumed date
of 30 June 2023 (i.e. that completion does not occur until 30 September 2024).
Cash extraction delay: At 31 December 2023, NISPI, the SolarArise holding
company and each of the SolarArise SPVs had significant negative distributable
reserve balances, prohibiting the payment of dividends. The valuations reflect
this, but assume that some measures to eliminate cash traps (for example,
capital reductions) are implemented within a reasonable timeframe. The
sensitivity assumes that such measures to eliminate cash traps are delayed by
12 months at both NISPI and SolarArise.
FX rate: Investments are held in the currency of the territory in which the
asset is located. A flat increase or decrease of 10% in the relevant rate over
the remaining asset life of each plant has been applied to the final values at
31 December 2023.
Financial Review
The Financial Statements of the Company for the year ended 31 December 2023
are set out in this report. The Financial Statements have been prepared in
accordance with United Kingdom adopted international accounting standards and
the applicable legal requirements of the Companies Act 2006.
Basis of accounting
The Company applies IFRS 10 and Investment Entities: Amendments to IFRS 10,
IFRS 12 and IAS 28, which state that investment entities should measure all
their subsidiaries, joint ventures and associates that are themselves
investment entities at fair value. The primary impact of this application, in
comparison to consolidating subsidiaries, is that the cash balances, working
capital balances and borrowings in its subsidiaries are presented as part of
the Company's fair value of investments.
The comparative period is the period from 1 November 2021 to 31 December 2022.
Results for the year/period
31 December 31 December
2023 2022
US$m US$m
Net asset value 81.5 86.6
Fair value of Company's investments 42.1 11.5
Movement on fair value of investments 5.0 (47.0)
Net assets per share (cents) 46.4 49.3
Onerous contract provision with respect to 57% acquisition of SolarArise - (38.5)
Loss for the year/period (0.6) (88.8)
Net assets
The net asset value as at 31 December 2023 was US$81.5 million or 46.4 cents
per ordinary share (2022: US$86.6 million or 49.3 cents per ordinary share).
The fair value of the Company's investment portfolio as at 31 December 2023
was US$42.1 million (2022: US$11.5 million). Movements between 31 December
2022 and 31 December 2023 are detailed in the bridge below:
Net asset value bridge - 31 December 2022 to 31 December 2023
Notes to the NAV bridge
· Change in fair value of investments: The change of
US$5.7 million represents the increase in fair value of the underlying
investments of US$5.0 million and investment income of US$0.7 million, net of
the additional capital injections made in the year. These include US$5.0
million invested into AEIT Holdings in April 2023, of which US$3.1 million was
used for the VSS acquisition, and a further US$19.8 million invested into
SolarArise to fund the construction of the RUMS project in October 2023. For
further information see note 9 to the Financial Statements.
· Exceptional costs following temporary share suspension: 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 temporary 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 strategic review of the options for the Company's future. The Board is
investigating the Company's right to seek compensation for these exceptional
costs whilst reserving all the Company's other rights.
· Other Company-level costs: Other ongoing Company-level costs
incurred in the year, excluding management fees of US$1.4 million. Total
ongoing Company-level costs for the year were US$3.1 million as detailed in
the OCR APM calculation.
· Other movements: Principally comprise of FX gains (US$0.3
million) and interest received on cash deposits (US$0.6 million).
Income
In accordance with the Statement of Recommended Practice: Financial Statements
of Investment Trust Companies and Venture Capital Trusts ("SORP") issued in
July 2022 by the Association of Investment Companies ("AIC"), the statement of
comprehensive income differentiates between the 'revenue' account and the
'capital' account, and the sum of both items equals the Company's profit for
the year. Items classified as capital in nature either relate directly to the
Company's investment portfolio or are costs deemed attributable to the
long-term capital growth of the Company.
In the year ended 31 December 2023, the Company's total revenue was US$5.7
million comprising of the movement of fair value of investments of US$5.0
million and interest receivable from its investments of US$0.7m (2022: total
revenue of negative US$85.5 million, consisting of negative US$47.0 million
movement in fair value of investment and negative US$38.5 million onerous
contract provision).
Operating expenses
The operating expenses included in the statement of comprehensive income for
the year were US$6.4 million (2022: US$3.3 million). These comprise US$4.2
million of exceptional one-off costs following the temporary share suspension,
US$1.4 million fees relating to the Transitional Investment Manager and Former
Investment Manager and US$5.9 million operating expenses offset by US$0.3
million net foreign exchange gains and net finance income of US$0.6 million in
the year. The US$1.4 million of management fees includes fees of US$1.0
million which may be claimed by the Former Investment Manager but are not
being paid to the Former Investment Manager whilst the Board evaluates all
available options. The details on how the Transitional Investment Manager's
and Former Investment Manager's fees were charged are as set out in note 19 to
the Financial Statements.
Ongoing charges
The ongoing charges ratio ("OCR") is a measure, expressed as a percentage of
average net assets, of the regular, recurring annual costs of running the
Company. It has been calculated and disclosed in accordance with the AIC
methodology, as annualised ongoing charges (i.e. excluding acquisition costs
and other non-recurring items) divided by the average published undiluted NAV
in the year. For the year ended 31 December 2023, the OCR was 3.6% (2022:
2.5%). The increase in OCR is driven primarily due to the lower average NAV in
2023 compared to 2022. The OCR is an APM and its calculation is detailed in
the APMs. Total costs (i.e. including acquisition costs and other
non-recurring expenses) were equivalent to 8.4% (2022: 4.1%) of the average
net assets for the year.
Financing
The Company does not have any debt. However, it is permitted to have debt
within its underlying investments. Per the Company's investment policy,
gearing should not exceed 65% of the Adjusted GAV (measured at the time the
facility is entered into), with the Company targeting gearing of below 50% in
the medium term. External debt financing is only at the level of the Indian
and Vietnamese solar portfolios and, as at 31 December 2023, this comprised
outstanding principal amounts of US$109.8 million, (2022: US$45.9 million pro
rated for economic ownership) representing a gearing ratio of 57% (2022: 27%).
At 31 December 2023, US$7.2 million had been drawn under the US$54.9 million
project finance facility for construction of the RUMS project. On a pro forma
basis, gearing would increase to 65% once the full project finance facility of
the RUMS project is drawn down based on the NAV as at 31 December 2023.
Dividends
During the year, interim dividends totalling US$4.4 million were paid (1.18
cents per share was paid in respect of the quarter to 31 December 2022 in May
2023, 0.44 cents per share paid in respect of the quarter to 31 March 2023 in
July 2023, 0.44 cents per share paid in respect of the quarter to 30 June 2023
in September 2023 and 0.44 cents per share paid in respect of the quarter to
30 September 2023 in December 2023).
A dividend has not been paid or proposed in respect of the quarter ended 31
December 2023 and, subject to shareholders approving the orderly realisation
proposal at a general meeting of the Company expected to be held in Q2 2024,
the Company's priority will be to achieve a balance between maximising the
value of its investments and progressively returning cash to shareholders in a
timely manner. It is currently expected that surplus cash will be returned
from time to time in the form of capital rather than dividends and that any
dividends will be paid on an ad hoc basis.
Impact Report
Impact highlights(24)
Providing financial returns through clean energy generation
Installed operational capacity - MW Clean energy generated - MWh EU Taxonomy alignment(25)
233 - SolarArise (2022: 100) 391,683 (2022: 85,199) 100% (2022: 100%)
32 - NISPI (2022: 32)
6 - VSS (2022: Nil)
Providing environmental returns through GHG emission avoidance Providing social returns through quality jobs created
GHG emissions avoided - tCO(2)e Equivalent UK cars taken off the road - No. Employment directly supported full time equivalent ("FTE") jobs - No.
311,752 (2022: 62,770) 158,265 (2022: 34,427) 197 (2022: 148)
(24) These metrics have been proportioned to account for AEIT's share
of the SolarArise, NISPI and VSS assets during the reporting period.
(25) This calculation excludes cash held by the Company.
AEIT contribution to UN SDG targets
Through its investments, the Company made significant active contributions to
four UN SDGs as outlined below.
Affordable and clean energy
7.2: Reducing India's, the Philippines' and Vietnam's reliance on fossil fuels
through renewable energy generation by AEIT's assets.
Decent work and economic growth
8.5: Achieve productive employment and decent work, illustrated by the 197
jobs supported by the portfolio and the additional income generated for locals
through the robotics program at NISPI.
8.8: Protecting labour rights and promoting safe and secure working
environments for all workers through policies and grievance mechanisms and
health and safety training.
Take urgent action to combat climate change and its impacts
13.1: Strengthening resilience of portfolio to climate-related hazards through
climate risk analysis and monitoring.
13.2: Contributing to national strategies to increase share of renewable
energy to the grid in the fight against climate change.
Life on land
15.5: Reduce the degradation of natural habitats and loss of biodiversity,
protecting and preventing impacts to threatened species and other local flora
and fauna through the implementation of environmental screening and monitoring
at AEIT's assets.
Additional contributions were made through impact initiatives
Impact and ESG approach
Objective
The Company delivers on climate change mitigation through its investments.
Nowhere is it more urgent to invest in renewable energy solutions that provide
an alternative to polluting fossil fuels and coal than in Asia. The Company's
investments in sustainable energy target these fast-growing and emerging
economies where greenhouse gas emissions ("GHGs") continue to grow rapidly.
The investee companies within the investment portfolio address the climate
change mitigation priorities set out in those countries' Nationally Determined
Contributions under the Paris Agreement on Climate Change, and efforts to
achieve the United Nations Sustainable Development Goals ("UN SDGs"). The
investment strategy finances renewable energy generation and avoids GHG
emissions, while having a positive impact in the communities where we invest.
As a result of this inherently green contribution, the Company was awarded the
Green Economy Mark by the London Stock Exchange in December 2021. In 2022 AEIT
was also classified as an Article 9 financial product with a sustainable
objective under the EU Sustainable Finance Disclosure Regulation ("SFDR").
Approach
The Company integrates environmental, social and governance ("ESG") risk
management into its due diligence and management systems and applies a
triple-return approach that considers social and environmental objectives
alongside the financial returns of the Company.
Financial return(26) Environmental return Social return
Providing shareholders with attractive dividend growth and prospects for Protecting natural resources and the environment. Delivering economic and social progress, through job creation and contribution
long‑term capital appreciation. to UN SDGs.
The Investment Manager supports investee companies in monitoring and reporting
on mandatory Principle Adverse Impact ("PAI") indicators established under the
SFDR framework, and a range of additional ESG-related indicators, as part of
its approach to active investment management.
The Company uses a set of key performance indicators ("KPIs") that aims to
balance economic, environmental and social considerations, aligning the
triple-return approach to the impact areas of generating clean energy,
avoiding emissions and supporting quality jobs. The KPIs are listed below:
Impact area Metric Unit Definition Definition framework
Financial return: Generating clean energy Installed operational capacity MW Total amount of energy the portfolio can transmit as of the end of the IRIS+. Energy Capacity (PD3764).
reporting period
New energy capacity added MW Amount of new energy capacity connected to the grid during the reporting IRIS+. Energy Capacity Added (PI9448)
period
Energy generated for sale MWh Amount of energy generated and sold to offtaker(s) during the reporting period IRIS+. Energy Generated for Sale: Renewable (PI5842)
Environmental return: Avoiding emissions Avoided emissions tCO(2)e Avoided emissions from renewable energy generation estimated using IFI Joint Methodology for Renewable Energy Accounting approach
standardised grid emission factors per MWh.
Social return: Quality jobs Jobs in directly financed companies Number of FTE jobs Number of full time equivalent employees working for enterprises financed or IRIS+. Jobs in Directly Supported/ Financed Enterprises. (PI4874)
supported by the organisation as of the end of the reporting period, aligned
with HIPSO Direct Jobs Supported (Operations and Maintenance)
Beyond the Company's contributions to these selected impact KPIs, investments
support a range of positive contributions in the communities where the Company
operates assets, including through ancillary corporate social responsibility
efforts. These additional sustainability contributions are also monitored and
highlighted in this Impact Report.
(26 ) Subject to shareholders approving the orderly realisation
proposal at the general meeting of the Company expected in Q2 2024, the
Company's target financial return will be changed to focus on achieving a
balance between maximising the value to be obtained from existing investments
held and progressively returning cash to shareholders in a timely manner.
Financial return: generating clean energy(27)
The financial return target, in particular yield through dividends, is
contributed to through the generation of clean energy and the operational
performance of assets. Put simply, with all other things being equal, the more
green energy an asset produces, the better the financial return for investors
through receiving revenue for the electricity that is sold. In this respect,
there is no tradeoff between financial return and positive impact through
avoided emissions.
In looking through the impact lens, the financial return are generated though
the installed operational capacity and the resulting clean energy generated,
and this return is sustainable through the alignment to the EU Taxonomy.
The following KPIs are proportionally based on AEIT's equity stake in the
SolarArise, NISPI and VSS portfolios.
Installed operational capacity - MW Clean energy generated - MWh EU Taxonomy alignment
233 - SolarArise 391,683 100%
32 - NISPI
6 - VSS
In 2023 the investment portfolio comprised interests in 319 MW of installed
operational capacity. The proportional share of this was 271 MW of generating
capacity which generated 391,683 MWh of clean renewable energy in the
Philippines, India and Vietnam in 2023. This clean energy generation is
equivalent to providing 413,144 people with clean electricity (see table for
breakdown by country). This directly supports these countries Nationally
Determined Contributions under the Paris Agreement on Climate Change, helping
to address their climate mitigation priorities.
Equivalent number of people provided with clean electricity - No.
51,415 in the Philippines(28) 360,022 in India(29) 1,707 in Vietnam(30)
(27 ) Subject to shareholders approving the orderly realisation
proposal at the general meeting of the Company expected in Q2 2024, the
Company's target financial return will be changed to focus on achieving a
balance between maximising the value to be obtained from existing investments
held and progressively returning cash to shareholders in a timely manner.
(28 ) On the basis of: IEA 2020.
(https://www.iea.org/regions/asia-pacific) Average per capita electricity
consumption in Philippines (0.84 MWh).
(29 ) On the basis of: IEA 2020.
(https://www.iea.org/regions/asia-pacific) Average per capita electricity
consumption in India (0.96 MWh).
(30 ) On the basis of: IEA 2020.
(https://www.iea.org/regions/asia-pacific) Average per capita electricity
consumption Vietnam (2.44 MWh).
Potential annual MWh contribution and impact of AEIT's operational portfolio
once fully constructed.
Potential once
Metric 2023 Actual fully constructed Change
MW capacity 271 471 +74%
MWh generation 391,683 700,452 +79%
People powered 413,144 734,434 +78%
The EU Taxonomy
The EU Taxonomy was published in 2020, the culmination of an extensive effort
to develop a shared framework for defining environmentally sustainable
activities across the European Union. The EU Taxonomy specifies six
environmental objectives:
· climate change mitigation;
· climate change adaption;
· protecting marine and water resources;
· transitioning to a circular economy; preventing pollution;
· protecting and restoring biodiversity and ecosystems
The EU Taxonomy is a critical element of the EU's Sustainable Finance Action
Plan, and has a central role in the EU SFDR which requires definition of the
extent to which investments with an environmentally sustainable objective will
meet EU Taxonomy requirements.
The Company aims for 100% alignment of sustainable investments with the EU
Taxonomy. In some cases, bringing infrastructure assets into alignment with
the full requirements of technical screening criteria may be part of the value
addition of the acquisition. Investee companies may also make substantial
contributions to other environmental objectives of the EU Taxonomy. To ensure
no significant harm to biodiversity and ecosystems, environmental screening is
conducted for all investments. Physical climate risk and vulnerability
assessments have been completed for all investee company sites by an external
consultant. Investee companies will continue to develop longer term climate
change risk management plans as part of their ongoing ESG management approach.
As at 31 December 2023 100% of existing investments made a significant
contribution to climate change mitigation and were aligned with the EU
Taxonomy.
This analysis was conducted drawing on publicly available information and
proprietary data sets, and information provided directly by investee
companies. Where necessary, inputs from third-party technical advisors may be
reflected.
Improving the resilience of the investment portfolio is another way to ensure
long-term financial returns. Climate change is a daily lived reality at the
renewable energy sites operated by investee companies, which are located in
some of the most climate vulnerable regions of the world. The Company's
efforts to assess climate risk and develop scenarios for its investment
portfolio are discussed as part of its "Task Force on Climate-Related
Financial Disclosures" in this Annual Report.
Environmental returns: avoiding emissions
Through investments in renewable energy, the Company protects natural
resources and the environment, directly avoiding greenhouse gas emissions.
The following KPIs are proportionally based on AEIT's equity stake in the
SolarArise, NISPI and VSS portfolios.
Avoided emissions - tCO(2)e(31) Equivalent cars taken off the GHG intensity of investee companies - tCO(2)e/ US$m revenue
26,768 - NISPI road in the UK(32) - No. 82.55
282,931 - SolarArise 158,265
2,054 - VSS
The total 391,683 MWh of clean energy generated resulted in a total of 311,752
tonnes of avoided CO(2) emissions. This is equivalent to 158,265 cars taken
off the road in the UK for a year.
Potential tCO(2)e avoided emissions and impact from AEIT's operational
portfolio once fully constructed.
Metric 2023 Actual Potential Change
once fully constructed
MWh generation 391,683 700,452 +79%
tCO(2)e avoided 311,752 564,624 +81%
Cars off the road 158,265 286,639 +81%
(31 ) Carbon avoided is calculated using the International
Financial Institution's approach for harmonised GHG accounting.
(32 ) Equivalent cars is calculated using a factor for displaced
cars derived from the UK government GHG Conversion Factors for Company
reporting.
2023 carbon footprint
Some GHG emissions will inevitably be associated with investments even though
they help avoid emissions that would otherwise result if the same electricity
was produced using fossil fuels. The Investment Manager engaged with its
investee companies to measure their GHG emissions through collecting data.
During the reporting period, the Investment Manager appointed Altruistiq to
provide the platform to calculate the GHG emissions footprint for the Company.
The Company has quantified and reported organisational GHG emissions in line
with the iCI and ERM Greenhouse Gas Accounting and Reporting Guide for the
Private Equity Sector (2022). This methodology was developed to complement
both the World Resources Institute's Greenhouse Gas Protocol Standards and the
Partnership for Carbon Accounting Financials' ("PCAF") standard for the
financial industry. This approach consolidates the organisational boundary
according to the operational control approach. More detail on how different
activities were allocated to different scopes is laid out below:
2023 AEIT carbon footprint
Portfolio emissions Company emissions Total emissions
Scope (tCO(2)e) (tCO(2)e) (tCO(2)e) % of Total
1 - Direct emissions 32.11 - 32.11 0.02%
2 - Indirect emissions: market-based(33) 1,430.31 - 1,430.31 0.91%
3 - Indirect emissions 154,968.26 478.26 155,446.52 99.07%
- Purchased Goods and Services 154,254.76 478.26 154,733.02 98.61%
- Fuel & Energy Related Activities 560.63 - 560.63 0.36%
- Travel and Transport(34) 49.08 - 49.08 0.03%
- Waste 103.79 - 103.79 0.07%
Total 156,430.68 478.26 156,908.94
(33 ) Using a location-based approach, AEIT's Scope 2 emissions
in 2023 were 1,202.79 tCO(2)e.
(34 ) This category includes upstream transportation and
distribution, employee commuting, business travel and contractor travel.
Scope 1 emissions are primarily associated with on-site fuel combustion. In
2023, Scope 1 emissions accounted for the smallest proportion of the
investment portfolio's carbon footprint. This figure reflects limited use of
on-site combustion. Scope 2 emissions are associated with imported electricity
to the solar portfolio and accounted for 0.91% of its total emissions. The
Company, as a legal entity, has no direct employees, owned or leased real
estate, or direct assets, and therefore the Company has no Scope 1 or 2
emissions.
98% of AEIT's total carbon footprint relates to TT9, the 200 MW asset that is
under construction.
It will only take an estimated 7.5 months of operation for TT9 to avoid the
equivalent emissions it generated during 2023.
Scope 3 emissions account for the majority of emissions, making up 99.07% of
the total carbon footprint. The vast majority of these Scope 3 emissions
relate to TT9's purchased goods and services which equate to 97.6% of AEIT's
total carbon footprint. This is a result of the large amount of embodied
carbon in the equipment and materials purchased for the construction of this
200 MW site. The remainder of the emissions are associated with activities
that are indirectly associated with the Company and its portfolio investments
(for example, waste generated on site, other fuel and energy related
activities, upstream transportation and distribution, employee commuting,
business travel and contractor travel). The Company's emissions relate to the
AEIT's purchased goods and services (specifically, the emissions relating to
the Company's legal services and the Investment Manager's services).
As a result of the carbon intensity of the TT9 project, the carbon intensity
of AEIT increased to 333.14 tCO(2)e/MW capacity in 2023 (from 19.76 tCO(2)e/
MW capacity in 2022). This includes Scope 1, 2 and 3 of the whole of AEIT's
emissions. If shareholders approve the orderly realisation proposal at a
general meeting of the Company expected to be held in Q2 2024, the Company
will not make any further acquisitions or commitments to new investments and
absolute emissions are expected to decrease over time. The weighted average
carbon intensity ("WACI") in 2023, which represents the emissions intensity
per million US Dollars of revenue generated, also saw an increase from 35.87
tCO(2)e/US$m revenue to 82.55 tCO(2)e/US$m revenue. This reflects the change
in methodology from location-based Scope 2 emissions to market-based Scope 2
emissions, and more location-specific emission factors. Using a location-based
calculation, the GHG intensity of AEIT's investee companies was 42.76
tCO(2)e/US$m revenue.
Data quality
The Company recognises the challenges in measuring its GHG emissions for its
sites and activities. In particular:
· quality and availability of data collected for conversion
calculations can significantly impact the accuracy of the final emissions
output; and
· availability and specificity of emissions factors used to convert
data into related emissions can also impact the validity of final emissions
output.
In 2023, the Transitional Investment Manager engaged with Investee Companies
to capture higher quality carbon-emission related data and to reduce reliance
of calculations on financial expenditure data. As a result of this engagement,
the Transitional Investment Manager procured all relevant datapoints from
AEIT's investee companies directly, and thus no proxy calculations for
portfolio emissions were required. Of the data received, 74% was
activity-based and 26% was spend-based. Further, by partnering with
Altruistiq, the Company has benefitted from the large database of emission
factors that Altruistiq use for their carbon calculations. As a result of
these two improvements, the Transitional Investment Manager has a greater
degree of confidence over the precision of these emission calculations
relative to those collated in 2022.
Social return: quality jobs
The Company aims to contribute to delivering economic and social progress and
help build resilient communities through supporting jobs and contributing to
the UN SDGs.
Employment: directly supported full time equivalent jobs - No. UN SDGs contributed to - No.
197 4 - SDGs 7,8,13,15
As at 31 December 2023, the investment portfolio (proportioned by share)
supported four FTE salaried jobs at its investee companies and 193 FTE
contractor positions.
FTE employee opportunities supported - No. FTE contractor employment opportunities
supported - No.
4
193
The vast majority of both direct and contractor jobs were occupied by men.
NISPI is the only investee company with direct employees, disclosing a 32%
difference in the gross hourly salary between men and women. Attracting and
retaining diverse talent, including female employees, remains a challenge
within the industry. However, in 2023 c.38% of NISPI's workforce was comprised
of female employees. This is in line with the share of woman in the solar PV
industry (40%)(35). No targets have been set in the reporting period.
No major health and safety incidents resulting in lost working time were
reported on any of the investee company sites in 2023.
Adherence with global standards and guidelines on human rights and good
governance, such as the UN Principles on Business and Human Rights and the
OECD Guidelines for Multinational Enterprises, are key to the Company's
commitments. All investee companies in the investment portfolio have grievance
mechanisms through which any counterparty could raise concerns about their
project implementation frameworks. In 2023, no complaints related to adherence
with these frameworks were reported. The Investment Manager will continue to
work closely with investee companies to identify and action areas where
implementation of these frameworks can be further enhanced, make information
about the functioning of these mechanisms more readily available and establish
appropriate policies to promote respect for human rights in all activities,
including with their suppliers. All of the investee companies' asset managers
have signed up to the Investment Manager's Supplier Code of Conduct or have an
equally robust one in place.
(35 ) "Solar PV: A Gender Perspective", IRENA 2022.
Case study - Impact initiatives and Stakeholder Management Programs at NISPI
in 2023
In 2023, NISPI's impact initiatives demonstrated a multifaceted approach
towards sustainable development, community engagement, and environmental
stewardship. Key activities included:
· agrivoltaics, integrating agriculture within solar farms to
enhance land use efficiency;
· biodiversity conservation through tree planting;
· renewable energy advocacy and infrastructure support;
· health and wellness programs for local communities;
· educational outreach and assistance;
· innovative waste management solutions; and
· robust government and community relations efforts.
These initiatives underscored NISPI's commitment to creating shared value,
prioritising stakeholder welfare and leading by example in the renewable
energy sector.
Agrivoltaic program: Harmonises solar energy production with agricultural
activities, supporting local farming communities and optimising land use on
site.
The women's organisation KALIPI is reaping the benefits of a gardening and
livelihood program, having been allocated designated land within the solar
farm, along with water supply and the initial set of seeds for a diverse array
of crops.
Health and wellness: Community health initiatives, including blood donations
drives and wellness seminars.
In 2023, three blood drives were organised, collecting over 60 bags of blood
for the local communities' reserves.
Renewable energy advocacy: Develops infrastructure and raises awareness for
renewable energy transition.
In 2023, NISPI conducted numerous renewable energy advocacy drives for local
schools, delivering talks about renewable energy as well as access to
infrastructure. An example beneficiary of these drives is a remote school in
the La Carlota region where 32 families of the 55 pupils attending the school
have been gifted access to solar flood lights. The drive introduced NISPI to
the community and promoted the use of solar renewable energy as the main
source of light for households that are not reachable to the local
distribution utility. The solar flood light can be used by the beneficiaries
to light their houses but can also be used as portable emergency lights. This
is also useful as they traverse the mountain trails during the dark. NISPI
also donated a 1-KW solar system to the school, facilitating the use of
electronics at the school as well as providing an emergency charging station
for the community.
Waste management: Promotes recycling and sustainable waste practices through
I-SWEEP, a solid waste exchange economy program.
Through this initiative, plastic wrappers are collected and transformed into
materials for throw pillows or stuffed toys, while plastic bottles are sold to
junk shops. Revenue generated from these activities is allocated towards
purchasing educational materials for the local community, ensuring the
project's self-sustainability. This initiative aims to foster a culture of
segregation and recycling, reducing plastic waste and generating profit from
recycled products, thereby contributing to environmental conservation and
educational support.
Biodiversity initiatives: Tree planting and honeybee farming to promote
ecological balance and economic opportunities.
In September 2023 8,000 fruit-bearing trees were planted by 41 volunteers. The
activity is in coordination with the City Environment and Natural Resources
("ENR") Management Office, the Agricultural and Biosystems Engineering Office
of La Carlota City, the Office of the Provincial Agriculture and Brgy Ara-al
Agrarian Reform Beneficiary Association ("BAARBA"). The trees will provide
livelihood to members of BAARBA and as well as assist in the reforestation
efforts of the local ENR Office. Training with the Negros Occidental Honeybee
Association is being scheduled to facilitate the honeybee introduction and
farming initiative.
Community and government engagement.
NISPI participated and supported many government initiatives and programs to
strengthen stakeholder relationships and support local community projects.
Examples during 2023 included the multi-sectoral clean up drives, Earth Hour
celebration and local festivals.
NISPI's comprehensive impact initiative strategy in 2023 illustrates a
proactive approach to social responsibility, environmental conservation and
stakeholder engagement. By sharing the benefits of the solar farm with the
local community, NISPI has integrated itself as a core part of these
communities and promoted a "Just Transition".
Risk and Risk Management
Risk appetite
The Board is ultimately responsible for defining the level and type of risk
that the Company considers appropriate, ensuring it remains in line with the
Company's investment objective and investment policy which set out the key
components of its risk appetite. The Company's risk appetite is considered in
light of the principal and emerging risks that the Company faces, including
having regard to, amongst other things, the level of exposure to power prices,
gearing and financing risk and operational risk.
Risk management
The Company's risk management framework is overseen by the Audit and Risk
Committee, comprising independent non-executive Directors.
The Company's risk management policies and procedures do not aim to eliminate
risk completely, as this is neither possible nor commercially viable. Rather,
they seek to reduce the likelihood of occurrence, and ensure that the Company
is adequately prepared to deal with risks and minimise their impact if they
materialise.
Procedures to identify principal or emerging risks
The Board regularly reviews the Company's risk matrix, with a focus on
ensuring appropriate controls are in place to mitigate each risk. The risk
management framework was implemented at IPO and has been in place for the year
under review and continues to be in operation.
The following is a description of the procedures for identifying principal
risks that each service provider highlights to the Board on a regular basis.
1. Alternative Investment Fund Manager: The Company has appointed Adepa
Asset Management S.A to be the Alternative Investment Fund Manager of the
Company (the "AIFM") for the purposes of UK AIFM Directive. Accordingly, the
AIFM is responsible for exercising the risk management function in respect of
the Company. As part of this the AIFM has put in place a risk management
policy which includes stress testing procedures and risk limits. As part of
this risk management function, the AIFM maintains a register of identified
risks including emerging risks likely to impact the Company. This is updated
quarterly following discussions with the Investment Manager and presented to
the Board for review and challenge.
2. Investment Manager: Portfolio management has been delegated by the AIFM
to the Investment Manager. The Investment Manager provides a report to the
Board at least quarterly on asset level risks, industry trends and insight to
future challenges in the renewable sector including the regulatory, political
and economic changes likely to impact the renewables sector.
3. Brokers: Brokers provide regular updates to the Board on Company
performance, advice specific to the Company's sector, competitors and the
investment company market whilst working with the Board and Investment Manager
to communicate with shareholders.
4. Company Secretary and Auditor: Both brief the Board on forthcoming
legislation/regulatory change that might impact on the Company. The Auditor
also provides specific briefings at least annually.
Procedures for oversight
The Audit and Risk Committee undertakes a quarterly 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 that emerging (as well
as known) risks are adequately identified and, so far as practicable,
mitigated.
The Board has completed a robust assessment of the Company's principal and
emerging risks, including:
(a) a description of its principal risks;
(b) what procedures are in place to identify emerging risks; and
(c) an explanation of how these are being managed or mitigated.
Following the issues that came to light during the audit of the 2022 Annual
Report, the Audit and Risk Committee has reflected on the risks that
crystallised during the year and the steps it has taken and changes it has
made as a result. These are detailed in the table below:
Crystallised risk Impact of crystallisation Steps taken/changes made
Valuation process · Temporary share suspension due to a material uncertainty · Inaccurate or aggressive valuation assumptions identified by the
regarding the fair value of the Company's assets. Company following an independent review have been updated in line with best
practice and market standards.
· Identified errors and inaccuracies in the prior period
valuations. · Introduction of a SolarArise holding company model to accurately
reflect Indian tax liabilities and cash repatriation out of India.
· Replacement of the Former Investment Manager effective from 1
November 2023 by the Transitional Investment Manager.
· Replacement of the former independent valuation expert.
· Appointment of PwC as an independent valuation expert to provide
a private independent opinion on the reasonableness of the valuations that are
prepared by the Investment Manager.
· Commenced a review of value optimisation strategies with the
Transitional Investment Manager.
Asset valuations · Large decreases in the NAV when subsequent valuations carried out · Replacement of the Former Investment Manager effective from 1
using less aggressive assumptions in line with best practice and market November 2023 by the Transitional Investment Manager.
standards.
· Updated valuation assumptions in line with best practice and
market standards and replaced the independent valuation expert as detailed
above.
· The Transitional Investment Manager has additional controls in
place for any conflicted transactions.
Reliance on third- party service providers (Company and asset level) · Valuations based on inaccurate or aggressive assumptions · Replacement of the Former Investment Manager effective from 31
subsequently being updated in line with best practice and market standards, October 2023 by the Transitional Investment Manager. The Transitional
leading to a large decline in the NAV. Investment Manager has a comprehensive due diligence process that should flag
pre-construction risks at the point at which commitments are made.
· Inherited asset acquisitions that do not optimise cash extraction
by AEIT, thus requiring reorganisation. · The Transitional Investment Manager is currently undertaking a
review of governance procedures across all of the investment portfolio to
· Asset management contracts have not been formalised. identify areas of weakness and propose potential improvements to the Board.
· Reports from whistleblowers of key information being withheld · The former independent valuation expert has been replaced and PwC
from the Board, particularly with regard to the cost and funding of the has been appointed as the independent valuation expert to provide a private
proposed construction of the RUMS project and the potential penalties that independent opinion on the reasonableness of the valuations that are prepared
would result from aborting it. by the Transitional Investment Manager.
· The Board, which had embedded itself in the detail of the
Company's activities, has ensured, in so far as possible, that the new service
providers have been given the appropriate handover and information to carry
out their duties.
· Getting in place appropriate asset management agreements is a
priority for the Transitional Investment Manager.
· Changes made to SPV governance to ensure that the Board is aware
of all commitments made in the underlying investments prior to signing.
Construction risk · Changes in macro-economic factors from the commitment date to the · Appointment of an independent India-based financial adviser to
construction commencement date, such as the increase in solar panel prices advise the Board on the options for the RUMS project, including proceeding
(and EPC costs) and the changes in FX rates. with construction and aborting it, and the associated risks of each option.
· Commitments made without the Board being made aware of all · Appointment of an independent technical advisor, Fichtner, to
associated risks of the project. oversee the construction of RUMS project and provide independent reports to
the Transitional Investment Manager and the Board.
· Delays to the RUMS project construction beyond the scheduled
commercial operation date of 5 February 2024. · Contingency and provision for liabilities associated with a delay
in COD included in the construction budget.
Generation · Operational assets acquired underperformed against P50 technical · Appointment of independent technical advisor, Sgurr, to conduct
assumptions at time of investment. refreshed due diligence on the P50 technical assumptions to validate or update
modelled assumptions for subsequent valuations.
Principal risks and uncertainties
The Board has defined principal risks that have the potential to materially
impact the Company's business model, reputation or financial standing. Subject
to shareholders approving the Board's recommended orderly realisation
proposal, the Board considers the following to be the principal risk faced by
the Company along with the potential impact of these risks and the steps taken
to mitigate it.
Risk Potential impact Mitigation
Disposal of investments The realisation of the Company's investments is subject to sale processes. The The Company will seek to ensure any sale processes are led effectively by the
final value realised on disposal of each investment as the Company implements Transitional Investment Manager and the Company's other advisors. The
its orderly realisation strategy may be materially different to its fair Company will seek to achieve a balance between maximising the value of AEIT's
value, which could impact the value of the Company either positively or investments and progressively returning cash to shareholders in a timely
negatively. manner.
The Board considers the following to be the additional principal risks faced
by the Company along with the potential impact of these risks and the steps
taken to mitigate them.
External economic, political and climate risk factors for the Company -
external risks that could impact the income and value of the Company's
investments
Risk Potential impact Mitigation
Foreign currency The Company's functional currency is US Dollars (USD), but the Company's While the Company does not hedge translational risk on the valuation of the
investments are based in countries whose local currency is not USD. investment portfolio, the Company may hedge revenues which are to be received
by the Company in currencies other than the US Dollar and used to fund
Therefore, changes in foreign currency exchange rates may adversely affect the dividend payments to shareholders.
value of the investments or dividend income, interest or capital payments from
the investment portfolio may be less than expected when received in US The Investment Manager monitors foreign exchange exposures using short and
Dollars. long-term cash flow forecasts. The Company's portfolio concentrations and
currency holdings are monitored regularly by the Board, AIFM and Investment
Manager.
Interest rates While most borrowing arrangements are on fixed rate terms, the timing of The Company seeks to maintain a leverage ratio of below 65% of Adjusted GAV.
entering into such agreements when interest rates are increasing, may lead to
reduced project returns and a lower valuation of the investment portfolio. The Company seeks to limit its exposure to interest rate volatility and
therefore the investee companies fix the finance costs at the date of signing.
Where rates are variable, rising rates could lead to adverse debt-cover
ratios. Debt cover ratios are monitored monthly at the investee company level.
Refinancing of borrowings may be at higher interest rates than expected Interest rate assumptions are reviewed and monitored regularly by the AIFM and
resulting in lower returns and decreased revenue flows to AEIT. Investment Manager in the valuation process.
Macro level changes in interest rates may affect the valuation of the
investment portfolio by impacting the valuation discount rates and could also
impact returns on any cash deposits.
Inflation The expenditure of the Company's investments is frequently partially Inflation assumptions are reviewed and monitored regularly by the AIFM and
index-linked and therefore any discrepancy with the Company's inflation Investment Manager in the valuation process.
expectations could impact positively or negatively on the Company's cash
flows.
The Indian portfolio currently has a non-index-linked fixed price revenue
stream over the lives of the assets presenting the risk that high-cost
inflation could cannibalise returns.
Tax Changes to the existing rates and rules could have an adverse effect on the The Company considers tax matters at the point of investment, actively
valuation of the investment portfolio and levels of dividends paid to monitors forthcoming changes in the jurisdictions in which it operates and has
shareholders. tax advisors to ensure it is abreast of any upcoming changes to tax
legislation and rates and can implement necessary changes.
Investment in multiple jurisdictions diversifies exposure to individual
country regulations and hence risk.
During the year, the Board commissioned additional tax advice, particularly in
relation to SolarArise.
Reputation Events over the course of 2023, namely the temporary share suspension, the Following the temporary share suspension, the Board worked tirelessly to
decline in the Company's NAV and public allegations between the Board and complete the activities required to enable the suspension to be lifted, which
Former Investment Manager, can impact the Company's reputation and ultimately occurred on 6 March 2024. In doing so, the Board appointed external advisors
have an adverse effect on shareholder returns. to perform detailed reviews, has actively and transparently engaged with
shareholders, including notifying them of issues as soon as they arose, and
made positive changes to improve the Company's future and outlook.
Government policy or regulatory changes Relevant government support for the transition to clean affordable energy in The Company aims to hold a diversified investment portfolio, and a diversified
the countries in which the investment portfolio is situated may change or set of electricity sale arrangements within target countries, so that it is
decrease. Changes to government policy may lead to changes in tax incentives, unlikely that all assets will be affected equally by any single potential
auction processes for PPAs and other contracting and pricing mechanisms for change in regulation or policy. Country level investment strategies have
renewable energy, which could lead to opportunities being commercially assessed government commitments to scaling up low carbon energy and taking
unviable or unattractive which may lead to lower returns or slower deployment ambitious action on climate change, and the Investment Manager and investee
of capital. companies monitor policy developments closely.
Additionally, the investment portfolio does not benefit from any revenue
subsidies.
Climate change Climate-related risks relate to transition risks and physical risks. Climate risk assessments are undertaken for each asset in the portfolio as
part of the investment process and screening for EU Taxonomy alignment.
Further detail can be found in the TCFD disclosures The prominent transition risk relates to oversupply of renewable energy over
time, which may cause downward pressure on long-term power price forecasts There is growing demand for consistent, comparable, reliable, and clear
setting lower capture prices, including the risks associated with periods of climate-related financial disclosure from many participants in financial
negative power prices and power price volatility in markets This could markets. The Board, AIFM and Investment Manager have included TCFD disclosures
ultimately lead to a shortfall in anticipated revenues to the Company. as part of this Annual Report which provide a detailed analysis of risks and
opportunities associated with climate change.
The prominent physical risks relate to long-term changes to weather patterns,
which could cause a material adverse change to an asset's energy yield from
that expected at the time of investment. Physical risks associated with acute
and chronic temperature change could lead to flooding, storms and typhoons,
and high winds. This could damage equipment and force operational downtime
resulting in reduced revenue capability and profitability of the portfolio of
assets.
Internal risk factors for the Company - internal risks that could impact
target returns and result in Company objectives not being met over the longer
term
Risk Potential impact Mitigation
Strategic review Having undertaken a strategic review of the options for the Company's future, As part of the strategic review, the Board, with its advisers, completed a
the Board is recommending an orderly realisation strategy and winding up of thorough analysis of a range of options, including proposals to relaunch the
the Company. Company, to undertake a managed wind down and subsequent winding up of the
Company and an immediate winding up of the Company. Following careful
Details of this proposal, which is subject to shareholder approval at a consideration of the options available to the Company and after taking into
general meeting of the Company expected to be held in Q2 2024, will be set out account feedback from investors representing a significant proportion of
in a separate circular to shareholders and made available on the Company's AEIT's issued share capital, the Board concluded that it is in the best
website in due course. interests of shareholders as a whole to put forward a proposal for the orderly
realisation of AEIT's assets, to be effected in a manner that seeks to achieve
a balance between maximising the value of its investments and progressively
returning cash to shareholders in a timely manner.
The proposal is subject to shareholder approval at a general meeting of the
Company expected to be held in Q2 2024.
Investment restrictions Failure to comply with the investment restrictions may arise due to foreign The restrictions in the Company's investment policy are measured at the time
currency movements, construction over- spend, asset allocation or failure to of investment or commitment.
deploy capital in a timely manner.
The Board monitors compliance through information provided by the Investment
Breaches of investment restrictions may result in lower returns than expected, Manager, Company Secretary and AIFM on a quarterly basis as well as prior to
lower dividend income or reputational damage. commitment of capital. The assessment of potential or actual breaches to
investment restrictions forms part of the Board's risk management framework.
The decision to proceed with the RUMS project could have resulted in a breach
of the single country limit and as a mitigation measure shareholder and FCA
approval was sought, and received, to amend the investment policy. Further
information can be found in this report. This risk did not materialise due to
the significant reduction in NAV announced following this change, whilst still
having a large cash balance.
Conflicts of interest The appointments of the AIFM and Investment Manager are on a non-exclusive The AIFM and Investment Manager have clear conflicts of interest and
basis and each of the AIFM and Investment Manager manages other accounts, allocation policies in place. Transactions where there may be potential
vehicles and funds pursuing similar investment strategies to that of the conflicts of interest follow these policies.
Company. This has the potential to give rise to conflicts of interest.
Conflicts of interest policies are also in place at the Board and Company
Asset transfers between funds managed by the Investment Manager give rise to levels.
potential conflicts of interest.
The Board, AIFM and Investment Manager are responsible for establishing and
There are possibilities for the Board to have conflicts of interest. regularly reviewing procedures to identify, manage, monitor and disclose
conflicts of interest relating to the activities of the Company.
Reliance on Company level third-party service providers The Company has no employees and therefore it has contractually delegated to All third-party service providers are subject to ongoing oversight by the
third-party service providers the day-to-day management of the Company. Board and AIFM and the performance of the key service providers is reviewed on
(crystallised risk)
a regular basis. The Board's Management Engagement Committee (the "MEC")
A deterioration in the performance of any of the key service providers undertakes a formal review at least once a year to consider the ongoing
including the Investment Manager, AIFM and Administrator could have an impact performance of the Investment Manager and other service providers and makes a
on the Company's performance and there is a risk that the Company may not be recommendation on the continuing appointments. See the Management Engagement
able to find appropriate replacements should the engagement with the service Report for the outcome of the MEC's formal review in 2023.
providers be terminated.
As explained under 'Procedures for oversight', following the reliance on
In particular, the Company relies on the experience and recommendations of the third-party service provider risk having crystallised during the year, changes
Investment Manager for the achievement of its investment objective. have been made to further mitigate the crystallisation of this risk in the
future.
Valuation process The valuation of the investment portfolio is dependent on financial models It is Company policy to retain an independent valuation expert to provide a
which utilise certain key drivers and assumptions: principally discount and private independent opinion on the reasonableness of the quarterly valuations
(crystallised risk) local inflation rates, FX rates, near and long-term electricity price outlooks prepared by the Investment Manager. Valuations are reviewed by the Audit and
and the amount of electricity generated and sold. Risk Committee and approved by the AIFM and Board before adoption in the
quarterly results.
Some assumptions and projections are based on the experience and judgement of
the Investment Manager. As explained under 'Procedures for oversight', following the valuation process
risk crystallised during the year, changes have been made to further mitigate
Actual results may vary significantly from the projections and assumptions the crystallisation of this risk, at the time of both acquisitions of
which may reduce the valuations and profitability of the Company leading to investments and subsequent valuations, in the future.
reduced returns to shareholders.
Errors may occur in financial models.
Environmental, Social and Governance ("ESG") Material ESG risks may arise such as health and safety, human rights, bribery, The Board has put in place an ESG Committee to specifically review and monitor
corruption and environmental damage that may impact shareholder returns. ESG-related polices, processes and risks.
If the Company fails to adhere to its public commitments and policies as ESG risk consideration is embedded in the investment cycle. Ongoing
stated in its SFDR pre-contractual disclosures and its triple return operational and construction ESG risk management is reviewed periodically by
investment objective, this could result in shareholder dissatisfaction and the Investment Manager, who works closely with asset managers on ESG and
adversely affect the reputation of the Company. impact standards and reporting.
Further details on the ESG Committee can be found in the ESG Report.
Cyber security Attempts may be made to access the IT systems and data used by the Investment Cyber security policies and procedures implemented by key service providers
Manager, Administrator and other service providers through a cyber-attack or are reported to the Board and AIFM periodically to ensure conformity.
malicious breaches of confidentiality that could impact the Company's
reputation or result in financial loss. Thorough third-party due diligence is carried out on all suppliers engaged to
service the Company.
All providers have processes in place to identify cyber security risks and
apply and monitor appropriate risk plans.
Compliance with relevant laws, regulations and rules Failure to comply with any relevant laws, regulations and rules, including The Board monitors compliance with relevant laws, regulations and rules and
section 1158 of the Corporation Tax Act 2010, the rules of the FCA (including associated information provided by the Company Secretary, AIFM and Investment
the Listing Rules and the Prospectus Regulation Rules), the Companies Act Manager on a quarterly basis and the assessment of associated risks forms part
2006, the UK Market Abuse Regulation, the UK AIFM Directive, Accounting of the Board's risk management framework. All parties are appropriately
Standards and the General Data Protection Regulation, could result in qualified professionals and ensure that they keep informed with any
financial penalties, loss of investment trust status, legal proceedings developments or updates to relevant laws, regulations and rules.
against the Company and/or its Directors or reputational damage.
Risk factors for the investment portfolio - risks that could adversely impact
the portfolio's performance and, as a result, the ability to achieve the
Company's objectives and target returns over the longer term.
Risk Potential impact Mitigation
Power prices Revenues of certain investee companies in the investment portfolio are wholly The Investment Manager will seek to acquire assets which have a PPA in place,
dependent on the wholesale electricity market price achieved and therefore or obtain a PPA to ensure visibility of revenue streams. It is targeted that
such revenue is subject to volatility. more than 75% of an investee company's revenue, on an aggregated basis, will
be secured by a mid to long-term PPA therefore minimising the impact of
The income and value of the Company's investments may be adversely impacted by declining energy prices.
changes in the prevailing market prices of electricity and/or prices
achievable for offtaker contracts. Model assumptions are based on semi-annual reports from a number of
independent established market consultants to inform on the electricity prices
There is a risk that the actual prices received vary significantly from the over the longer term. The Company policy is to blend at least two wholesale
model assumptions, leading to a shortfall in anticipated revenues to the electricity spot market price curves as prepared by market advisors that are
Company and dividends payable to shareholders. reputable in the relevant markets.
Capital structure The ability to extract cash efficiently from the underlying investee companies The Transitional Investment Manager has ensured that the underlying valuation
is imperative to maximise the value of the Company's Investment portfolio. models reflect the current capital structures of the underlying investments.
The risk that cash extraction is delayed or trapped due to inefficient capital Assumptions have been made within the underlying valuation models with regard
structures can decrease the value of the underlying investments. to capital restructurings and the timing required to put these into effect.
The sensitivity of delays in this timing are shown in note 9 to the Financial
Statements.
Credit risk Some investee companies may have one offtaker, therefore increasing the Prior to taking part in the auction process for a PPA, the Investment Manager
concentration of credit risk. Late or non-payment of sales invoices issued by diligences and assesses the credit risk of an offtaker to conclude on credit
the investee companies may lead to lower cash flows and revenues received by worthiness.
the Company.
Where possible, late interest payment terms will be included in PPAs.
The Investment Manager ensures asset managers monitor outstanding balances and
actively chase non-payments.
Construction Construction projects carry the risk of over‑spend, supply chain risk, Where an investment is made in a construction phase asset, it must have an
delays or disruptions to construction milestones, connection failures, changes offtake agreement in place, the land for the construction must be identified
(crystallised risk) in market conditions and/ or inability of contractors to perform their or contractually secured where appropriate and all relevant permits must have
contractual commitments, all of which could impact Company performance. These been granted.
include, but are not limited to:
The Investment Manager carries out due diligence on any external third-party
· increase in prices of component parts (for example, solar construction contractors prior to engaging. Its ESG due diligence processes
panels); also support efforts to anticipate and manage construction-related risks.
· legislative changes impacting the construction timeline or Construction of the RUMS project has seen a number of these risks being
construction cost; crystallised. The Company has appointed an independent technical advisor,
Fichtner, to oversee the construction.
· community-related issues that disrupt construction; and
· inaccurate forecasts for build timelines or associated costs.
Generation The volume of solar irradiation available on a given day is out of the The Company utilises technical consultants prior to acquisition to advise on
Company's control and this is a risk on the performance of the assets. the assumptions which should be made regarding volume and its impact on
performance for each investment and to minimise downtime.
Inconsistent irradiation may have a significant effect on performance of the
investment portfolio if actual electricity generation is significantly The Investment Manager works with investee companies to stay informed of grid
different from the assumptions made in the valuation models. This may and supporting infrastructure maintenance arrangements, and liaises with
negatively impact project returns or expected dividend income. relevant operators to seek to anticipate and minimise interruptions.
Additionally, the investment portfolio may be subject to the risk of The investee companies have in place insurance to cover certain losses and
interruption in grid connection or irregularities in overall power supply damage.
infrastructure.
The Board has appointed an independent technical advisor, Sgurr, to review the
Circumstances may arise that adversely affect the performance of the relevant technical assumptions associated with each asset in the portfolio.
renewable energy asset.
These include health and safety, grid connection, material damage or
degradation, equipment failures and environmental risks.
Reliance on asset level third-party service providers The performance of some investee companies may be dependent on external Prior to entering into a service contract, the Investment Manager carries out
O&M service providers and/or asset managers in remote locations and relies due diligence on third-party suppliers to assess reputation, experience and
upon them performing their duties with the required skill or level of care. breadth of the local team.
The Investment Manager seeks to include service level metrics in O&M
agreements with minimum production, overall plant performance metrics and
health and safety targets as a minimum.
Formal asset management agreements are outstanding on some portfolio assets
and this is a priority for the Transitional Investment Manager.
Cyber security Attempts may be made to access the IT systems and data used by the third-party Processes in place and training for the Transitional Investment Manager to
asset managers through a cyber-attack or phishing attempts that could result mitigate risks associated with receiving emails from bad actors.
in financial loss.
Third-party due diligence is carried out on asset managers engaged to manage
investment portfolio.
Further financial risks are detailed in note 18 to the Financial Statements.
Task Force on Climate-Related Financial Disclosures
Compliance statement
The Company has complied with the requirements of LR 9.8.6(8)R by including
climate-related financial disclosures consistent with the TCFD recommendations
and recommended disclosures.
Improvements have been made from the 2022 disclosures to include quantitative
information around climate risks and opportunities alongside transition plans
as required by TCFD Strategy principle (b), and accurate Scope 3 emission data
as required under Metrics and Targets principle (b), as set out on in this
report.
Sue Inglis
Chair
13 May 2024
Governance
a) Describe the Board's oversight of climate-related risks and opportunities.
Addressing climate change through investment in renewable energy in
fast-growing and emerging economies in Asia is the essence of the investment
strategy. The Board has established an ESG Committee to review and monitor
ESG‑related matters, which include climate-related risks. The ESG Committee
meets at least two times a year and reports back to the Board to provide
recommendations for how sustainability should be considered within the
Company's investment strategy. The Committee understands climate change issues
and seeks support from external advisors to supplement its work.
The Company embeds climate change within its triple return investment strategy
through investments into assets that support the transition to a low carbon
economy, or which mitigate the effects of climate change. The Board has
considered climate change as an integral component of the investment objective
and has defined the Company as an Article 9 Fund under the SFDR, targeting 95%
of investments to be aligned with the EU Taxonomy's Climate Change Mitigation
criteria. In 2022, the Board instructed the Former Investment Manager to
appoint an external advisor to undertake climate change assessments on AEIT's
portfolio to identify climate-related risks and potential mitigation
strategies. This analysis considered all SolarArise, NISPI and VSS assets.
These reports were reviewed in 2023 by the Transitional Investment Manager and
have been reviewed by the ESG Committee as part of preparing this report.
The Audit and Risk Committee ("ARC") also considers climate change as part of
its oversight of investment processes. The ESG Committee and ARC work closely
to oversee climate-related disclosures and agree remedial measures. Climate
change risk is included within the Company's risk register.
b) Describe management's role in assessing and managing climate-related risks
and opportunities.
The Former Investment Manager had an ESG Monitoring and Stewardship Committee
and considered climate change as part of its remit. Climate risk assessments
were completed for prospective investments, reports were shared with the
Former Investment Manager and opportunities to build resilience around
investments were considered. The Transitional Investment Manager will continue
to assess climate risks and consider opportunities for mitigation for existing
and prospective investments with oversight of policies by the ESG Committee.
Strategy
The Company aims to finance climate action by investing in sustainable energy
and the business model is expressly designed to accelerate the low-carbon
transition in emerging Asian economies, both benefitting from and reinforcing
efforts to act on climate change. As highlighted in the Impact Report, the
investment portfolio has contributed to climate change mitigation. The Company
invests in some of the most climate-vulnerable countries in the world, and is
seeking to assess and manage climate risk and foster resilience through its
investment strategy.
a) Describe the impact of climate-related risks and opportunities the
organisation has identified over the short, medium and long term.
The Former Investment Manager coordinated a transition risk analysis, with
external specialist support using ERM's Climate Risk and Impacts Solutions
Platform, based on transition scenarios from the International Energy Agency
(the "IEA") and aligned with Intergovernmental Panel on Climate Change (the
"IPCC") scenarios under three time-horizons: 2025, 2030 and 2040. The IEA
Announced Pledges Scenario ("APS") was used as the low-carbon scenario, and
assumes that all climate commitments made by governments around the world will
be met in full and on time. APS assumes global warming will reach 1.7oC by
2100. The IEA Stated Policies Scenario ("STEPS") was used as the
business-as-usual carbon scenario which reflects current sector-by-sector and
country-by-country assessment of the existing policies that are in place.
STEPS assumes global warming will reach 2.5⁰C by 2100. The transition
assessment considered transition indicators including eight opportunity
indicators (carbon price, national decarbonisation plans, per capita
emissions, annual investment in renewables, solar PV power generation, biomass
power generation, battery storage capacity and reputation) and one risk
indicator (increase in critical metals demand). The choice of these indicators
was driven by the IEA model used to support the transition risk assessment.
Physical climate risk analysis was performed for each of the investee company
sites using the external specialist's proprietary physical risk screening
tool. Using the IPCC's 2021 Sixth Assessment Report scenarios, a low and high
greenhouse gas emissions scenarios (SSP1-2.6 and SSP5-8.5) were selected under
three time-horizons: baseline, 2030 and 2050. These time-horizons were
selected to cover the portfolio's asset lifetime. On this basis, five key
hazards that are expected to increase in the medium (2030) and long (2050)
term were identified: tropical cyclones, water stress and drought, wildfire
weather, extreme heat, and extreme rainfall flooding. A potential impact from
these hazard types could include increased costs for energy and water
resources. The combined conditions of high temperature, high wind speed and
low humidity may also increase the risk of wildfires.
b) Describe the impact of climate-related risks and opportunities on the
organisation's businesses, strategy and financial planning.
The tables below are a summary of the key material risks and opportunities
that are likely to affect portfolio investments, the investment strategy and
financial planning in the short, medium and long term. Risks included are
those that the Investment Manager estimate to be potentially significant (for
example, significant revenue decrease, cost increases, NAV decrease and
increased cost of capital).
Climate-related risks
Time horizon Risk type Impact
Short-term (2025) Policy change and power price volatility: Climate and sustainable energy Financial planning
policies are evolving and dynamic in core target markets. These changes are
monitored closely as increased efforts to increase energy supply and the share
of renewables in the grid could present itself as a competition risk.
Increased competition for investments may lead to a reduction in financial
returns of new projects. In countries with dynamic markets, there is a risk of
renewable energy cannibalisation.
Grid capacity limitations: The capacity of local grids in target economies to Strategy, financial planning
accommodate large increases in intermittent energy supply is a concern, given
current technical specifications and management capacities. This may impact
the project's ability to sell its maximum energy generation potential.
Supply chain risk: More copper for grids, silicon for solar panels and lithium Strategy, financial planning
for battery storage is required to transition to low-emissions power systems.
Rapidly growing critical mineral demand for clean energy technologies is
resulting in supply chain competition, increases in costs, and supply chain
sustainability risk management issues.
Medium-term (2030) Climate-related hazards: Risks associated with tropical cyclones are already Portfolio investments, financial planning
high, and factored into asset design in most cases, but may increase. High
wind speeds can cause physical damage to sites, equipment, and vehicles and
can lead to increased expenditure for reparations. Extreme heat could cause a
health and safety risk for personnel and could overheat electrical equipment.
Flooding can also lead to physical damage of the assets that will require
additional expenditure for reparations and lost revenue during the reparations
period.
Construction risk: Climate-related physical risks may also affect construction Portfolio investments
projects, including inaccurate assessment of the opportunity, and changes in
market conditions linked to climate-related disruptions.
Technology obsolescence risk: As more resources and scientific research are Strategy
dedicated to achieving net zero goals, new technologies may emerge that could
replace current renewables or environmental infrastructure technologies.
Price uncertainty: A faster than forecast transition to a global renewable Financial planning
energy supply would increase the penetration of zero marginal cost electricity
leading to 'price cannibalisation' and could result in generating assets
without long-term PPAs selling their power for less than forecast at
investment.
Long-term (2050) Climate-related physical risks: As climate change worsens, portfolio Portfolio investments
investments could face a higher likelihood of experiencing extreme weather
events, both chronic (for example, altered rainfall patterns, wildfires, and
extreme heat) and acute (for example, more frequent and severe tropical
cyclones, storms, heat waves, droughts, and floods), potentially resulting in
more physical damage to on-site infrastructure and off-site transmission and
distribution systems.
Climate-related opportunities
Time horizon Opportunity type Impact
Short-term (2025) National decarbonisation plans: Governments in target countries remain Strategy
committed to climate action and increasing the share of renewable energy in
the energy mix. Governments in target countries continue to offer incentives
to invest in the focus technologies, notably solar energy, but also in wind.
Demand for renewable energy: There is a growing demand for renewable energy, Financial planning, strategy
and pressure on businesses and corporations to decarbonise and purchase
renewable energy through both regulatory and climate-related commitments is
growing. The investment strategy targets fast-growing economies in Asia, with
expanding populations. This increased demand creates short-term opportunities
to sell renewable energy at a premium. An increase in public support for
decarbonisation is also poised to increase demand for impact-focused
investment in public markets.
Integration of new energy technologies including those that address Portfolio investments
intermittency issues: Energy storage technologies, such as lithium-ion
batteries, are becoming more widely adopted and efficient, making it possible
to store solar energy for later use. This presents short-term opportunities to
provide more reliable and consistent solar supply.
Medium-term (2030) Technological advancements: Can further reduce the levelised cost of energy, Financial planning
and create attractive new pipeline opportunities. For example, the use of
higher-efficiency solar cells can increase the energy output of solar panels,
while reducing the cost per unit of energy produced.
Carbon pricing and taxation: Could help direct capital towards renewable Strategy
technologies and away from carbon-intensive sources.
Long-term (2050) Continued commitment to decarbonisation and technology innovation: As the Strategy
viability and cost effectiveness of low-carbon sustainable energy solutions
become mainstream in emerging Asia, so will the business model. These may
provide opportunities to broaden the Company's investment mandate, including
by taking on different approaches and technologies.
The Transitional Investment Manager has carried out a high-level analysis of
the potential financial impact of the climate‑related hazards and physical
risks identified in the Company's scenario planning. In each of the scenarios,
limited changes to risks were identified for NIPSI and VSS and therefore
mitigations for high risks are already built into the way these assets were
designed and managed. For India, changes in severity of risks are seen in the
different scenarios, with some risks becoming higher risk. As a result,
financial impact scenarios are based on weighted averages from the SolarArise
portfolio.
Category Details
Wildfire risk The sites TT, TT1, TT2, TT4, TT5, TT6 and TT9 are high risk.
Financial impact scenario Illustrative cost implications without insurance (total cost of US$831,600)
· Damage limited to 2 inverters (central inverter at US$251,000
each), although extent of damage could be influenced by proximity to local
services.
· Business interruption: Limited to 30 days, equivalent to
US$329,600 revenue loss based on weighted average of India portfolio.
Illustrative cost implications with insurance (total cost of US$285,700)
· Insurance deductible (business interruption): 21 days, equivalent
to US$230,700 revenue loss based on weighted average of India portfolio.
· Insurance deductible (material damage): US$55,000
Mitigation Measures · Existing measures include onsite fire protection measures (water,
sand, extinguishers), an emergency response plan and vegetation management and
established fire breaks.
· Infrastructure manager to explore opportunities to enhance
existing fire prevention protocols (for example, implementing more frequent
audit of existing protections, carrying out fire safety drills, increasing
grass cutting management). These mitigations are expected to have negligible
impact to operating costs
Category Details
Extreme heat risk TT, TT1, TT2, TT4, TT5, TT6, TT9, Islasol II, Islasol III, VSS Viet Hong and
Hoang Thong are high risk.
Financial impact scenario Baseline level of extreme heat is already high and so do not expect any
material financial impact.
Mitigation Measures · Existing management practices in place to ensure work
continuation
· Workers to carry shade with them.
· Avoiding times of day which are too hot.
Category Details
Water scarcity TT, TT1, TT2, TT4, TT6, TT9, VSS Viet Hong, and Hoang Thong are high risk.
Financial impact scenario · Reduced access to water for fire prevention measures and panel
cleaning however, with existing site bore holes it is not expected to happen
so financial impact is low.
Mitigation Measures · Access to bore holes on sites.
Category Details
Cyclone risk All NISPI assets, TT and TT6 are high risk.
Financial impact scenario Illustrative cost implications without insurance: (total: $417,200)
· Damage limited to minor module damage (equivalent to 5% or 2,000
panels at a cost estimate of $87,600).
· Business interruption: 30 days due to spares held on site and
considering lead time on panels and replacing structure (equivalent to
$329,600 revenue loss based on weighted average of India portfolio).
Illustrative cost implications with insurance: (total: $285,700)
· Insurance deductible: 21 days (equivalent to $230,700 revenue
loss based on weighted average of India portfolio).
· Insurance Premium: $55,000.
Mitigation measures · NISPI sites have risk identified in the baseline scenario. As
such, mitigants would have been considered in the design of the structures.
· Only an increase of risk from moderate to high was identified for
TT and TT6. Currently, insurance would cover the damage and business
interruption. In case insurance will no longer cover this - the Investment
Manager would look to review structural design at these sites and consider
reinforce measures where necessary.
Category Details
Flood risk TT5, TT4, TT, TT6, and Islasol II & III are high risk.
Note, TT9 was also identified as high risk, but given the site is on a hill
with good drainage and stable soil this has been concluded as N/A.
Financial Impact Scenario Illustrative cost implications without insurance: (total: $831,600)
· Damage limited to: 2 inverters (central inverter at $251,000
each).
· Business interruption: Limited to 30 days (equivalent to $329,600
revenue loss based on weighted average of India portfolio).
Illustrative cost implications with insurance: (total: $285,700)
· Insurance deductible (business interruption): 21 days (equivalent
to $230,700 revenue loss based on weighted average of India portfolio).
· Insurance deductible (material damage): $55,000.
Mitigation Measures · TT5 has an existing stormwater drainage system installed in 2021,
which will require ongoing maintenance.
· TT4 has a drainage system not specifically designed for
stormwater, with no erosion or trapped water observed; improvements are
advised post-hydrological study at an estimated cost of $65,000.
· TT (including TT6) lack proper stormwater drainage systems, with
evidence of erosion, necessitating a hydrology study and the design and
implementation of stormwater drainage systems at an estimated cost of $130,000
for each site.
· Flooding concerns at Islasol II and III solar sites are
considered non-material. These projects were classified with a 'high' flood
risk in the baseline scenario and were designed to withstand conditions up to
Category 2 on the Saffir-Simpson scale. With adequate storm water drainage
systems and no flooding incidents reported on-site, the incremental risk up to
2040 is not expected to materially impact the sites.
c) Describe the resilience of the organisation's strategy, taking into
consideration different future climate scenarios, including a 2°C or lower
scenario.
Overall, the Company is well positioned to take advantage of the investment
opportunities that arise from this transition over the short-, medium- and
long-term. The speed and efficiency of the transition will have a notable
effect on the performance of the Company. If global temperature change is to
be limited to a 2°C increase from pre-industrial levels by 2100, it is
expected there will need to be significant intervention from governments,
regulators and the market. Given the current investment mandate, there is a
direct correlation between the transition to a low-carbon future and the size
of the investment opportunity over the long-term. If temperatures increase
beyond 2°C, the physical effects of climate change will be more severe,
creating additional risks for the Company's portfolio. Climate-related risks
and opportunities on balance provide more opportunities to the Company than
risks to the Company, which is likely to benefit from an APS scenario more
than the STEPS scenario pathway.
Risk management
a) Describe the organisation's processes for identifying and assessing
climate-related risks.
With the support of ERM and its software and proprietary tools, the Former
Investment Manager completed an exercise whereby climate-related risks and
opportunities to the Company were identified and assessed. All principal risks
are integrated into the Company's risk register and management frameworks.
b. Describe the organisation's processes for managing climate-related risks.
There are a number of risk mitigation strategies the Company can utilise to
mitigate climate-related risk:
· Diversify the investment portfolio across technologies,
geographies and development stage.
· Carry out diligence and analysis to understand latest trends and
dynamics and status of policy, using external experts where appropriate
· Work with policy makers and regulators to educate and influence
policy and frameworks that accelerate the transition to a clean energy future,
and actively engage with stakeholders and communities to mitigate resistance
to renewable energy assets.
· Actively manage and engage with investee companies on
climate-related issues, risks and opportunities, encouraging asset-level
adaptation plans that mitigate most material risks (for example, ensuring
effective insurance cover, diversified supply chains, and equipment spares)
For example, while the NISPI facilities were not damaged by Super Typhoon Rai
in December 2021, continuing severe rain tested the adequacy of the site
drainage system. In response, increased maintenance of the drainage system was
introduced to avoid potential flooding. This paid off during the 2022 typhoon
season in Negros when, despite severe rains, NISPI's sites were not disrupted.
c. Describe how processes for identifying, assessing and managing
climate-related risks are integrated into the organisation's overall risk
management.
In 2022, the Former Investment Manager completed comprehensive physical
climate risk assessments for all AEIT's infrastructure assets to capture any
potential climate-related risks not already considered in existing
risk-management frameworks. These assessments were carried out with an
external specialist in line with EU Taxonomy Do No Significant Harm
requirements, using its proprietary assessment and data tool. The resulting
report used best-in-class open-source climate data and highlighted relevant
natural hazards that may have an impact under present day climate conditions,
as well as in the future climate scenario. This analysis was also complemented
by additional reports generated by the Climate Scale tool.
Further monitoring of how severe weather events may affect the operations of
AEIT's investee companies and opportunities to reduce service interruptions
will continue to build portfolio resilience against climate change and help
manage risks going forward.
Metrics and targets
a) Disclose the metrics used by the organisation to assess climate-related
risks and opportunities.
The Transitional Investment Manager continues to develop the framework for
assessing climate-related risks and opportunities.
Opportunity metrics:
The investment strategy is aligned to climate mitigation. Therefore, the
metrics presented below measure the contribution made through generating clean
energy and driving a transition to net zero. These metrics measure the scale
of the climate-related opportunities the Company has taken advantage of. The
following KPIs track this contribution and are included in this report:
· installed operational capacity - MW;
· clean energy generated - MWh;
· EU Taxonomy alignment - %; and
· GHG emissions avoided - tCO(2)e.
Risk metrics:
In 2022, the Former Investment Manager undertook a review of 100% of
infrastructure assets which were screened for physical and transition-related
climate change risks. Portfolio diversification is also a core metric to
monitor climate-related risk.
b. Disclose Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas
emissions, and the related risks.
Efforts to measure and manage the Company's GHG footprint complement the focus
on avoiding GHG emissions by investing in sustainable energy in fast-growing
and carbon intensive economies in Asia where demand for energy continues to
soar, as well as its adherence with the highest standards of good practice for
financial products with a sustainability objective under the EU Sustainable
Finance Disclosure Regulation. The transition risks associated with future
constraints on emissions, whilst not expected to be a high risk for a
low-carbon portfolio, can also be monitored through carbon measurement.
The Transitional Investment Manager worked with all investee companies and
Altruistiq, to account for GHG emissions. Altruistiq are an environmental data
platform, helping organisations and funds measure, manage and share their
carbon and environmental impact. Disclosure of Scope 1, 2 and 3 emissions, and
methodology taken can be found in this report.
c. Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets.
The Transitional Investment Manager has set a climate-related risk management
target to maintain the investment portfolio's current status of 100% of
infrastructure assets screened for climate-related risks.
The metrics set out in this report set an initial GHG footprint for the
Company using the updated methodology. Most investee companies are poised to
grow their renewable energy asset base. As a result, at this stage,
quantitative GHG emission reduction targets which would address any risks in
relation to future constraints on emissions are not being specified. As the
infrastructure investment portfolio becomes more established, the Company will
explore the viability and value addition of setting portfolio level targets
given these risks are not expected to be high for the portfolio. This is
expected to occur in 2024. In the meantime, the Transitional Investment
Manager has set a qualitative target to continue to work with investee
companies to improve key elements of GHG measurement related to operations and
maintenance service providers.
A climate-related opportunity management target has already been set as part
of AEIT's SFDR disclosures. AEIT has a target of 100% alignment of sustainable
investments with the EU Taxonomy.
Target 2022 2023
100% of infrastructure assets screened for climate-related risks. 100% 100%
Improve key elements of GHG measurement related to operations and maintenance First carbon footprinting exercise completed with guidance from a carbon Second carbon footprinting exercise completed with guidance from Altruistiq.
service providers. consultant. Large proportion of data based on spend data. Significant improvement in quality of data received, with reduction of
proportion of data based on spend data (26%), the majority of which is in
relation to Scope 3 category "Purchased goods and services".
100% alignment of sustainable investments with the EU taxonomy alignment.(36) 100% 100%
(36) This calculation excludes cash held that is committed and is
awaiting deployment.
Stakeholder Engagement
The Board is aware of the need to foster the Company's business relationships
with suppliers, customers and other key stakeholders through its stakeholder
management activities as described below. The Board believes that positive
relationships with each of the Company's stakeholders are important to support
the Company's long-term success. The table below outlines the stakeholders
that the Board has identified as key, the specific engagement methods used and
key activities within the reporting period.
Key stakeholders How we engage Key activities
Shareholders of AEIT The Company has a broad range of shareholders, comprising both professional The Board sought to actively and transparently communicate in a timely manner
and retail investors, and has developed various ways of engaging with them, with investors throughout the year in response to the challenges faced by the
The Board looks to attract long-term investors in the Company and, in doing including: Company and the temporary share suspension.
so, it has sought out regular opportunities to communicate with shareholders
· Regulatory announcements and publications: The Company issues A list of the key Board communications to shareholders during the year
The Board seeks to engage with shareholders to obtain their feedback and views regulatory announcements via the London Stock Exchange in respect of routine (through regulatory announcements and other publications) are outlined in the
on their perspectives, concerns, priorities and expectations which the Board reporting obligations, periodic financial and portfolio information updates timeline of key events.
uses to inform its discussions and decisions and in response to other material events. The Company's Annual and Interim
Reports and associated presentations, as well as quarterly factsheets and The Chair attended more than 90 one-on-one shareholder meetings during the
shareholder circulars, are made available on the Company's website. Their year, discussing the challenges faced by the Company and shareholders'
availability is announced via London Stock Exchange regulatory announcements perspectives, concerns, priorities and expectations. Shareholder feedback from
and they are available via 'Regulatory News Service' section under 'Investor these meetings was used by the Board to inform its discussions and decisions,
Centre' on the Company's website. including its discussions during the strategic review and its decisions to
appoint a transitional Investment Manager in place of the Former Investment
· Website (www.asianenergyimpact.com): This includes information on Manager, proceed with the RUMS project and change the investment policy to
strategy, performance, investment portfolio, share price and other relevant ensure that proceeding with the RUMS project would not breach that policy.
information to enhance investors' understanding of the Company and its
strategy.
· Direct investor meetings and engagement: The Investment Manager,
on behalf of the Board and with the assistance of AEIT's corporate brokers,
undertakes a programme of investor engagement throughout the year. AEIT's
corporate brokers also maintain a dialogue with shareholders. The Board
receives feedback from the Investment Manager's and corporate brokers'
investor engagement and agrees any follow-up actions. The Chair also meets
with individual shareholders at relevant times during the year. Shareholders
may contact the Company via its corporate brokers or by post or email
(AEIT.cosec@jtcgroup.com) via the Company Secretary on any matters that they
wish to discuss with the Board and the corporate brokers or Company Secretary
will arrange for the relevant Board member to contact them.
· Annual General Meetings: The Annual General Meeting of the
Company provides a forum for shareholders to meet, ask questions and discuss
issues with the Directors and Investment Manager. The next Annual General
Meeting is expected to be held in Q2 2024.
Service providers including the Investment Manager, AIFM, Administrator and The Board engages with the Investment Manager, AIFM, Administrator and other Due to a breakdown in the trusted relationship between the Board and the
other corporate service providers service providers in numerous ways, including: Former Investment Manager resulting from the events that led to the temporary
share suspension and other matters that came to light following that
The Investment Manager's specialist knowledge and experience is vital to · Regular reporting: The Board receives regular reports from the suspension (including new information received under the protections of the
implementing AEIT's investment strategy successfully and achieving its Investment Manager, AIFM, Administrator, corporate brokers and, as required, Company's whistleblowing policy regarding key information being withheld from
investment objective other service providers. the Board, and misleading information being given to it, by the Former
Investment Manager over a protracted period of time, the Company terminated
The Administrator provides accounting, company secretarial and other · Scheduled meetings: Representatives of the Investment Manager and the Former Investment Manager's appointment with effect from 31 October 2023
administrative services that are critical to the effective running of AEIT's Administrator attend Board, Committee and valuation meetings and and without any compensation being payable to the Former Investment Manager.
day-to-day operations representatives of the AIFM attend Audit and Risk Committee, valuation and, as
required, Board meetings. The Company's Auditor is invited to attend all Audit Before terminating the Former Investment Manager's appointment, the Board
The Board relies on the AIFM and other key service providers for essential and Risk Committee meetings as well as valuation meetings. The Company's undertook a competitive tender process for the appointment of a Transitional
services and for advice, support and, in the case of the AIFM, risk management independent valuation expert also attends the valuation meetings. To build and Investment Manager whose immediate priorities would be finalising the
and valuation oversight, to help ensure the Company operates effectively maintain strong working relationships, the Company's other key service 31 December 2022, 30 June 2023 and 30 September 2023 valuations, 2022 audit
providers are invited to attend quarterly Board meetings to present their and accounts and 2023 interim report and a deep dive into the Company's
The Board seeks to build trusted relationships with key service providers respective reports. assets. As a result of that process, Octopus Energy Generation was appointed
through constructive and transparent ongoing two-way communication and aligned
as the transitional Investment Manager with effect from 1 November 2023.
objectives for growth and development · Ongoing dialogue: The Board also engages with the AIFM,
Investment Manager, Administrator and other key service providers outside of Board members used their individual experience to support the Investment
scheduled meetings to develop its working relationship with those service Manager in the performance of its responsibilities to the Company throughout
providers and ensure the smooth operational function of the Company. This the year. In particular, the Board was heavily involved in getting the
includes weekly meetings between the Chair and the Investment Manager and the Transitional Investment Manager quickly 'up-to- speed' on the Company's
Chair of the Audit and Risk Committee maintaining regular contact with the history, portfolio and challenges, enabling the Transitional Investment
Auditor, Investment Manager and Administrator to oversee the audit process. Manager to promptly and efficiently prepare the portfolio valuations required
for the 30 September 2023 NAV (announced on 13 December 2023) and assist the
This active engagement with the Company's key service providers aims to enable completion of the 2022 audit and the portfolio valuations and financial
the Board to exercise effective oversight of the Company's activities, but reporting for the periods ended 31 December 2022 and the six months ended 30
effective oversight is heavily dependent on accurate, transparent and timely June 2023. The 2022 Annual Report and 2023 Interim Report were published on 22
provision of material information by key service providers to the Board. The January 2024, achieving a key milestone towards lifting the temporary share
Board also has in place a Management Engagement Committee that meets annually suspension, which took place on 6 March 2024.
to review service provider performance. Further information on the Management
Engagement Committee can be found in its report. In conjunction with the appointment of the Transitional Investment Manager,
the Board appointed a new independent valuation expert to support the
The Company's whistleblowing framework allows employees of key service finalisation of all outstanding valuations and to reassure shareholders of the
providers to confidentially raise any concerns or issues with the Board. robustness of the valuation process.
The Board maintained constant communication with the Company's Auditor
following the temporary share suspension, making it aware of the steps taken
to rectify historic issues and updated timelines.
Asset level service providers The Investment Manager actively manages asset level service providers, A key focus for the Transitional Investment Manager was to commence a review
including third-party asset managers, operations and maintenance ("O&M") of all contractual and governance provisions of the local asset managers to
Building trusted partnerships through shared learnings and an ongoing dialogue contractors, construction managers, owner's engineers, suppliers, HSE (health, ensure they are working within delegated authority frameworks. Having
and aligned objectives for growth and development safety, and environment) contractors and landowners. identified some deficiencies, the Transitional Investment Manager is working
to remedy these and improve the overall governance at the local asset
Communications with service providers are managed across a variety of management level.
platforms to ensure focus on day-to-day operational performance of the assets.
The Investment Manager undertakes quarterly meetings with external asset Updated technical due diligence has been conducted across all operational
managers to review performance against service level provisions, weekly calls sites and the Transitional Investment Manager is feeding these findings back
with all operators and formal annual contract reviews. through to the valuations. This should ensure that the assumptions used in the
valuations accurately reflect historical performance, any continuing
The Investment Manager's whistleblowing framework allows employees supported deficiencies in performance and any optimisation plans.
by the investee companies to confidentially raise any concerns or issues.
The Transitional Investment Manager is building relationships across material
service providers to the investee companies and has been appointed to the
Boards of investee companies for NISPI and VSS.
Local communities Local asset managers facilitate impact initiatives in the surrounding area of Social responsibility engagement by investee companies is featured in regular
the solar assets the Company is invested into. impact reporting and highlighted in the Impact Report.
Making a meaningful contribution in the communities where we invest advances
AEIT's impact objective The Investment Manager engages with local asset managers to ensure active With regard to the recent land-related issues with local farmers affecting the
dialogue with key stakeholders within the community and resolution of any construction of the RUMS project, the Transitional Investment Manager has been
issues. actively monitoring the situation and the local asset manager applied pressure
on the landowner for a positive resolution to the dispute. The dispute appears
The Investment Manager ensures active maintenance of grievance mechanisms at to have been resolved.
investee companies that enable communities to engage around any complaints.
The Investment Manager received no complaints through the grievance mechanisms
and a key focus of the Transitional Investment Manager in 2024 will be to
review the existing impact initiatives on sites which benefit the local
communities to see if there are any more opportunities for enhancement.
Section 172(1) statement
The Company provides disclosures relevant to the requirements of section
172(1) (a) to (f) ("S172") throughout the Strategic Report. As an externally
managed investment trust, the Company has no employees.
The Board has a clear framework for determining the matters within its remit
and has approved Terms of Reference for the matters delegated to its
Committees. When making decisions, each Director confirms that they act in the
way they consider, in good faith, would most likely promote the Company's
success for the benefit of its members as a whole, and in doing so have regard
(among other matters) to section 172(1) (a) to (f) as described below.
(a) The likely consequences of any decision in the long term.
The Company was launched with a long-term triple return investment objective
which consists of: (i) financial return; (ii) environmental return; and (iii)
social return. In view of the issues that arose during the reporting period
(see the timeline of key events), the Board commenced strategic review of the
options for the Company's long-term future. After consultation with its
advisers and taking into account feedback from investors representing a
significant proportion of AEIT's issued share capital, the Board has concluded
that it is in the best interests of shareholders as a whole to put forward a
proposal for the orderly realisation of AEIT's assets, to be effected in a
manner that seeks to achieve a balance between maximising the value of its
investments and progressively returning cash to shareholders in a timely
manner. Details of this proposal, which is subject to shareholder approval at
a general meeting of the Company expected to be held in Q2 2024, will be set
out in a separate circular to shareholders and will be made available on the
Company's website in due course.
The Directors recognise there have been significant complexities in relation
to Board decision-making, in particular with reference to the challenges faced
by the Company over the last 12 months as outlined in the timeline of key
events in the Strategic Report.
In their discussions, decision-making and reporting, the Directors have
considered S172 and acted in good faith having regard to the long-term
sustainable success of the Company.
(b) The interests of the company's employees.
The Company does not have any direct employees. However, the Directors seek to
ensure that the Company's renewable assets provide decent work and jobs
through its social return objective.
The Board monitors this through people-related KPIs, collecting gender pay
gap, diversity and other statistics from the employees and contractors of the
investee companies within the investment portfolio. The outcome of this
monitoring is reported which outlines the social return impact KPIs.
Additional KPIs can be found in the Principle Adverse Impact Statement.
(c) The need to foster the company's business relationships with suppliers,
customers and others.
As the Company has no direct employees, all activities of the Company are
delivered through its service providers. The Board actively monitors its
relationships with its direct service providers as well as the performance of
those service providers and this is outlined in the Management Engagement
Committee Report.
Further information can be found in the 'Stakeholder Engagement' section of
the Strategic Report.
(d) The impact of the company's operations on the community and the
environment.
The Board has in place an ESG Committee which monitors the social and
environment returns for the Company and further information can be found in
the ESG Committee Report.
The outcomes of the Board's focus in this area can be found in the Impact
Report.
(e) The desirability of the company maintaining a reputation for high
standards of business conduct.
The Board appoints an Investment Manager who ensures that the Company's
investments are managed to a high standard of business conduct. The Investment
Manager has in place a Responsible Investment Policy which ensures clear
governance frameworks, such as a supplier code of conduct, code of ethics,
whistleblowing policies and modern slavery statements, to ensure that high
standards are maintained in investee companies. The Board has taken steps
through the Investment Manager to combat modern slavery and human trafficking.
Through the Investment Manager, the Board is informed and monitors ethics and
compliance with relevant governance standards. This helps to ensure that Board
decisions and the actions of the Company promote and maintain high standards
of business conduct.
(f) The need to act fairly between members of the company.
Throughout the year and following the year end, the Board has actively engaged
in open dialogues and consultations with shareholders, both those voting in
line with and those voting against the Board's recommendations, to understand
their perspectives, concerns and expectations. This engagement is facilitated
through regular shareholder meetings ensuring that the Board remains
responsive to the needs and interests of all members and can act in the best
interests of members as a whole.
To further meet the requirements of section 172(1)(f) the Board has also
adopted a transparent decision-making process. This includes the publication
of detailed explanations behind major decisions, highlighting how these
decisions serve the best interests of the Company and its members
collectively.
Non-financial Information Statement
The Board reviews ongoing progress, issues and any updates as part of the
quarterly Board meetings through updates from the Investment Manager and the
corporate brokers. The Investment Manager provides updates on relationships
with stakeholders such as co-shareholders, O&M providers and EPC
contractors, where relevant. The corporate brokers provide updates on
communications with shareholders and the Management Engagement Committee
reviews the Company's relationships with key suppliers. The Company's risk
review framework also facilitates the identification of items relevant to the
S172 statement. During the annual review of the strategy, objectives and
processes, the Board assesses the longer-term factors relating to the
Company's decisions and the implications for the communities and environments
in which we invest and operate.
As an investment trust specialising in sustainable energy in emerging markets,
we are committed to advancing sustainable energy solutions while delivering
value to our investors and contributing positively to the communities and
environments in which we operate. Our non-financial information statement
reflects our dedication to environmental stewardship, social responsibility
and governance ("ESG") practices, underpinning our strategic decisions and
operations.
Non-financial information area Statement and references
Environmental matters (including the impact of the Company's business on the Our investment in solar farms is at the core of our environmental commitment,
environment) significantly contributing to the reduction of carbon emissions and supporting
the transition to a low-carbon economy. We rigorously assess the environmental
impact of our investments, focusing on the conservation of biodiversity, the
responsible use of natural resources and the implementation of innovative
technologies to maximise energy efficiency and minimise environmental
footprints.
For further information, please see the 'Environmental return' section of the
Impact Report.
The Company's employees As a closed-ended investment company, the Company has no direct employees.
Information on indirect employees can be found in the 'Social return' section
of the Impact Report.
Social matters The social impact of our investments is core to our investment objective. By
financing renewable energy projects, we not only generate renewable energy but
also create jobs, foster local economic development and provide communities
with clean and affordable energy sources. Our investment in NISPI is a great
example of how our investments enable us to actively engage with local
communities to ensure that our projects align with their needs and contribute
positively to their well-being.
For further information, please see the 'Social return' section of the Impact
Report.
Respect for human rights Our commitment to human rights is reflected in our rigorous due diligence
processes, which identify and assess any potential human rights impacts
associated with our investments. In particular, the solar sector has higher
risk of human rights supply chain risk. We strive to ensure that our projects
do not contribute to human rights abuses and actively work to prevent any such
occurrences. These policies are aligned with international human rights
standards and principles, including the United Nations Guiding Principles on
Business and Human Rights, and are a core component of being categorised as an
Article 9 fund.
Anti-corruption and anti-bribery matters It is the Company's policy to conduct all of its business in an honest and
ethical manner. The Company takes a zero-tolerance approach to bribery and
corruption and is committed to acting professionally, fairly and with
integrity in all its business dealings and relationships wherever it operates.
Further information is outlined in the 'Anti-bribery, anti-corruption and tax
evasion' section of the Directors' Report.
This Strategic Report has been approved by the Board of Directors and signed
on its behalf by:
Sue Inglis
Chair
13 May 2024
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report, including this
Financial Statements, in accordance with applicable law and regulations,
including the FCA's Listing Rules and Disclosure Guidance and Transparency
Rules.
UK company law requires the Directors to prepare financial statements for each
financial year. Under UK company law:
· the Directors are required to prepare financial statements in
accordance with UK-adopted international accounting standards ("IFRS"); and
· the 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 the profit or loss of the Company for that period.
In preparing the Financial Statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable IFRS have been followed, 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 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 and
enable them to ensure that the Financial Statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and, hence, for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for ensuring that the Annual Report, including
the Financial Statements, taken as a whole, are fair, balanced, and
understandable and provide the information necessary for shareholders to
assess the Company's performance, business model and strategy.
Website publication
The Directors are responsible for ensuring this Annual Report, including the
Financial Statements, are made available on a website. Financial statements
are published on the Company's website in accordance with legislation in the
United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company's website is the responsibility of
the Directors. The Directors' responsibility also extends to the ongoing
integrity of the financial statements contained therein.
Responsibility statement
Each of the Directors confirms that, to the best of their knowledge:
· the Financial Statements, which have been prepared in accordance
with IFRS, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company;
· the Strategic Report includes a fair review of the development
and performance of the business and the financial position of the Company,
together with a description of the principal risks and uncertainties that it
faces; and
· this Annual Report, including the Financial Statements, taken as
a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy.
This responsibility statement was approved by the Board and is signed on its
behalf by:
Sue Inglis
Chair
13 May 2024
Independent Auditor's Report to the Members of Asian Energy Impact Trust plc
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements of Asian Energy Impact Trust plc (the
'company'):
· give a true and fair view of the state of the company's affairs
as at 31 December 2023 and of its loss for the year then ended;
· have been properly prepared in accordance with United Kingdom
adopted international accounting standards; and
· have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements which comprise:
· the statement of comprehensive income;
· the statement of financial position;
· the statement of changes in equity;
· the statement of cash flows; and
· the related notes 1 to 22.
The financial reporting framework that has been applied in their preparation
is applicable law and United Kingdom adopted international accounting
standards.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor's responsibilities for the
audit of the financial statements section of our report.
We are independent of the company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK,
including the Financial Reporting Council's (the 'FRC's') Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We confirm
that we have not provided any non-audit services prohibited by the FRC's
Ethical Standard to the company.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters The key audit matters that we identified in the current year were:
· Valuation of investments at fair value through profit or loss;
and
· Going concern.
Materiality Materiality was set at $1.7 million determined based on 2% of net assets.
Scoping All audit work to address the risk of material misstatements was carried out
by the audit engagement team.
Significant changes in our approach In the prior year we identified a key audit matter relating to an onerous
contract for the commitment to acquire a further 57% investment in SolarArise
for $38.5m. The acquisition completed in January 2023 and the onerous contract
was fully settled. On acquisition, the investment was immediately fair valued
to $nil. We therefore no longer identify a key audit matter in relation to the
onerous contract provision.
4. Key audit matters
Key audit matters are those matters that, in our professional judgement, are
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on the overall audit strategy,
the allocation of resources in the audit, and directing the efforts of the
engagement team.
These key audit matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
4.1. Valuation of investments at fair value through profit or loss
Key audit matter description As at 31 December 2023, the company held three principal investments being a
40% economic interest in NISPI, a 100% interest in SolarArise and a 99.8%
interest in Viet Solar System Company Limited and its subsidiaries ("VSS").
Each investment is measured at fair value through profit and loss. As
described in note 18, at 31 December 2023, NISPI was valued at $12.7m (2022:
$11.5m), SolarArise at $25.5m (2022: $nil) and VSS at $2.4m (2022: no
investment). The company engaged an independent valuation firm to review the
valuation of each investment as prepared by the investment manager, Octopus
Energy Generation.
As described in the significant accounting policies in note 2 and in note 9
(investments at fair value through profit or loss) of the financial
statements, the fair value of each investment is determined using a discounted
cash flow methodology, which corresponds to the income approach under IFRS13
'Fair value measurement'.
The fair value of each investment is based on several significant assumptions,
the most critical of which are set out below. The focus of our work and the
key audit matter relates to the investment in NISPI and SolarArise as these
investments constitute 91% of the total investment balance.
· The forecast power prices adopted in valuing NISPI, as the asset
has not entered into a power purchase arrangement ('PPA') and consequently
sells its output on the Philippines spot market. SolarArise has fixed price
PPA's and consequently power price risk is limited. The directors engaged a
range of third party providers to provide power price forecasts to aid them in
their selection of power price forecasts for NISPI.
· The discount rate used in valuing the investments in both NISPI
and SolarArise.
· Forecast energy generation within SolarArise. In the year the
company obtained a range of updated generation forecasts from an external
independent party. Judgement is needed in determining which generation
forecast is the most acceptable to use within the valuation. Octopus as
investment manager have taken the mid-point of the best and worse case
generation forecasts.
· The valuation of the RUMS asset within SolarArise. The asset is
now valued using a discounted cash flow methodology following the decision
made in 2023 to proceed with construction of the asset.
Other key assumptions include forecast energy generation (NISPI), the timing
of dividends and the availability of distributable reserves, and inflation.
The company has identified the valuation of investments as a key source of
estimation uncertainty, with further details provided in note 2 and note 9 to
the financial statements. Note 9 also provides disclosure on the sensitivity
of the valuation of investments to a change in the above assumptions. The
significant assumptions adopted in valuing each investment is also referred to
within the Audit and Risk Committee report.
Given the inherent subjectivity in the above assumptions, and the risk of bias
in the assumptions adopted, in particular the discount rate, forecast energy
generation, the valuation of RUMS and forward power prices, we identified a
risk of fraud in the adoption of the discount rate (NISPI and SolarArise),
forward power prices (NISPI only), forecast energy generation (SolarArise
only) and the valuation of the Rewa Ultra Mega Solar Park (the "RUMS project")
within SolarArise.
How the scope of our audit responded to the key audit matter Procedures to address the risk around future power prices, the discount rates
and forecast energy generation adopted included:
· obtaining an understanding of relevant controls established
around the valuation of investments and the selection of key assumptions;
· holding discussions with the board's valuation expert to
understand and challenge their work including assessing their competence,
capabilities and objectivity;
· agreeing the power prices adopted in valuing NISPI to the
external forecasts obtained by the directors and Investment Manager (Octopus
Energy Generation) and assessing whether the forecasts adopted were within a
reasonable range and whether there was evidence of bias in the forecasts
adopted. We also assessed the competence, capability and objectivity of the
providers of those forecasts;
· working with our valuation specialist, we calculated an
independent discount rate range for each investment. We assessed whether the
discount rate adopted by the directors fell within this range; and
· agreeing the initial generation profile adopted in valuing
SolarArise to the technical reports obtained from the independent third party.
We checked the computational accuracy of calculating the mid-point of these
forecasts and checked that they had been appropriately incorporated into the
valuation model. We also assessed historic generation and forecasting
accuracy.
Procedures to address the risk around the valuation of 'RUMS' in SolarArise
included:
· assessing the accuracy of the RUMS valuation model including
agreeing key inputs such as prices to the power purchase agreement and costs
back to agreements;
· recomputing the overall accuracy of the valuation;
· agreeing construction costs back to the relevant agreements; and
· understanding progress on construction completion post year end and
the implications for the valuation of any delays which also included
information on construction progress subsequent to the balance sheet date.
Procedures to address other aspects of the valuation included:
· recomputing the valuation, assess the mechanical accuracy of the
models and check the foreign exchange rates adopted to external data;
· evaluating the macroeconomic assumptions included in the
forecasts with reference to observable market data and external forecasts;
· assessing historic generation and assess forecasting accuracy,
while benchmarking average annual degradation to external data;
· benchmarking the inflation assumptions to external, independent
forecasts;
· checked the modelling of dividends and distributable reserves in
the model;
· agreeing the power price rate used in the SolarArise valuation to
the PPAs; and
· assessing the appropriateness of the disclosures made in the
financial statements including the key assumptions, sensitivities applied and
challenging whether these reflect a reasonable possible range.
Key observations Based on the audit procedures performed and our benchmarking of assumptions,
we identified differences within the valuations which we reported to the Audit
and Risk Committee. However these differences were not material.
5.2. Going concern
Key audit matter description As set out in note 2 to the financial statements, in April 2024, the Board
completed the strategic review of the options for the Company's future. Having
consulted shareholders, the Board concluded that a proposed realisation
strategy is in the best interests of shareholders as a whole. This realisation
strategy would consist of an orderly realisation of the Company's assets and
winding up of the Company, balancing maximising the value from existing
investments and progressively returning cash to shareholders in a timely
manner. This realisation strategy will be subject to a shareholder vote later
in 2024.
Given the orderly realisation proposal being recommended by the Board, the
Financial Statements have been prepared on a basis other than that of a going
concern given that the Directors have a reasonable expectation that the
shareholders will vote for the orderly realisation proposal and the ultimate
liquidation of the Company. Given the significance of this to the financial
statements, we identified a key audit matter in respect of the going concern
assessment and the associated disclosures within the financial statements.
There has been no impact on the presentation of the financial statements as at
the balance sheet date as a result not preparing the financial statements on a
going concern basis. Please see note 2 for further information.
How the scope of our audit responded to the key audit matter Procedures to address this key audit matter included;
· obtaining an understanding of the relevant controls that the
company has established regarding the drafting, review and approval of the
going concern model and going concern assessment;
· reviewing the going concern papers prepared by the investment
manager;
· understanding the mechanism and potential outcomes of the
shareholder vote later in 2024 and review of the RNS published by the Board on
the realisation proposal;
· assessing whether the decision to prepare the financial
statements on a non-going concern impacted the financial performance and
position of the company at the balance sheet date; and
· reviewing the disclosures within the financial statements.
Key observations We concur with management's decision to prepare the financial statements on a
basis other than a going concern.
5. Our application of materiality
5.1. Materiality
We define materiality as the magnitude of misstatement in the financial
statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality both
in planning the scope of our audit work and in evaluating the results of our
work.
Based on our professional judgement, we determined materiality for the
financial statements as a whole as follows:
Materiality $1.7 million (2022: $1.7 million).
For the audit of specific balances in the income statement, materiality was
limited to $0.85 million (2022: $0.85 million).
Basis for determining 2% (2022: 2%) of net assets as at 31 December 2023.
materiality We applied a lower materiality of 50% of overall materiality to specific
balances in the income statement.
Rationale for the We have considered the users of the financial statements when selecting the
appropriate benchmark. Prior to the announcement of the company's realisation
benchmark applied strategy, the company's investment objective was to achieve long-term capital
appreciation from its investments. We therefore evaluated the company's net
assets as the most appropriate benchmark as it is one of the principal
considerations for members of the company in assessing financial performance
and represents total shareholders' interest.
Our procedures on the income statement (excluding fair value and exchange rate
movements) were performed to a lower level of materiality for which we believe
misstatements of lesser amounts than materiality for the financial statements
as a whole could be reasonably expected to influence the users' assessment of
the financial performance of the company.
5.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the
probability that, in aggregate, uncorrected and undetected misstatements
exceed the materiality for the financial statements as a whole. Performance
materiality was set at 50% of materiality for the 2023 audit (2022: 50%). In
determining performance materiality, we considered the following factors:
· the increased inherent risks following the announcement and impact of
the share suspension in April 2023;
· the complexity and the risks associated with the valuation of the
company's two principal investments; and
· the quality of the control environment which meant we were not able
to rely on controls.
5.3. Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the
Committee all audit differences in excess of $88,000 (2022: $88,000), as well
as differences below that threshold that, in our view, warranted reporting on
qualitative grounds. We also report to the Audit and Risk Committee on
disclosure matters that we identified when assessing the overall presentation
of the financial statements.
6. An overview of the scope of our audit
6.1. Scoping
Our audit was scoped by obtaining an understanding of the entity and its
environment, including internal control, and assessing the risks of material
misstatement. Audit work to respond to the risks of material misstatement was
performed directly by the audit engagement team.
6.2. Our consideration of the control environment
We have obtained an understanding of the control environment and the relevant
controls to address key aspects of the financial statements, in particular
controls over the valuation of investments. Following the share suspension
announced in April 2023, the board appointed a new investment manager (Octopus
Energy Generation) to manage the investment portfolio and to support the board
in preparation of the Annual Report and Accounts in both the current and prior
year. As set out in the Audit and Risk Committee report and the Risk
Management section, deficiencies were identified by the board in the overall
control environment including controls around the acquisition of, and
valuation of, investments and in assessing and valuing the RUMS construction
obligations within SolarArise.
As disclosed within the same sections referenced above, the board continues to
take steps to improve the overall control environment including (amongst
others) appointing a new investment manager, undertaking a detailed review of
the key assumptions in valuing each of the company's investments in
conjunction with an independent valuer and the precision of manual review
controls around the valuation of investments.
Given the matters noted above we did not plan to test or rely on controls for
our audit, and therefore maintained a fully substantive approach.
6.3. Our consideration of climate-related risks
Climate change and the transition to a low carbon economy were considered in
our audit where they have the potential to directly or indirectly impact key
judgements and estimates within the financial statements, including the
valuation of investments.
The directors have disclosed their climate risk considerations (and
opportunities). This is consistent with our evaluation of the climate-related
risks facing the company. We assessed these disclosures by performing
inquiries with the board and investment manager, and we did not identify any
climate related material risks of misstatement. We also considered whether
information included in the climate related disclosures in the annual report
were materially consistent with our understanding of the business and the
financial statements and our knowledge obtained in the audit.
7. Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
8. Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the company's ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
9. Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC's website at: www.frc (http://www.frc)
.org.uk/auditorsresponsibilities. This description forms part of our auditor's
report.
10. Extent to which the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
10.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of
irregularities, including fraud and non-compliance with laws and regulations,
we considered the following:
· the nature of the industry and sector, control environment and
business performance including the design of the company's remuneration
policies, key drivers for directors' remuneration, bonus levels and
performance targets;
· results of our enquiries of the investment manager, the directors
and the Audit and Risk Committee about their own identification and assessment
of the risks of irregularities, including those that are specific to the
company's sector;
· any matters we identified having obtained and reviewed the
company's documentation of their policies and procedures relating to:
o identifying, evaluating and complying with laws and regulations and
whether they were aware of any instances of non-compliance;
o detecting and responding to the risks of fraud and whether they have
knowledge of any actual, suspected or alleged fraud;
o the internal controls established to mitigate risks of fraud or
non-compliance with laws and regulations;
· the matters discussed among the audit engagement team and
relevant internal specialists, including tax and valuations specialists
regarding how and where fraud might occur in the financial statements and any
potential indicators of fraud
As a result of these procedures, we considered the opportunities and
incentives that may exist within the organisation for fraud and identified the
greatest potential for fraud in the valuation of investments at fair value
through profit or loss. In common with all audits under ISAs (UK), we are also
required to perform specific procedures to respond to the risk of management
override.
We also obtained an understanding of the legal and regulatory framework that
the company operates in, focusing on provisions of those laws and regulations
that had a direct effect on the determination of material amounts and
disclosures in the financial statements. The key laws and regulations we
considered in this context included the UK Companies Act, Listing Rules, the
Investment Trust SORP and UK tax legislation, given the company's
qualification as an investment trust.
In addition, we considered provisions of other laws and regulations that do
not have a direct effect on the financial statements but compliance with which
may be fundamental to the company's ability to operate or to avoid a material
penalty.
10.2. Audit response to risks identified
As a result of performing the above, we identified the valuation of
investments at fair value through profit and loss as a key audit matter
related to the potential risk of fraud. The key audit matters section of our
report explains the matter in more detail and also describes the specific
procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified
included the following:
· reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with provisions of relevant laws
and regulations described as having a direct effect on the financial
statements;
· enquiring of the board of directors, investment manager, the
Audit and Risk Committee and legal counsel concerning actual and potential
litigation and claims;
· performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material misstatement due
to fraud;
· reading minutes of meetings of those charged with governance; and
· in addressing the risk of fraud through management override of
controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting
estimates are indicative of a potential bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the
normal course of business.
We also communicated relevant identified laws and regulations and potential
fraud risks to all engagement team members including internal specialists, and
remained alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.
Report on other legal and regulatory requirements
11. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared
in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the company and its
environment obtained in the course of the audit, we have not identified any
material misstatements in the strategic report or the directors' report.
12. Corporate Governance Statement
The Listing Rules require us to review the directors' statement in relation to
going concern, longer-term viability and that part of the Corporate governance
statement relating to the company's compliance with the provisions of the UK
Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each
of the following elements of the Corporate Governance Statement is materially
consistent with the financial statements and our knowledge obtained during the
audit:
· the directors' statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material uncertainties
identified;
· the directors' explanation as to its assessment of the company's
prospects, the period this assessment covers and why the period is
appropriate;
· the directors' statement on fair, balanced and understandable;
· the board's confirmation that it has carried out a robust
assessment of the emerging and principal risks;
· the section of the annual report that describes the review of
effectiveness of risk management and internal control systems; and
· the section describing the work of the Audit & Risk
Committee.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
· we have not received all the information and explanations we
require for our audit; or
· adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not visited by us;
or
· the financial statements are not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
13.2. Directors' remuneration
Under the Companies Act 2006 we are also required to report if in our opinion
certain disclosures of directors' remuneration have not been made or the part
of the directors' remuneration report to be audited is not in agreement with
the accounting records and returns.
We have nothing to report in respect of these matters.
14. Other matters which we are required to address
14.1. Auditor tenure
Following the recommendation of the Audit and Risk Committee, we were
appointed by the board of directors on 28 October 2021 to audit the financial
statements for the period ending 31 October 2021 and subsequent financial
periods. The Company decided to change its financial year end to 31 December,
with the period ending 31 December 2022 being a 14-month period of account.
The period of total uninterrupted engagement including previous renewals and
reappointments of the firm is three accounting periods, covering the periods
ending 31 October 2021, 31 December 2022 and 31 December 2023.
14.2. Consistency of the audit report with the additional report to the audit
committee
Our audit opinion is consistent with the additional report to the Audit &
Risk Committee we are required to provide in accordance with ISAs (UK).
15. Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Daryl Winstone FCA (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
13 May 2024
Financial Statements
Statement of Comprehensive Income
For the year ended For the period from 1 November 2021
31 December 2023
to 31 December 2022
Revenue Capital Total Revenue Capital Total
Notes US$'000s US$'000s US$'000s US$'000s US$'000s US$'000s
Investment income 9 752 - 752 - - -
Movement in fair value of investments 9 - 4,988 4,988 - (46,993) (46,993)
Onerous contract provision 13 - - - - (38,500) (38,500)
Total revenue 752 4,988 5,740 - (85,493) (85,493)
Investment management fees 3e (701) (701) (1,402) (712) (712) (1,424)
Administration and professional fees - exceptional 4 (4,183) - (4,183) (1,192) - (1,192)
Administration and professional fees - other 4 (1,703) - (1,703) (2,048) (296) (2,344)
Administration and professional fees - total 4 (5,886) - (5,886) (3,240) (296) (3,536)
Net finance income 5 622 - 622 - - -
Net foreign exchange gains 5 287 - 287 1,669 - 1,669
(Loss)/profit before taxation (4,926) 4,287 (639) (2,283) (86,501) (88,784)
Taxation 6 - - - - - -
(Loss)/profit for the year/period (4,926) 4,287 (639) (2,283) (86,501) (88,784)
(Loss)/profit per ordinary share (cents) - basic and diluted 8 (2.80) 2.44 (0.36) (1.98) (75.14) (77.13)
The total column of the above statement of comprehensive income is the profit
and loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations.
There are no items of other comprehensive income in the current year or prior
period, other than the profit/(loss) for the year or period, and therefore no
separate income statement has been presented.
The accompanying notes are an integral part of these Financial Statements.
Statement of Financial Position
As at As at
31 December 2023 31 December 2022
Notes US$'000s US$'000s
Non-current assets
Investments at fair value through profit or loss 9 42,065 11,491
Current assets
Trade and other receivables 10 2,370 633
Cash and cash equivalents 11 41,170 115,819
43,540 116,452
Current liabilities: amounts falling due within one year
Trade and other payables 12 (4,056) (2,863)
Onerous contract provision 13 - (38,500)
(4,056) (41,363)
Net current assets 39,484 75,089
Net assets 81,549 86,580
Capital and reserves: equity
Ordinary share capital 14 1,757 1,757
Share premium 14 63,518 63,518
Special distributable reserve 15 105,697 110,089
Revenue reserve 3i (7,209) (2,283)
Capital reserve 3i (82,214) (86,501)
Shareholders' funds 81,549 86,580
Net assets per share (cents) 16 46.42 49.28
The Financial Statements were approved by the Board of Directors and
authorised for issue on 13 May 2024 and were signed on its behalf by:
Sue Inglis
Clifford Tompsett
Chair of the Board Director
The accompanying notes are an integral part of these Financial Statements.
Incorporated in England and Wales with registered number 13605841
Statement of Changes in Equity
For the period from 1 November 2021 to 31 December 2023
Share Preference shares Share premium Special distributable reserve Capital reserve Revenue reserve Total
capital
Notes US$'000s US$'000s US$'000s US$'000s US$'000s US$'000s US$'000s
At 1 November 2021 - 66 - - - - 66
Shares issues in the period 14 1,757 - 179,128 - - - 180,885
Share issue costs 14 - - (3,618) - - - (3,618)
Transfer to special distributable reserve 15 - - (111,992) 111,992 - - -
Cancellation of share capital 14 - (66) - - - - (66)
Loss and comprehensive income for the period - - - - (86,501) (2,283) (88,784)
Dividends paid 7 - - - (1,903) - - (1,903)
Closing equity as at 31 December 2022 1,757 - 63,518 110,089 (86,501) (2,283) 86,580
Loss and comprehensive income for the year - - - - 4,287 (4,926) (639)
Dividends paid 7 - - - (4,392) - - (4,392)
Closing equity as at 31 December 2023 1,757 - 63,518 105,697 (82,214) (7,209) 81,549
The accompanying notes are an integral part of these Financial Statements.
Statement of Cash Flows
For the year ended For the period from
1 November 2021 to
31 December 2023 31 December 2022
Notes US$'000s US$'000s
Operating activities cash flows
Loss before taxation (639) (88,784)
Adjustments for:
Movement in fair value of investments 9 (4,988) 46,993
Investment income 9 (752) -
Increase in provisions 13 - 38,500
Foreign exchange gains (287) (1,669)
Operating cash flow before movements in working capital* (6,666) (4,960)
Changes in working capital:
Increase in trade and other receivables 10 (1,737) (633)
Increase in trade and other payables 12 1,193 2,863
Net cash flow used in operating activities (7,210) (2,730)
Investing activities cash flows
Acquisition of and cash injections into investments 9 (63,334) (28,298)
Net cash flow used in investing activities (63,334) (28,298)
Financing activities cash flows
Dividends paid to shareholders 7 (4,392) (1,903)
Proceeds from issue of share capital during the year/period 14 - 150,699
Costs in relation to issue of shares 14 - (3,618)
Net cash flow from financing activities (4,392) 145,178
Cash and cash equivalents at start of year/period 115,819 -
Net (decrease)/Increase in cash and cash equivalents (74,936) 114,150
Foreign exchange gains on cash or cash equivalents 287 1,669
Cash and cash equivalents at end of year/period 11 41,170 115,819
*This includes the payment of costs presented as exceptional of US$4.2 million
(2022: US$1.2 million).
The accompanying notes are an integral part of these Financial Statements.
Notes to the Financial Statements
For the year ended 31 December 2023
1. General information
Asian Energy Impact Trust plc ("AEIT" or the "Company") is a public company
limited by shares incorporated in England and Wales on 6 September 2021 with
registered number 13605841. The Company changed its name from ThomasLloyd
Energy Impact Trust plc on 27 October 2023. The Company is a closed-ended
investment company with an indefinite life. The Company commenced its
operations on 14 December 2021 when the Company's ordinary shares were
admitted to trading on the premium segment of the London Stock Exchange's Main
Market (the "IPO"). The Directors intend, at all times, to conduct the affairs
of the Company as to enable it to qualify as an investment trust for the
purposes of section 1158 of the Corporation Tax Act 2010, as amended.
The registered office and principal place of business of the Company is The
Scalpel, 18th Floor, 52 Lime Street, London, EC3M 7AF, United Kingdom.
The Company's principal activity is to invest in a diversified investment
portfolio of sustainable energy infrastructure assets in fast-growing and
emerging economies in Asia.
The audited financial statements of the Company (the "Financial Statements")
are for the period from 1 January 2023 to 31 December 2023 and comprise only
the results of the Company as the Company is determined to be an investment
entity and, therefore, its subsidiaries are measured at fair value and are not
consolidated (see note 2). The comparative period is the period from 1
November 2021 to 31 December 2022.
The Company has appointed Adepa Asset Management S.A to be the alternative
investment fund manager of the Company (the "AIFM") for the purposes of
Directive 2011/61/EU of the European Parliament and of the Council on
Alternative Investment Fund Managers as incorporated into UK law. Accordingly,
the AIFM is responsible for the portfolio management of the Company and for
exercising the risk management function in respect of the Company.
The AIFM, with the agreement of the Company, has delegated the portfolio
management of the Company to the Investment Manager. For the period from IPO
to 31 October 2023, the Investment Manager was ThomasLloyd Global Asset
Management (Americas) LLC (the "Former Investment Manager"). Under the
relevant investment management agreement between the AIFM, Company and Former
Investment Manager (the "IMA") the Former Investment Manager was entitled to a
management fee, details of which are included in note 19 to the Financial
Statements. On 15 September 2023, the Board served notice on the Former
Investment Manager terminating the IMA with effect from 31 October 2023. From
1 November 2023, Octopus Energy Generation ("OEGEN" or the "Transitional
Investment Manager") was appointed as transitional Investment Manager to cover
an initial period through to 30 April 2024. For this initial term, the Company
will pay OEGEN a management fee of US$1.35 million. At the end of the term, at
the discretion of the Board, there is scope for OEGEN to earn an additional
management fee of up to US$550k for its services during the transitional
period.
JTC Limited (the "Administrator") provides administrative and company
secretarial services to the Company under the terms of the Administration
Agreement between the Company and the Administrator.
2. Basis of preparation
The Financial Statements have been prepared in accordance with United Kingdom
adopted international accounting standards and the applicable legal
requirements of the Companies Act 2006.
The Financial Statements have also been prepared as far as is relevant and
applicable to the Company in accordance with the Statement of Recommended
Practice: Financial Statements of Investment Trust Companies and Venture
Capital Trusts ("SORP") issued in July 2022 by the Association of Investment
Companies (the "AIC"). In line with the AIC SORP, the statement of
comprehensive income differentiates between the 'revenue' account and the
'capital' account, and the sum of both items equals the Company's profit for
the year. Items classified as capital in nature either relate directly to the
Company's investment portfolio or are costs deemed attributable to the
long-term capital growth of the Company.
The Financial Statements are prepared on the historical cost basis but as the
Company qualifies as an investment entity under the amendments to IFRS10, all
investments in subsidiaries, associates and joint ventures are measured at
fair value through profit or loss. They have been prepared on the basis of the
accounting policies, significant judgements, key assumptions and estimates as
set out in notes 2 and 3. These policies are consistently applied.
The Financial Statements are presented in US Dollar ('US$'), which is the
Company's functional currency, and are rounded to the nearest thousand, unless
otherwise stated. On 14 December 2021, the date of the IPO, the Company
changed its functional and presentation currency to the US Dollar from the
Great British Pound ("GBP"), with the change in functional currency being
applied prospectively.
Going concern
In April 2024, the Board completed the strategic review of the options for the
Company's future and having consulted shareholders, the Board concluded that a
proposed realisation strategy is in the best interests of shareholders as a
whole. This realisation strategy would consist of an orderly realisation of
the Company's assets and winding up of the Company, balancing maximising the
value from existing investments and progressively returning cash to
shareholders in a timely manner.
Details of this proposal, which is subject to shareholder approval at a
general meeting of the Company expected to be held in Q2 2024, will be set out
in a separate circular to shareholders. However, while the outcome of the
shareholders vote is uncertain, it is the Board's expectation, based on
shareholder interactions to date, that shareholders will vote for the
realisation strategy being proposed. This will mean that the Company will
subsequently cease to trade, following the realisation of its investments. The
Board does not intend to declare a dividend in respect of the quarter ended 31
December 2023, nor does it intend to make any further acquisitions or
commitments to new investments prior to the shareholder vote on its
recommended proposal.
The Directors have assessed that the Company will be able to continue to meet
its liabilities in the going concern assessment period, being a period of at
least 12 months from the date the Financial Statements were authorised for
issue. In reaching this conclusion, the Directors considered the expectation
that there will be an orderly realisation of the Company's assets, and the
Company's net assets as at 31 December 2023 of US$81.5 million and its cash
reserves at that date of US$41.2 million, along with the cash reserves of AEIT
Holdings of US$1.8 million. The Directors also considered the Company's cash
reserves at the date of approval of the Financial Statements of US$42.1
million, along with the cash reserves of AEIT Holdings of US$1.8 million. The
Directors considered the Company's recurring operating expenditure
requirements, both to date and into the future and the commitment made post
year end of up to US$4.5 million of additional funding for the construction of
the RUMS project.
The Company continues to meet its day-to-day liquidity needs through its cash
resources. Assumed future cash inflows over the going concern assessment
period include the receipt of dividend and interest income and capital
repayments from its underlying investments and the main cash outflows are the
ongoing running costs of the Company and the additional costs incurred in
connection with the strategic review. Were the receipt of dividend and
interest income and capital repayments from its underlying investments
delayed, the Company would still have sufficient resources to meet its
liabilities. No realisation of investments has been assumed in this assessment
but such realisations may take place in the going concern period.
However, given the orderly realisation proposal being recommended by the
Board, whilst the Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the foreseeable
future, the Financial Statements have been prepared on a basis other than that
of a going concern given that the Directors have a reasonable expectation that
shareholders will vote for the orderly realisation proposal and the ultimate
liquidation of the Company.
No adjustments arose within the Financial Statements as a result of preparing
them on a basis other than that of a going concern. The Company was not
committed to any costs in respect of a wind-up at the balance sheet date and
the Company's investments (its principal assets other than cash) were already
held at fair value at the balance sheet date. However, the final fair value
realised on disposal of each investment as the Company implements its
realisation strategy may be materially different to the fair value as at 31
December 2023.
Critical accounting judgements, estimates and assumptions
The preparation of the Financial Statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed regularly on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimates
are revised and in any future periods affected. Significant estimates,
judgements and assumptions for the year are set out as follows:
Key sources of estimation uncertainty: fair value estimation for investments
at fair value
The Company's investments at fair value are not traded in active markets. As
such, the fair value of these investments are calculated using discounted cash
flow ("DCF") models based on valuation methods and techniques generally
recognised as standard in the industry, specifically taking into account the
International Private Equity and Venture Capital Valuation Guidelines, which
include recommendations and best practice.
The discounted cash flow models use observable data, to the extent
practicable. However, the key inputs require management to make estimates. The
key assumptions used in the DCF models as at 31 December 2023 that the
Directors believe would have a material impact on the fair value of the
investments should they change are set out in note 9. The key unobservable
inputs, and therefore the key sources of estimation uncertainty, are future
power prices, renewable energy generation, discount rates, construction
timeline of the RUMS project and the timing of dividends given some of the
investments have capital structures which make payment of dividends more
difficult. Sensitivities of the key inputs used in the DCF models are detailed
in note 9.
Further considerations on currency risk, interest rate risk, power price risk,
credit risk, and liquidity risk are detailed in note 18.
Critical accounting judgment - Going Concern
The Company has considered the impact of preparing the financial statements on
a basis other than that of a going concern. It has been assessed that this
does not impact the fair value of its investments at the balance sheet date,
since these investments are reflected at fair value at the balance sheet date,
based on calculations using DCF models and utilising valuations methods and
techniques generally recognised as standard within the industry plus market
assumptions that were in place at the balance sheet date. The valuation
methods, techniques and assumptions applied do not change as a result of
preparing the financial statements on a basis other than that of a going
concern. However, the final value realised on disposal of each investment as
the Company implements its realisation strategy may be materially different to
the fair value as at 31 December 2023.
As at 31 December 2023, the Company assessed that there were no additional
costs required to be shown in respect of the orderly realisation proposal,
since there had been no commitments made at the balance sheet date, and the
strategic review was ongoing, at this date and the subsequent outcome of the
strategic review remains subject to shareholder approval.
Critical accounting judgement: Equity and loan investments
The Company considers its equity and 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 to the investors.
Critical accounting judgement: Basis of non-consolidation
The Company has adopted the amendments to IFRS 10 which states that investment
entities should measure all of their subsidiaries that are themselves
investment entities at fair value (in accordance with IFRS 9 Financial
Instruments: Recognition and Measurement and IFRS 13 Fair Value Measurement).
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 of 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
invest in renewable energy infrastructure investments due to high barriers to
entry and capital requirements;
ii. the Company intends to hold its investments for the remainder of
their useful lives for the purpose of capital appreciation and investment
income in line with the Company's stated strategy and the Directors believe
the Company is able to generate returns to the investors during that
period(39); and
iii. the Company measures and evaluates the performance of all of its
investments 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 of 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.
(39 ) Having undertaken a strategic review of the options for the
Company's future, the Board is recommending a proposal for the orderly
realisation of assets and liquidation of the Company. Details of this
proposal, which is subject to shareholder approval at a general meeting of the
Company expected to be held in Q2 2024, will be set out in a circular to
shareholders and will be made available on the Company's website in due
course.
New and amended standards and interpretations
There are no new or amended accounting standards or interpretations adopted
during the year that have a significant or material impact on the Financial
Statements. The Company notes the following standards and interpretations
which were in issue and effective at the date of the Financial Statements.
· IFRS 17 including Amendments to IFRS 17: Insurance Contracts
(effective for accounting periods beginning on or after 1 January 2023)
· Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of
Accounting Policies (effective for accounting periods beginning on or after 1
January 2023)
· Amendments to IAS 8: Definition of Accounting Estimate (effective
for accounting periods beginning on or after 1 January 2023)
· Amendments to IAS 12: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (effective for accounting
periods beginning on or after 1 January 2023)
· Amendments to IAS 12: International Tax Reform - Pillar Two Model
Rules (issued on 23 May 2023 with immediate effectiveness)
The Company also notes the following standards and interpretations which were
in issue but not effective at the date of the Financial Statements. They are
not expected to have a material impact on the Company's financial statements.
· Amendments to IAS 1: Classification of Liabilities as Current or
Non-current (effective date of 1 January 2024)
· Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements
(effective date of 1 January 2024)
· Amendments to IFRS 16: Lease Liability in a Sale and Leaseback
(effective date of 1 January 2024)
3. Significant accounting policies
a) Financial instruments
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 are derecognised
when the contractual rights to the cash flows from the instrument expire or
the asset is transferred and the transfer qualifies for derecognition in
accordance with IFRS 9 Financial Instruments.
Financial assets
As an investment entity, the Company is required to measure its investments in
its wholly owned direct subsidiaries, joint ventures and associates at fair
value through profit or loss ("FVTPL"). As explained in note 2, the Company
has made a judgement to fair value both the equity and debt investments in its
subsidiaries, joint ventures and associates together. Subsequent to initial
recognition, the Company measures its investments on a combined basis at fair
value in accordance with IFRS 9 Financial Instruments.
Recognition and measurement and IFRS 13 fair value measurement
Trade receivables, loans and other receivables that are non-derivative
financial assets and that have fixed or determinable payments that are not
quoted in an active market are classified as financial assets at amortised
cost. These assets are measured at amortised cost using the effective interest
method, less allowance for expected credit losses. The Company has assessed
IFRS 9's expected credit loss model and does not consider there to be any
material impact on the Financial Statements.
Trade receivables, loans and other receivables are included in current assets,
except where maturities are greater than 12 months after the year end date in
which case they are classified as non-current assets.
Regular purchases and sales of investments are recognised on the trade date -
the date on which the Company commits to purchase or sell the investment.
Financial assets at FVTPL are initially recognised at fair value. Transaction
costs are expensed as incurred within the Statement of Comprehensive Income.
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, all financial assets and financial
liabilities at FVTPL are measured at fair value.
Gains and losses arising from changes in the fair value of the 'financial
assets at FVTPL' category are presented in the Statement of Comprehensive
Income within investment income in the period in which they arise.
Income from financial assets at FVTPL is recognised in the Statement of
Comprehensive Income within investment income when the Company's right to
receive payments is established.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement.
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 and measurement and IFRS 13 fair value measurement
Financial liabilities are measured at amortised cost using the effective
interest method, with interest expense recognised on an effective interest
rate method.
The Company derecognises financial liabilities when, and only when, the
Company's obligations are discharged, cancelled or expire.
Ordinary shares are classified as equity. An equity instrument is any contract
that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs. Direct issue
costs are charged against the value of ordinary share premium.
b) Taxation
Investment trusts which have approval under section 1158 of the Corporation
Tax Act 2010 are not liable for taxation on capital gains. The Company has
successfully applied and has been granted approval as an Investment Trust by
HMRC.
Irrecoverable withholding tax is recognised on any overseas income on an
accrual basis using the applicable rate of taxation for the country of origin.
The underlying intermediate holding companies and project companies in which
the Company invests provide for and pay taxation at the appropriate rates in
the countries in which they operate. This is taken into account when assessing
the value of the subsidiaries, joint ventures and associates.
c) Segmental reporting
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. The financial information used by the Board to
manage the Company presents the business as a single segment.
d) Investment income
Investment income comprises interest income and dividend income received from
the Company's investments. Interest income is recognised in the Statement of
Comprehensive Income using the effective interest method. Dividend income is
recognised when the Company's entitlement to receive payment is established.
e) Expenses
All expenses are accounted for on an accrual basis. In accordance with the AIC
SORP, the Statement of Comprehensive Income differentiates between the
'revenue' account and the 'capital' account, and the sum of both items equals
the Company's profit for the period. In respect of the analysis between
revenue and capital items presented within the Statement of Comprehensive
Income, expenses directly attributable to the long-term capital growth of the
Company are presented as capital items. See below for specific examples:
· Investment management fees: As per the Company's investment
objective at the balance sheet date and until the proposed realisation
strategy has been approved by shareholders, it was expected that income
returns made up 50% of the Company's long-term return. Therefore, based on the
estimated split of future returns, 50% of the investment management fee is
charged as a capital item within the Statement of Comprehensive Income.
· Transaction costs: Transaction costs incurred on completed
transactions are charged as capital items within the Statement of
Comprehensive Income.
f) Foreign currency
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are retranslated into
the functional currency using the exchange rate prevailing at the Statement of
Financial Position date. Foreign exchange gains and losses arising from
translation are included in the Statement of Comprehensive Income. Foreign
exchange gains and losses relating to the financial assets carried at fair
value through profit or loss are presented in the Statement of Comprehensive
Income.
g) Cash and cash equivalents
Cash and cash equivalents includes deposits held with banks and other
short-term deposits with original maturities of three months or less.
h) Dividends payable
Final dividends payable to equity shareholders are recognised in the Financial
Statements when they have been approved by shareholders and become a liability
of the Company. Interim dividends payable are recognised in the period in
which they are paid.
i) Reserves
The Company's capital is represented by the ordinary shares, share premium,
the special distributable reserve, retained losses and other comprehensive
income.
· Share premium: Share premium includes the premium above nominal
value received by the Company on issuing shares, net of issue costs, to the
extent not subsequently cancelled and transferred to another reserve.
· Special distributable reserve: This reserve is distributable and
may be used, where the Board considers it appropriate, by the Company for the
purposes of paying dividends to shareholders (and, in particular, augmenting
or smoothing payments of dividends to shareholders) or buying back shares.
There is no guarantee that the Board will make use of this reserve for such
purposes. See note 15 for further information.
· Retained losses: Retained losses are split between revenue and
capital reserves as follows:
· Revenue reserve: This reserve reflects all income and costs which
are recognised in the revenue column of the statement of comprehensive income.
This reserve is distributable by way of dividend.
· Capital reserve: This reserve includes gains and losses on
disposal of investments and changes in fair values of investments, foreign
exchange differences determined to be of a capital nature and the capital
element of the management fee. Any associated tax relief is also credited to
this reserve. This reserve is distributable by way of dividend.
j) Onerous contract provision
Present obligations arising under onerous contracts are recognised and
measured as provisions. An onerous contract is considered to exist where the
Company or its subsidiaries has a contract under which the unavoidable costs
of meeting the obligations under the contract exceed the economic benefits
expected to be received under it. Please refer to note 13 for further detail.
4. Administration and professional fees
For the year ended 31 December 2023 For the period ended 31 December 2022
Revenue Capital Total Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Administration fees 166 - 166 146 - 146
AIFM fees 122 - 122 94 - 94
Legal and professional fees 3,805 - 3,805 693 - 693
Transaction costs - - - - 296 296
Compliance and regulatory fees 102 - 102 157 - 157
Directors' fees 294 - 294 267 - 267
Valuation fees 742 - 742 842 - 842
Company's audit and non-audit fees:
- in respect of audit services 357 - 357 445 - 445
- in respect of non-audit related services - - - 207 - 207
Other operating expenses 298 - 298 389 - 389
5,886 - 5,886 3,240 296 3,536
Analysed as:
For the For the
year ended
period ended
31 December 2023
31 December 2022
Total Total
US$'000
US$'000
Ongoing and recurring costs of the Company 1,703 1,508
Exceptional costs incurred following the temporary share suspension 4,183 1,192
Other one-off costs - 836
Total 5,886 3,536
Fees payable to the Company's Auditor during the year/period were:
For the For the
year ended
period ended
31 December 2023 31 December 2022
Total Total
US$'000 US$'000
Fees payable to the Company's Auditor for the audit of the Company's 357 445
Financial Statements
Fees payable to the Company's Auditor for other services:
Audit-related services - 43
Non-audit related services - 446
Total 357 934
The audit-related services provided in the period ended 31 December 2022
relate to the review of the 2022 interim financial statements. During the
prior period, the Company's Auditor was also paid £215,000 (US$282,000
equivalent) for its role as reporting accountant and £136,000 (US$164,000
equivalent) for tax structuring advice in connection with the IPO. The
reporting accountant fee was recognised directly in equity as a cost
associated with the initial capital raising of the Company.
In addition to the fees disclosed above, US$3,350 (2022: US$3,350) is payable
to the Company's Auditor in respect of audit services provided to the
Company's unconsolidated subsidiary, AEIT Holdings, that is not included in
the Company's expenses above.
The Company has no employees. Full detail on Directors' fees is provided in
note 19. Directors' fees in the table above include employer social security
contributions of US$25,266 (2022: US$11,000).
5. Investment income, net foreign exchange gains and net finance income
Investment income relates to interest receivable in respect of the investment
portfolio held by the Company.
Net foreign exchange gains relate to foreign exchange gains realised on the
cash balances held in currencies other than US$ and exchange differences
arising due to the timing between receipt of supplier invoices in GBP and the
payment date of these invoices.
Net finance income relates to interest receivable in respect of cash which has
been placed in interest bearing deposit accounts.
6. Taxation
(a) Analysis of charge in the year/period
For the year ended 31 December 2023 For the period ended 31 December 2022
Revenue Capital Total Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Corporation tax - - - - - -
Tax charge for the year/period - - - - - -
(b) Factors affecting total tax charge for the year/period
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 period ended 31 December 2022
Revenue Capital Total Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
(Loss)/profit before taxation (4,926) 4,287 (639) (2,283) (86,501) (88,784)
Corporation tax at 23.5% (1,158) 1,007 (151) (434) (16,435) (16,869)
(2022: 19%)
Effects of:
Non-taxable capital gains - (1,172) (1,172)
Non-deductible capital losses - - - - 16,244 16,244
Unutilised losses carried forward 1,158 165 1,323 434 191 625
Total tax charge/(credit) for the year/period - - - - - -
The Directors are of the opinion that the Company has complied with the
requirements for maintaining investment trust status for the purposes of
section 1158 of the Corporation Tax Act 2010. This allows certain capital
profits of the Company to be exempt from UK tax. Additionally, the Company may
designate dividends payable wholly or partly as interest distributions for UK
tax purposes. Interest distributions are treated as tax deductions against
taxable income of the Company so that investors do not suffer double taxation
on their returns.
The Financial Statements do not directly include the tax charges for any of
the Company's subsidiaries as these are held at fair value. Each of these
companies is subject to taxes in the country in which it operates.
The Company has an unrecognised deferred tax asset of $2.2 million (2022:
US$0.8 million) based on the excess unutilised operating expenses of US$8.9
million (2022: US$3.3 million) at the prospective UK corporation tax rate of
25%. A deferred tax asset has not been recognised in respect of these
operating expenses and will be recoverable only to the extent that the Company
has sufficient future taxable revenue.
7. Dividends
The dividends reflected in the Financial Statements for the period are as
follows:
For the year ended For the period ended
31 December 2023
31 December 2022
Cents per ordinary Total Cents per ordinary Total
share
US$'000
share
US$'000
Q4 2022 dividend - paid on 23 May 2023) 1.18 2,073 - -
Q1 dividend - paid on 19 July 2023 (2022: 24 June 2022) 0.44 773 0.44 508
Q2 dividend - paid on 11 September 2023 (2022: 30 September 2022) 0.44 773 0.44 622
Q3 dividend - paid on 11 December 2023 (2022: 2 December 2022) 0.44 773 0.44 773
Total 2.50 4,392 1.32 1,903
The dividends relating to the year ended 31 December 2023 and period ended 31
December 2022, which is the basis on which the requirements of section
1159(40) of the Corporation Tax Act 2010 are considered, are detailed below:
For the year ended For the period ended
31 December 2023
31 December 2022
Cents per ordinary Total Cents per ordinary Total
share
US$'000
share
US$'000
Q1 dividend 0.44 773 0.44 508
Q2 dividend 0.44 773 0.44 622
Q3 dividend 0.44 773 0.44 773
Q4 dividend - - 1.18 2,073
Total 1.32 2,319 2.50 3,976
A dividend has not been paid or proposed in respect of the quarter ended 31
December 2023 and, subject to shareholders approving the orderly realisation
proposal at a general meeting of the Company expected to be held in Q2 2024,
the Company's priority will be to achieve a balance between maximising the
value of its investments and progressively returning cash to shareholders in a
timely manner.
It is currently expected that surplus cash will be returned from time to time
in the form of capital rather than dividends and that any dividends will be
paid on an ad hoc basis.
(40) The requirement for an investment trust to pay out 85% of revenue
profits generated in the year as dividends
8. Earnings per ordinary share
Earnings per ordinary share is calculated by dividing the profit or loss
attributable to equity holders of the Company by the weighted average number
of ordinary shares in issue during the year/period.
For the year ended For the period ended
31 December 2023
31 December 2022
Revenue Capital Total Revenue Capital Total
(Loss)/profit attributable to the equity holders of the Company (US$'000) (4,926) 4,287 (639) (2,283) (86,501) (88,784)
Weighted average number of ordinary shares in issue (000s) 175,685 175,685 175,685 115,177 115,177 115,177
Earnings per ordinary share (cents) - basic and diluted (2.80) 2.44 (0.36) (1.98) (75.14) (77.13)
9. Investments at fair value through profit or loss
As set out in note 2, the Company accounts for its interest in its investments
at fair value through profit or loss.
31 December 31 December 2022
2023
US$'000 US$'000
Amount brought forward 11,491 -
Acquisitions/capital injections in the year/period 63,334 58,484
Provisions utilised during the year/period (38,500)
Investment income 752 -
Movement in fair value of portfolio (excluding investment income) 4,988 (46,993)
Total investments at FVTPL 42,065 11,491
Movements in the period net of acquisitions/capital injections:
Discount rate unwind 4,097 2,833
Changes to inflation (356) 2,789
Change in FX (272) (3,391)
Revaluation of RUMS project 5,412 (14,071)
Changes to capital structure and timing of cash extraction (3,243) (12,410)
Changes to power prices (2,167) (9,036)
Changes to generation profile (1,694) (3,328)
Changes in discount rates 94 (826)
Removal of carbon credit revenues (SolarArise) - (2,033)
Inclusion of residual land value 1,965 -
Other movements in fair value of investments 1,904 (7,520)
Movement in the fair value of the Company's investments in the year/period 5,740 (46,993)
Analysed as:
Investment income 752 -
Movement in fair value of Company's investments taken to the P&L in the 4,988 (46,993)
year/period
Movement in the fair value of the Company's investments in the year/period 5,740 (46,993)
Acquisitions and capital injections during the year
On 13 January 2023, the Company acquired a 57% shareholding in SolarArise for
a cash consideration of US$38.5 million, increasing its overall shareholding
in SolarArise to 100%. This acquisition crystallised the utilisation of the
onerous contract provision of US$38.5 million that was recognised in the prior
period. See note 13 to the Financial Statements for further information.
During the year, a total amount of US$5.0 million was invested into AEIT
Holdings Limited, a wholly owned subsidiary. This funding was used to acquire
a 99.8% shareholding in VSS, with the excess being held as cash in the bank of
AEIT Holdings Limited.
On 18 October 2023, funding of US$19.8 million was invested in SolarArise
through an INR-denominated external commercial borrowings loan from the
Company to enable the construction activities for the RUMS project.
Fair value of the investment portfolio
The Transitional Investment Manager has carried out a fair market valuation of
the investments as at 31 December 2023. These valuations have been reviewed by
the Company's independent valuation expert and AIFM.
The Directors have satisfied themselves as to the methodology used, the
discount rates applied and the valuation. All investments are in renewable
energy assets and are valued using a discounted cash flow methodology, with
the exception of the development project within SolarArise (the "TT8 project")
as discussed further below.
The key assumptions used in the DCF models at 31 December 2023 that the
Directors believe would have a material impact on the fair value of the
investments should they change are set out in the table below. The key and
most material unobservable inputs, and therefore the key sources of estimation
uncertainty, are future power prices, renewable energy generation, ability and
timing of cash extraction, the timing for completion of the RUMS project and
discount rates. The table below also includes other assumptions that the
Transitional Investment Manager considers to be key to the valuation of each
investment including inflation and foreign exchange rates.
Whilst the Company holds its investments at fair value, the final value
realised on disposal of each investment as the Company implements its orderly
realisation strategy may be materially different to its fair value as at 31
December 2023.
Key assumption Philippines India Vietnam Description
Power prices Forecast WESM(41) prices are based on a blend of two WESM price curves as Fixed price PPA Forecast retail electricity tariff(42) prices are based on a blend of two All assets in the Indian portfolio have long- term fixed price power purchase
prepared by independent market advisors that are reputable in this market. wholesale energy price curves as prepared by independent market advisors that agreements and therefore market forecasts are not required. The Philippine
are reputable in this market. portfolio generates revenue through the sale of power to the grid at the WESM
price and is fully exposed to volatility in wholesale energy price curves. All
assets in the Vietnamese portfolio have long- term fixed price power purchase
agreements, with exposure to upside from a proportion of power sold to tenants
of each rooftop location priced at the applicable retail electricity tariff as
set by Electricity Vietnam and updated periodically. Therefore this investment
is exposed to fluctuations in forecasted power prices.
Energy generation P50 plus a 3.3- 3.37% 'haircut' based on For operational assets, P50 blend based on 'best case' and 'worst case' yield P50 less a haircut for one of the assets based on historical underperformance. Electricity output is based on specifically commissioned yield assessments
historical underperformance. assessments from the technical advisor reports. For the RUMS project, a prepared by technical advisors. Each asset's valuation assumes a 'P50' level
'haircut' is applied based on the historic underperformance of the wider of electricity output, which is the estimated annual amount of electricity
SolarArise portfolio. generation 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.
The P50 provides an expected level of generation over the long term.
Adjustments are made to the P50 forecasts where actual performance falls below
the P50.
Discount rate The discount rate used in each DCF model reflects the current market
assessment of the time value of money and the risks specific to each
investment. Key inputs to the discount rates have been reviewed by PwC, the
independent valuation expert.
The discount rates used in the valuation models are within the range of
10.0-12.5%.
FX rate US$1:PHP 55.40 US$1:INR 83.21 US$1:VND 24,269 Underlying valuations are calculated in local currency and converted back to
USD at the spot rate at the relevant valuation date.
Inflation CPI trends downwards to a long-term inflation rate assumption of 3%. India CPI forecasts trend downwards in the near term to a long-term inflation Vietnam CPI decreases in the short term before increasing towards a long-term Inflation assumptions used in the model are a blend of a leading market
rate assumption of 4.0%. This is in line with the Reserve Bank of India target rate of 3.7%. forecaster with International Monetary Fund CPI forecasts for all invested
The Bangko Sentral ng Pilipinas (central bank of the Philippines) target inflation range of 2% to 6%. markets as at 31 December 2023.
inflation range is 2% to 4%.
Capital structure Capital reduction effective on 30 June 2024 Capital reduction effective on 1 April 2025 n/a The current structure of each of these investments is not optimal for cash
extraction. The DCF models assume a degree of capital restructuring, as
indicated, for each investment to enable cash to be extracted more
efficiently. Any delay to these restructuring plans may delay the ability of
the Company to extract cash out of its underlying investments.
Construction of the RUMS project n/a Assumes commissioning occurs by 30 June 2024. n/a Any delay to the commissioning of the RUMS project may impact its valuation.
Post the year end, despite initial progress, construction faced delays due to
farmers from the surrounding land temporarily restricting access to the
construction site. The assumed commissioning date of 30 June 2024 factors in
the delays experienced since the year end.
(41) Philippine Wholesale Electricity Spot Market.
(42) Forecasted applicable retail electricity tariff, set by
Electricity Vietnam.
TT8 project
The TT8 project is a 150 MW solar project in Maharahtra currently under
development within the SolarArise portfolio. TT8 secured its PPA in August
2023 with Maharashtra State Electricity Distribution Company Limited at a
non-inflating fixed Indian rupee tariff of Rs. 2.9/kWh for 25 years. As at 31
December 2023, the TT8 project was valued at US$1.9 million (2022: US$nil),
which is equal to cost.
AEIT Holdings
On 5 May 2022, the Company incorporated a wholly owned subsidiary, AEIT
Holdings, a private company, limited by ordinary shares. AEIT Holdings'
principal activity is to act as an investment holding company. During the
year, the Company invested cash of US$5.0 million into AEIT Holdings, which
was used to acquire a 99.8% holding in VSS in Vietnam on 31 May 2023 for a
total consideration of US$3.1 million. As at 31 December 2023, as well as its
investment in VSS, AEIT Holdings held cash of US$1.8 million and other net
liabilities of US$0.3 million. As such, AEIT Holdings has been valued at
US$1.5 million.
Valuation sensitivities
The following table presents the results and impact of the sensitivity
analysis completed on the key inputs used in the DCF models. The sensitivities
assume that the relevant input is changed over the entire useful life of each
of the underlying renewable energy investments, while all other variables
remain constant. All sensitivities have been calculated independently of each
other.
The Directors have assessed the sensitivity applied to each of the significant
unobservable inputs and believe that each sensitivity represents a reasonable
possible long-term movement in the significant unobservable input to which it
relates.
While the Directors believe the changes in inputs calculated to be within a
reasonable expected range based on their understanding of market transactions,
this is not intended to imply the likelihood of change or that possible
changes in value would be restricted to the range considered.
Impact of sensitivity
Significant unobservable input Relationship to fair value Fair value increase Fair value (decrease) NAV per share increase NAV per share (decrease)
Power prices Power price sensitivities have only been applied to investments whose US$6.5 million US$(7.0) million 3.7 cents (4.0) cents
underlying assets are exposed to merchant prices (i.e. revenue streams which
are not tied to a fixed‑price PPA). An increase in forecast power prices
used for these revenue streams would result in an increase in fair value.
Sensitivity: +/- 25%
Renewable energy generation An increase in generation would result in an increase in fair value. US$15.7 million US$(18.1) million 9.0 cents (10.3) cents
Sensitivity: +/- 10%
Discount rate A decrease in the discount rate used would result in an increase in fair US$3.3 million US$(2.9) million 1.9 cents (1.6) cents
value.
Sensitivity: -/+ 1%
Foreign exchange rate Deflation of the local currencies in which the investments are held against US$4.7 million US$(3.8) million 2.7 cents (2.2) cents
the US Dollar would result in an increase in fair value.
Sensitivity: -/+ 10%
Cost inflation A decrease in the inflation rate used would result in an increase in fair US$0.3 million US$(0.3) million 0.2 cents (0.2) cents
value.
Sensitivity: -/+ 1%
Timing of cash extraction As at 31 December 2023, NISPI, the SolarArise holding company and each of the - US$(0.9) million - (0.5) cents
SolarArise SPVs had significant negative distributable reserve balances,
prohibiting the payment of dividends.
The valuations have been updated to reflect this but assume that some measures
to eliminate cash traps (for example, capital reductions) within a reasonable
timeframe are implemented.
The sensitivity assumes that such measures to eliminate cash traps are delayed
by c. 12 months at both NISPI and SolarArise.
Sensitivity: Delay to assumed capital reductions +12 months
RUMS construction delays As at 31 December 2023, the valuation of the RUMS project assumed - US$(0.7) million - (0.4) cents
commissioning is reached by 30 June 2024. The sensitivity shows the impact on
the value of the SolarArise investment from construction delays of a further
three months.
Sensitivity: Delay to construction schedule by three months
10. Trade and other receivables
31 December 2023 31 December 2022
US$'000 US$'000
VAT receivable 1,698 541
Prepayments 68 92
Other receivables 354 -
Amounts receivable from subsidiaries 250 -
Total 2,370 633
Amounts receivable from subsidiaries relate to amounts paid by AEIT on behalf
of its directly-owned subsidiary, AEIT Holdings Limited (see note 19).
11. Cash and cash equivalents
The cash and cash equivalents were held in the following currencies at the
year/period end:
31 December 2023 31 December 2022
US$'000 US$'000
US$ 41,060 109,024
GBP 61 6,742
Euro 49 53
Total 41,170 115,819
12. Trade and other payables
31 December 2023 31 December 2022
US$'000 US$'000
Trade payables 891 350
Accrued expenses 3,165 2,513
Total 4,056 2,863
Amounts payable to related parties are included within trade payables and
accrued expenses. See note 19 for further information.
13. Provisions
31 December 2023 31 December 2022
US$'000 US$'000
Opening balance 38,500 -
Additions in the year/period
Onerous contract provision - 38,500
Amounts utilised in the year/period (note 9) (38,500) -
Balance at the end of the year/period - 38,500
On 20 June 2022 the Company made a commitment to purchase the remaining 57% of
SolarArise for a total consideration of US$38.5 million. As at 31 December
2022, the Company had identified an onerous contract and recognised a
provision of US$38.5 million in respect of this commitment as, on completion
of the acquisition in 2023, a fair value loss was recorded which was lower
than the consideration paid to acquire this 57% investment, primarily due to
potential abandonment liabilities relating to the RUMS project. Completion of
the purchase of 57% of SolarArise occurred on 13 January 2023 and it is at
this date on which the provision was utilised. See note 9 for further details
on how the fair value of SolarArise was determined.
14. Share capital
Number of ordinary Share Share Number of preference Preference share capital
capital
premium
Allotted, issued and fully paid: shares US$'000 US$'000 shares US$'000
At 31 October 2021 1 - - 50,000 66
Issue of shares at IPO (14 December 2021) 115,393,127 1,154 114,239 - -
Cancelation of preference shares (22 March 2022) - - - (50,000) (66)
Subsequent issue of shares (16 August 2022) 26,014,349 260 29,926 - -
Subsequent issue of shares (16 November 2022) 34,277,228 343 34,963 - -
Share issue costs - - (3,618) - -
Transfer to special distributable reserve - - (111,992) - -
Closing balance at 31 December 2022 and 31 December 2023 175,684,705 1,757 63,518 - -
The Company was incorporated on 6 September 2021 with share capital of £0.01,
being one ordinary share of £0.01.
On 18 October 2021, the Company issued US$0.01 of ordinary share capital,
being one ordinary share of US$0.01 and preference share capital of £50,000,
being 50,000 preference shares of £1.00. On this date, the Company cancelled
the one ordinary share of £0.01.
On 14 December 2021, at IPO, the Company issued 115,393,127 ordinary shares of
US$0.01 each, at a price of US$1.00 per ordinary share, raising gross
proceeds of US$115.4 million.
On 22 March 2022, the Company effected a capital reduction process which
included the cancellation of the 50,000 preference shares and the related
reduction of an amount receivable from related parties of US$66,000 and the
reduction of the share premium reserve and related transfer to the special
distributable reserve of US$111,992,000.
On 16 August 2022, the Company issued 26,014,349 ordinary shares of US$0.01
each in consideration for the 43% economic interest in SolarArise. SolarArise
formed part of the seed assets at the time of the IPO, with the consideration
shares forming part of the gross IPO proceeds. The shares were issued at a
price of US$1.16035 per share that was based on the 10-day average share price
prior to allotment of the shares.
On 18 November 2022, pursuant to the subsequent placing programme, the Company
issued 34,277,228 ordinary shares of US$0.01 each at a price of US$1.030 per
ordinary share, raising gross proceeds of US$35.3 million.
Expenses incurred of US$3.6 million were determined to be directly
attributable to the equity transactions and would have otherwise been avoided
if the shares had not been issued. These expenses include broker fees and
commissions, sponsor fees and amounts paid to lawyers, accountants and other
professional advisors in relation to the IPO and the subsequent placing
programme. Such expenses have been recognised directly in share premium.
15. Special distributable reserve
In March 2022, the Company was granted court approval for a capital reduction
process to cancel US$112.0 million of share premium which was transferred to
the special distributable reserve. During 2023, the Company paid dividends of
US$4.4 million from this reserve (2022: US$1.9 million). At 31 December 2023,
the special distributable reserve was US$105.7 million and is fully
distributable.
16. Net asset value per ordinary share
As at 31 December As at 31 December
2023 2022
Total shareholders' equity (US$'000) 81,549 86,580
Number of ordinary shares in issue (000s) 175,685 175,685
Net asset value per ordinary share (cents) 46 49.28
17. Financial instruments by category
The table below sets out the classifications of the carrying amounts of the
Company's financial assets and financial liabilities into categories of
financial instruments. There are no non-recurring fair value measurements.
As at 31 December 2023
Financial assets at Financial Financial Total
amortised cost assets at fair liabilities at
value through amortised
profit or loss cost
US$'000 US$'000 US$'000 US$'000
Non-current assets
Investments at fair value through profit or loss - 42,065 - 42,065
Current assets
Cash and cash equivalents 41,170 - - 41,170
Total assets 41,170 42,065 - 83,235
Current liabilities
Trade payables - - (891) (891)
Total liabilities - - (891) (891)
Net assets 41,170 42,065 (891) 82,344
As at 31 December 2022
Financial assets at Financial Financial Total
amortised cost assets at fair liabilities at
value through amortised
profit or loss cost
US$'000 US$'000 US$'000 US$'000
Non-current assets
Investments at fair value through profit or loss - 11,491 - 11,491
Current assets
Cash and cash equivalents 115,819 - - 115,819
Total assets 115,819 11,491 - 127,310
Current liabilities
Trade payables - - (350) (350)
Total liabilities - - (350) (350)
Net assets 115,819 11,491 (350) 126,960
Financial instruments are held at carrying value as an approximation to fair
value unless stated otherwise.
IFRS 13 requires the Company to classify its investments in a fair value
hierarchy that reflects the significance of the inputs used in making the
measurements. IFRS 13 establishes a fair value hierarchy that prioritises the
inputs to valuation techniques used to measure fair value. The three levels of
fair value hierarchy under IFRS 13 are as follows:
Level 1: fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities
Level 2: fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices)
Level 3: fair value measurements are those derived from valuation techniques
that include inputs to the asset or liability that are not based on observable
market data (unobservable inputs)
As at 31 December 2023
Level 1 Level 2 Level 3 Total
US$'000 US$'000 US$'000 US$'000
Financial assets
Investments at fair value through profit or loss - - 42,065 42,065
Total financial assets - - 42,065 42,065
As at 31 December 2022
Level 1 Level 2 Level 3 Total
US$'000 US$'000 US$'000 US$'000
Financial assets
Investments at fair value through profit or loss - - 11,491 11,491
Total financial assets - - 11,491 11,491
There were no Level 1 or Level 2 assets during the year/period. There were no
transfers between Level 1 and 2, Level 1 and 3 or Level 2 and 3 during the
year/period.
Reconciliation of Level 3 fair value measurement of financial assets and
liabilities
An analysis of the movement between opening to closing balances of the
investments at fair value through profit or loss (all classified as Level 3)
is given in note 9.
The fair value of the investments at fair value through profit or loss
includes the use of Level 3 inputs. Refer to note 9 for details on the
valuation methodology.
18. Financial risk management
The Company is exposed to certain risks through the ordinary course of
business and its financial risk management objective is to minimise the effect
of these risks on its operations. The management of risks is the
responsibility of the Board. The Investment Manager and AIFM 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 the Company's operations.
The exposure to each financial risk considered potentially material to the
Company, how it arises and the policy for managing it is summarised below.
(i) Currency risk
The Company operates internationally and holds both monetary and non-monetary
assets denominated in currencies other than the US Dollar, the functional
currency. Foreign currency risk, as defined in IFRS 7, arises as the value of
future transactions and recognised monetary assets and monetary liabilities
denominated in other currencies fluctuate due to changes in foreign exchange
rates. IFRS 7 considers the foreign exchange exposure relating to non-monetary
assets and liabilities to be a component of market price risk and not foreign
currency risk. However, the Investment Manager monitors the exposure on all
foreign currency-denominated assets and liabilities.
Whilst the Company will not pursue long-term currency hedging, the Board
intends to substantially hedge future dividend payments to shareholders where
those payments are funded by non-US Dollar-denominated dividend income. This
hedging programme may cover up to a rolling two-year period. At 31 December
2023, the Company had not entered into any foreign exchange hedging
transactions for the purpose of managing its exposure to foreign exchange
movements (both monetary and non-monetary).
In relation to local currency debt facilities held at the investment portfolio
level, these are and should be in the same currency as the offtake agreement,
which provides a natural hedge to mitigate the currency risk. The Investment
Manager also includes prevailing assumptions on annualised currency
depreciation in its financial projections, so that its financial models
contain anticipated changes in currency value. As at 31 December 2023, the
SolarArise portfolio held debt of US$108.6 million on a 100% basis (2022:
US$106.8 million on a 100% basis and US$45.9 million on a 43% proportionate
share basis).
When the Investment Manager formulates a view on the future direction of
foreign exchange rates and the potential impact on the Company, the Investment
Manager factors that into its investment portfolio decisions. While the
Company has direct exposure to foreign exchange rate changes on the price of
non-US Dollar-denominated investments, it may also be indirectly affected by
the impact of foreign exchange rate changes on the earnings of certain of its
investments and, therefore, the sensitivity analysis below may not necessarily
indicate the total effect on the Company's net assets of future movements in
foreign exchange rates.
The table below summarises the Company's assets and liabilities, both monetary
and non-monetary, denominated in the currencies the Company was exposed to,
expressed in US$'000s.
As at 31 December 2023
US$ GBP PHP INR VND Other Total
Assets
Investments at fair value through profit or loss - 1,491 12,690 25,481 2,403 - 42,065
Trade and other receivables 269 2,101 - - - - 2,370
Cash and cash equivalents 41,060 61 - - - 49 41,170
Liabilities
Trade and other payables (1,402) (2,654) - - - - (4,056)
Net assets 39,927 999 12,690 25,481 2,403 49 81,549
% of NAV 49% 1% 16% 31% 3% 0% 100%
As at 31 December 2022
US$ GBP PHP INR VND Other Total
Assets
Investments at fair value through profit or loss - - 11,491 - - - 11,491
Trade and other receivables - 633 - - - - 633
Cash and cash equivalents 109,024 6,742 - - - 53 115,819
Liabilities
Trade and other payables (593) (2,270) - - - - (2,863)
Onerous contract provision - - - (38,500) - - (38,500)
Net assets 108,431 5,105 11,491 (38,500) - 53 86,580
% of NAV 125% 6% 13% (43%) 0% 0% 100%
(ii) Interest rate risk
The Company's interest and non-interest bearing assets and liabilities (both
monetary and non-monetary) are summarised below:
As at 31 December 2023
Interest Non-interest
bearing bearing Total
US$'000 US$'000 US$'000
Assets
Cash and cash equivalents 30,564 10,606 41,170
Trade and other receivables - 2,370 2,370
Investments at fair value through profit or loss 23,855 18,210 42,065
Total assets 54,419 31,186 85,605
Liabilities
Trade and other payables - (4,056) (4,056)
Onerous contract provision - -
Total liabilities - (4,056) (4,056)
As at 31 December 2022
Interest bearing Non-interest bearing Total
US$'000 US$'000 US$'000
Assets
Cash and cash equivalents - 115,819 115,819
Trade and other receivables - 633 633
Investments at fair value through profit or loss - 11,491 11,491
Total assets - 127,943 127,943
Liabilities
Trade and other payables - (2,863) (2,863)
Onerous contract provisions - (38,500) (38,500)
Total liabilities - (41,363) (41,363)
(iii) Power power risk
The Company is also exposed to power price risk on its investments, primarily
being future power prices. Wholesale electricity prices tend to be volatile
and are impacted by a variety of factors, including market demand, the
electricity generation mix in a specific market and fluctuations in the market
prices of certain commodities. Whilst SolarArise benefits from fixed priced
PPAs, NISPI's revenues are based on the wholesale electricity spot market
price in the Philippines and VSS's revenues are based on the applicable retail
tariff in Vietnam. The Investment Manager continually monitors the wholesale
electricity spot market price and forecasts and aims to put in place
mitigating strategies, such as securing fixed PPA contracts, to reduce the
exposure of the Company to this risk. The valuation sensitivity of the
investment portfolio to power prices is shown in note 9.
The Company's policy is to manage price risk arising from investments through
diversification of its investment portfolio and selection of investments in
renewable energy assets and other financial instruments within the specified
limits set out in the Company's investment policy, or otherwise set by the
Board. See this report for details on the Company's Investment Policy.
(iv) Credit risk
The Company is exposed to third-party credit risk in several instances and the
possibility that a counterparty with which the Company or its underlying
investment entities contract may fail to perform their obligations under a
commitment that it has entered into with the Company or its underlying
investment entities in the manner anticipated by the Company.
Credit risk arises where capital commitments are being made and is managed by
diversifying exposures among a portfolio of counterparties and through
applying credit limits to those counterparties with a lower credit standing.
Counterparty credit risk exposure limits are determined based on the credit
rating of the counterparty. Counterparties are assessed and monitored on the
basis of their ratings from Standard & Poor's and/or Moody's. No financial
transactions are permitted with counterparties with a credit rating of less
than BBB- from Standard & Poor's or Baa3 from Moody's, unless specifically
approved by the Board.
Credit risk also arises from cash and other assets that are required to be
held in custody by banks and other financial institutions. Cash held with
banks and other financial institutions will not be treated as client money
subject to the rules of the FCA and may be used by the bank in the ordinary
course of its own business. The Company will, therefore, be subject to the
creditworthiness of the bank or other financial institution. In the event of
insolvency of a bank or other financial institution, the Company will rank as
a general creditor in relation thereto and may not be able to recover such
cash in full, or at all. To mitigate this risk, cash and bank deposits are
only held with major financial institutions with high credit ratings assigned
by international credit rating agencies.
The Company has assessed the expected credit loss model in IFRS 9 and does not
consider any material impact on these Financial Statements. No balances are
past due or impaired.
(v) Liquidity risk
Liquidity risk is the risk that the Company may not be able to meet its
financial obligations as they fall due. The objective of liquidity management
is, therefore, to ensure that all commitments which are required to be funded
can be met out of readily available and secure sources of funding.
At 31 December 2023, the Company's financial liabilities were trade payables.
The Company intends to hold sufficient cash to meet its working capital needs
over a horizon of at least the next 12 months from the signing of these
Financial Statements. The Company held cash and cash equivalents of US$41.2
million at 31 December 2023, with total financial and non-financial
liabilities of US$4.1 million.
Cash flow forecasts are prepared by the Investment Manager on a quarterly
basis for a rolling six-month period to assist in the ongoing analysis of
short-term cash flow, and for at least 12 months to cover the Company's going
concern assessment. The Directors monitor forecast and actual cash flows from
operating, financing and investing activities to consider payment of trade and
other payables, payment of dividends or the funding of additional investing
activities. The Company also ensures that it maintains adequate cash reserves
by monitoring the forecast and actual cash flows.
The following table shows the maturity analysis of financial liabilities held:
As at 31 December 2023
Less than 1-5 years More than Total
1 year
5 years
US$'000 US$'000 US$'000 US$'000
Liabilities
Trade and other payables (891) - - (891)
(891) - - (891)
As at 31 December 2022
Less than 1-5 years More than Total
1 year
5 years
US$'000 US$'000 US$'000 US$'000
Liabilities
Trade and other payables (350) - - (350)
(350) - - (350)
Capital risk management
The Company manages its capital to ensure that it will be able to continue as
a going concern while maximising the capital return to shareholders. The
capital structure of the Company at 31 December 2023 consists of equity
attributable to equity holders of the Company, comprising issued share capital
and reserves, including accumulated losses. The Board continues to monitor the
balance of the overall capital structure so as to maintain investor and market
confidence. The Company is not subject to any external capital requirements.
The Company does not have any debt. However, it is permitted to have debt
within its underlying investments. Per the Company's investment policy,
gearing should not exceed 65% of the Adjusted GAV (measured at the time the
facility is entered into), with the Company targeting gearing of below 50% in
the medium term. External debt financing as at 31 December 2023 is comprised
of outstanding principal amounts of US$109.8 million, representing a leverage
ratio of 57%.
19. Related party transactions
AIFM
The Company is classified as an Alternative Investment Fund under the EU
Alternative Investment Fund Managers' Directive as incorporated into UK law
and is, therefore, required to have an AIFM. The Company's AIFM is Adepa Asset
Management S.A.
The AIFM is entitled to an annual management fee at the following rates,
subject to a minimum fee of US$75,000, based on the NAV and payable quarterly
in arrears:
Fee based on NAV
Up to US$200 million 0.055%
Between US&200-400 million 0.045%
Between US&400-1,000 million 0.035%
Above US$1 billion 0.025%
The AIFM is also entitled to an annual risk management fee of EUR14,500.
During the year, the AIFM was entitled to management fees of US$122,384 (2022:
US$94,000). Of this total, no amounts remained outstanding at the balance
sheet date (31 December 2022: US$34,000 included in trade payables).
Investment Manager
The AIFM, with the agreement of the Company, has delegated the portfolio
management of the Company to the Investment Manager. For the period from IPO
to 31 October 2023, the Investment Manager was ThomasLloyd Global Asset
Management (Americas) LLC (the "Former Investment Manager").
Management fees to the Former Investment Manager were payable quarterly in
arrears and calculated at the following rates, based on the NAV on the last
business day of the relevant quarter:
Fee based on NAV
Up to US$700 million 1.3%
US$700 million to US$2.0 billion 1.1%
Over US$2.0 billion 1.0%
For the period from 1 January 2023 to 31 October 2023, management fees of
US$1.0 million (2022: US$1.4 million) may be claimed by the Former Investment
Manager. Of this total, US$1.0 million (31 December 2022: US$0.2 million)
remained outstanding at the balance sheet date (and is not being paid to the
Former Investment Manager whilst the Board evaluates all available options).
The Investment Management Agreement between the AIFM, Company and Former
Investment Manager (the "IMA") was terminated with effect from 31 October
2023. From 1 November 2023, Octopus Energy Generation were appointed as
transitional Investment Manager to cover an initial period through to 30 April
2024. For this initial term, the Company will pay OEGEN a management fee of
US$1.35 million. At the end of the term, at the discretion of the Board, there
is scope for OEGEN to earn an additional management fee of up to US$0.55
million for its services during the initial period. As at 31 December 2023,
investment management fees of US$0.5 million remained outstanding and payable
to OEGEN.
Transactions with the Former Investment Manager
Acquisition of SolarArise
The Company acquired its 43% economic interest in SolarArise from ThomasLloyd
SICAV, ThomasLloyd Cleantech Infrastructure Fund SICAV and ThomasLloyd
Cleantech Infrastructure Holding GmbH, all related parties of the Former
Investment Manager. The acquisition agreement signed in November 2021 was
amended prior to completion in August 2022 to provide for the consideration to
be changed from a fixed number of ordinary shares to a variable number of
shares based on an average 10-day share price prior to the date of allotment,
to update the fair value to that at 30 June 2022 as opined on by an
independent third-party and to provide for the number of ordinary shares to be
issued as consideration to be net of withholding tax of US$2.7 million, which
was required to be withheld and remitted by the Company to the tax authorities
on behalf of the sellers.
At November 2021, the consideration payable was US$34.6 million, which was to
be settled by the issue of 34,606,872 ordinary shares in the Company
(equivalent to an issue price of US$1.00 per share). Following the amendments
referred to above and on completion of the acquisition of 43% of SolarArise,
the aggregate consideration was US$32.9 million, settled net of a withholding
tax payable of US$2.7 million, through the issue of 26,014,349 ordinary shares
at an issue price US$1.16035 per share.
Acquisition of NISPI
On 17 December 2021 the Company acquired its 40% economic interest in NISPI
from ThomasLloyd CTI Asia Holdings Pte Ltd, which is a related party of the
Former Investment Manager and shares an ultimate beneficial owner with the
Former Investment Manager. Under the acquisition agreement, the Company paid
an initial cash consideration of US$25.4 million and may have been required to
pay an additional contingent cash consideration of up to US$22.0 million if
NISPI, prior to June 2023, was awarded a power purchase agreement pursuant to
a Green Auction carried out by the Department of Energy of the Philippines. If
such contingent consideration was payable, the consideration would have been
settled 10 business days after the Green Auction purchase price agreement is
awarded. On 10 June 2022, the Company and ThomasLloyd CTI Asia Holdings Pte
Ltd agreed to extend the date for payment of any contingent consideration to
the earlier of (i) 31 December 2026 and (ii) 10 business days after a further
capital raise by the Company, the purpose of which includes funding payment of
contingent consideration (or, if the updated valuation has not been received
prior to such fund raise, 10 business days after the updated valuation has
been received).
NISPI was not awarded a PPA prior to June 2023 and therefore no further
consideration is payable for the acquisition of NISPI.
Directors
The Company has four non-executive Directors. The standard Director's fee is
set at £50,000 per annum (2022: £50,000), with the remuneration for the
Chair of the Board set at £65,000 per annum (2022: £50,000) and for the
Chair of the Audit and Risk Committee at £55,000 per annum (2022: £50,000).
Total Directors' fees of US$261,314, (2022: US$255,000) with associated
payroll taxes of US$25,266 (2022: US$11,000), have been incurred in respect of
the year. Total expenses of US$4,203 (2022: US$6,000) were also paid to the
Directors in the year, of which none was outstanding at the year end (31
December 2022: US$1,000).
The Directors had the following shareholdings in the Company, all of which
were beneficially owned.
Ordinary shares held as at Ordinary shares held as at
date of
31 December
this report
2023
Sue Inglis 65,000 65,000
Kirstine Damkjaer - -
Mukesh Rajani 33,000 33,000
Clifford Tompsett 33,000 33,000
20. Subsidiaries, joint ventures and associates
As a result of applying Investment Entities (Amendments to IFRS 10, IFRS 12
and IAS 27), no subsidiaries have been consolidated in these Financial
Statements. AEIT has control of AEIT Holdings Limited, SolarArise, VSS and
their subsidiaries, either directly or indirectly, and therefore the transfer
of dividends is dependent on there being suitable distributable reserves. The
Company does not have a controlling stake in NISPI and, therefore, the
transfer of dividends is dependent on both the availability of sufficient
distributable reserves and the approval of co-shareholders. For those
subsidiaries with external debt, all debt agreements are complied with. The
Company's subsidiaries and associates are listed below:
Place of Registered Ownership
Name Category business Office* interest
AEIT Holdings Limited Intermediate Holdings UK A 100%
Negros Island Solar Power Inc. ("NISPI") Project company Philippines B 34%(43)
SolarArise India Projects Private Ltd ("SolarArise") Intermediate Holdings India C 100%
Talettutayi Solar Projects Private Limited Project company India D 100%
Talettutayi Solar Projects One Private Limited Project company India D 100%
Talettutayi Solar Projects Two Private Limited Project company India D 100%
Talettutayi Solar Projects Four Private Limited Project company India D 100%
Talettutayi Solar Projects Five Private Limited Project company India D 100%
Talettutayi Solar Projects Six Private Limited Project company India D 100%
Talettutayi Solar Projects Eight Private Limited Project company India D 100%
Talettutayi Solar Projects Nine Private Limited Project company India D 100%
Talettutayi Solar Projects Ten Private Limited Project company India D 100%
Viet Solar System Company Limited ("VSS") Intermediate holdings and project company Vietnam E 99.8%
VSS Ba Ria Co., Limited Project company Vietnam E 99.8%
VSS Vung Tau Co., Limited Project company Vietnam E 99.8%
Vtech Chau Duc Co., Limited Project company Vietnam E 99.8%
Vtech Vung Tau Co., Limited Project company Vietnam E 99.8%
* Registered offices:
A - The Scalpel, 18th Floor, 52 Lime Street, London, EC3M 7AF, United Kingdom
B - Emerald Arcade, F.e. Ledesma 8t., San Carlos, Negros Island, Philippines
C - A-39, LGF, Lajpat Nagar, Part-1 New Delhi-110024, India.
D - Unit No. 1004, 10th Floor, BPTP Park Centra, Sector 30, NH-8,
Gurugram-122001, Haryana, India.
E - Lot 21, Road D.02, Chau Duc Industrial Area, Quang Tay Hamlet, Nghia Thanh
Commune, Chau Duc District, Ba Ria - Vung Tau Province, Vietnam.
As at 31 December 2023, investments into AEIT Holdings, NISPI and SolarArise
were held directly. All other investments were held indirectly.
21. Guarantees, contingent liabilities and other commitments
As at 31 December 2023, the Company has no financial guarantees or other
commitments into which it has entered.
As at 31 December 2022, the Company had the following financial guarantees,
contingent liabilities and other commitments:
NISPI - contingent consideration
The sale and purchase agreement for the acquisition of the 40% economic
interest in NISPI provided for an initial cash consideration of US$25.4
million and potentially an additional contingent cash consideration of up to
US$22.0 million. As at 31 December 2022, this contingent cash consideration
was dependent upon NISPI being awarded a PPA, prior to June 2023, by the
Philippine's Department of Energy under their Green Auction process. At 31
December 2022 any payment was considered remote and therefore was fair valued
at US$nil. NISPI was not awarded a PPA under a Green Auction prior to June
2023.
AEIT Holdings - funding
As at 31 December 2022, the Company committed to provide US$5.0 million of
funding to AEIT Holdings to acquire a 99.8% interest in VSS, a privately owned
company which holds 6.12 MWp of rooftop solar assets. The funding was provided
through the issue of shares by AEIT Holdings to the Company for cash. The
funding was provided on 20 April 2023 and the acquisition of VSS completed on
31 May 2023 for US$3.1 million.
SolarArise - acquisition of additional 57% economic stake
On 20 June 2022 the Company made a commitment to purchase the remaining 57% of
SolarArise for a total consideration of US$38.5 million. As at 31 December
2022, the Company had identified an onerous contract and recognised a
provision of US$38.5 million in respect of this commitment. This provision
represents the Company's best estimate of the fair value of 57% of SolarArise
(which was US$nil after factoring in the liabilities associated with the RUMS
project) less the consideration payable as of 31 December 2022. Completion of
the purchase of 57% of SolarArise occurred on 13 January 2023. There is no
remaining commitment as at 31 December 2023.
22. Post year end events
In March 2024, the Board approved additional cash funding of up to US$4.5
million to fund project delays and additional costs for the RUMS project.
In April 2024, having undertaken a comprehensive strategic review of the
options for the Company's future and after consultation with its advisers and
having taken into account feedback from investors representing a significant
proportion of AEIT's issued share capital, the Board concluded that it is in
the best interests of shareholders as a whole to put forward a proposal for
the orderly realisation of AEIT's assets. The proposal will seek to achieve a
balance between maximising the value of AEIT's investments and progressively
returning cash to shareholders in a timely manner. Details of this proposal,
which is subject to shareholder approval at a general meeting of the Company
expected to be held in Q2 2024, will be set out in a separate circular to
shareholders and will be made available on the Company's website in due
course. For this reason these financial statements have been prepared on a
basis other than that of a going concern. Please see Note 2 for further
details.
On 1 May 2024 the Company announced a temporary share suspension. Due to a
small number of outstanding points in respect of the Company's Annual Report
and audit for the year ended 31 December 2023 the Company was not able to
publish the Annual Report by the required regulatory deadline of 30 April
2024, resulting in the suspension of the listing of and trading in the
Company's shares. Now that the Annual Report has been published in accordance
with the Company's obligations, the Board will move expeditiously to apply to
the FCA for a restoration of the Company's listing.
On 2 May 2024 the Company received US$5.6 million from its investment in
NISPI. The monies received arise after successful collaboration with the joint
owners to approve a partial redemption of shares in NISPI. Following this cash
return, the level of economic ownership and percentage of voting rights that
AEIT holds in NISPI remains unchanged. On a pro forma basis, the return is
broadly NAV neutral for the Company.
(43) The Company's economic interest in NISPI is 40%.
Other information
Alternative Performance Measures
In reporting financial information, the Company presents alternative
performance measures ("APMs"), which are not defined or specified under the
requirements of IFRS. The Company believes that these APMs, which are not
considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance of the
Company. The Directors assess the Company's performance against a range of
criteria which are viewed as particularly relevant for listed closed-ended
investment companies. The APMs presented in this Annual Report are shown
below:
NAV per share
A measure of the value of the Company attributable to each share, at the
reporting date. The calculation of NAV per share is shown in note 16 to the
Financial Statements.
NAV total return
A measure of success of the Company's investment strategy. The NAV total
return per share includes both income and capital returns by taking into
account any increase or decrease in the NAV per share over the relevant period
and assuming that dividends paid to shareholders during the relevant period
are reinvested at the NAV per share on the dividend payment date.
31 December 2023 (since IPO) NAV
NAV per share at IPO (14 December 2021) - cents a 98.00
NAV per share at 31 December 2023 - cents b 46.42
Dividends paid since IPO - cents c 3.82
Benefits of reinvesting dividends - cents(44) d (2.74)
Total return (expressed as a percentage) ((b+c+d)÷a)-1 -51.5%
31 December 2022 (since IPO) NAV
NAV per share at IPO (14 December 2021) - cents a 98.00
NAV per share at 31 December 2022 - cents b 49.28
Dividends paid in the year - cents c 1.32
Benefits of reinvesting dividends - cents(44) d (0.78)
Total return (expressed as a percentage) ((b+c+d)÷a)-1 -49.2%
31 December 2023 (reporting period) NAV Return
NAV per share at 31 December 2022 - cents a 49.28
NAV per share at 31 December 2023 - cents b 46.42
Dividends paid in the year - cents c 2.50
Benefits of reinvesting dividends - cents(44) d (1.42)
Total return (expressed as a percentage) ((b+c+d)÷a)-1 -3.6%
GAV, Adjusted GAV and gearing
GAV is a measure of the total size of the Company and is the total value of
the assets of the Company, being the aggregate of the fair value of its
investment portfolio and any cash and cash equivalents. Leverage is not
employed at the Company level but may be employed within investment portfolio.
Adjusted GAV is a measure of the total size of the Company, including, on a
look through basis, its proportionate share of any leverage within its
investment portfolio, and forms the basis on which the gearing restriction in
the Company's investment policy is calculated. Gearing is a measure of the
potential financial risk to which the Company is exposed and is its
proportionate share of any leverage within its investment portfolio expressed
as a percentage of Adjusted GAV.
31 December 2023 31 December 2022
US$ million US$ million
Value of investment portfolio a 42.1 11.5
Cash and cash equivalents of the Company b 41.2 115.8
GAV a+b=c 83.3 127.3
Debt in underlying SPVs(45) d 109.8 45.9
Adjusted GAV c+d=e 193.1 173.3
Gearing d÷e 57% 27%
(44 ) Calculated by taking the dividend per share and assuming it is
invested at the prevailing NAV per share on the dividend payment date.
(45 ) Pro-rated for economic ownership where applicable.
Net operational asset value
The value of the Company's operational asset investments, excluding
construction and development projects. This provides a measure of the value of
the investment portfolio that is revenue generating and makes a positive
contribution to the Company's dividend cover.
As at As at
31 December 2023 31 December 2022
US$ million US$ million
Value of investment portfolio a 42.1 11.5
Value of construction projects b 0.7 (12.0)
Value of development projects c 1.9 -
Total operational asset value a-b-c 39.5 23.5
Market capitalisation
Market capitalisation is a measure of the value of the Company as determined
by the stock market and is the total value of all outstanding shares at the
prevailing market price.
As at 31 December 2023, the shares of the Company were suspending from trading
and as such no calculation is shown at this date.
As at
31 December 2022
US$ million
Share price (US$ per share) a 1.18
Shares in issue at period end b 175,685
Market capitalisation axb 207.3
Ongoing charges ratio
The ongoing charges ratio is a measure of the recurring annual costs of
running the Company based on historical data. It is calculated using the AIC
methodology and is the Company's recurring operating expenses for the last 12
months expressed as a percentage of the average published net assets for that
period. Recurring operating expenses exclude the costs of buying and selling
investments, any non-recurring costs and the costs of issuing shares.
As at 31 December 2023 US$ million
NAV
Q1 2023(46) a 86.6
Q2 2023 b 89.9
Q3 2023 c 88.5
Q4 2023 d 81.5
Average NAV (a+b+c+d)/4=e 86.6
Total expenses f 6.4
Transaction costs g -
Other non-recurring expenses h (4.2)
Add realised FX gains i 0.3
Add net finance income j 0.6
Annualised expenses f-g-h+i+j=k 3.1
Ongoing charges ratio (expressed as a percentage) k÷e 3.58%
(46 ) Since there was no published or available NAV for Q1 2023, the Q4 2022
NAV has been used instead.
Period ended 31 December 2022 US$ million
Reported NAV
Q1 2022 a 106.2
Q2 2022 b 115.2
Q3 2022 c 142.5
Q4 2022 d 86.6
Average NAV (a+b+c+d)/4=e 112.7
Total expenses f 3.3
Less transaction costs g (0.3)
Less non-audit related services h (0.2)
Less other non-recurring expenses i (1.5)
Add realised FX gains j 1.7
Annualised expenses (f+g+h+i+j)/12.5*12=k 2.9
Ongoing charges ratio (expressed as a percentage) k÷e 2.50%
% of sustainable investments
The proportion of the Company's sustainability-related investments after
classifying the Company's cash as 'unsustainable'. This is disclosed in the
SFDR periodic disclosures.
As at 31 December As at 31 December
2023 2022
US$ million US$ million
Fair value of investments a 42.1 11.5
Net assets of the Company b 81.5 88.8
Onerous contract provision c - 38.5
Adjusted net assets of the Company b+c=d 81.5 127.3
% of sustainable investments a÷d 51.6% 9.0%
Committed for 57% of SolarArise e - 38.5
Committed for 99.8% of VSS f - 3.1
Total commitments e+f=g - 41.6
% of sustainable investments (including commitments) (a+g)÷d 51.6% 41.7%
Excluding cash, 100% of the Company's investments are sustainable.
SFDR Principle Adverse Impacts Statement for financial products (Unaudited)
SFDR Principle Adverse Impacts Statement for financial products (Article 7 of
SFDR)
Financial market participant: Asian Energy Impact Trust
Summary
Asian Energy Impact Trust plc (AEIT) LEI 254900V23329JCBR9G82 through its
Investment Manager during the period, ThomasLloyd Global Asset Management
(Americas) LLC, the "Former Investment Manager", for the period to 31 October
2023. Octopus Renewables Limited, trading as Octopus Energy Generation, the
"Transitional Investment Manager" for the period to 31 December 2023),
considered principal adverse impacts of its investment decisions on
sustainability factors. The present statement is the consolidated statement on
principal adverse impacts on sustainability factors of AEIT. This statement on
principal adverse impacts on sustainability factors covers the reference
period from 1 January 2023 to 31 December 2023. The indicators presented are
based on data directly provided by investee companies and reviewed by the
Transitional Investment Manager. This statement considers SolarArise's Q2
current value for its Q1 current value. Without doing so, this results in the
SolarArise being valued at zero due to material negative value of the RUMS
project at that time. A value of 0 at Q1 would mean all data pertaining to
SolarArise, would not have been considered due to the mathematical
calculations. Applying the Q2 value ensures that SolarArise reflects a
non-zero value and PAIs are more reflective of the assets. To complete a
comprehensive assessment of Scope 1, 2 and 3 assessments, the Transitional
Investment Manager engaged with Altruistiq to identify the most appropriate
emissions factors to both activity related data and financial expenditures. On
climate and environment related indicators: the GHG emissions associated with
the AEIT portfolio are a small fraction of the avoided emissions associated
with the clean energy generation it has financed, even when all three scopes
are accounted for. The Transitional Investment Manager will continue to work
with investee companies to explore opportunities to further reduce this
footprint, in order to improve carbon footprint, carbon intensity, and reduce
non-renewable energy consumption PAIs wherever possible. Portfolio emissions
or intensity targets are not yet proposed. No investments had negative impacts
on biodiversity sensitive areas, and emissions to water and hazardous waste
were small across the portfolio. On social and employee issues, respect for
human rights, anti-corruption and anti-bribery matters, no major issues
related to the UN Global Compact or OECD Guidelines for Multinational
Enterprises were reported, and grievance mechanisms were in place. Further
engagement with investee companies will strengthen the practical
implementation of existing policies and effectiveness of grievance mechanisms.
The data presented in this PAI statement for AEIT has been reviewed by the
Board.
Indicators applicable to investments in investee companies (AEIT investment
portfolio including commitment to SolarArise)
Adverse sustainability indicator Metric Impact 2023 Impact 2022 Explanation Actions taken, and actions planned and targets set for the next reference
period
Climate and other environment-related indicators
Greenhouse gas (GHG) emissions 1. GHG emissions Scope 1 GHG Emissions 7.1 tCO(2)e 23.0 tCO(2)e The Transitional Investment Manager used Altruistiq, to complete its GHG In 2023, the Transitional Investment Manager engaged with investee companies
footprint. GHG emissions were calculated in line with the iCI and ERM to better capture their GHG emissions. The Transitional Investment Manager
Greenhouse Gas Accounting and Reporting Guide for the Private Equity Sector will continue to engage with Investee companies to also look for innovative
(2022), using the operational control boundary approach. ways to reduce their carbon footprint, especially in relation to construction
activities. At this stage, GHG emission reduction targets are not being set.
The increase in GHG emissions compared to 2022 can be explained by the carbon
emissions generated through the construction activities at TT9. The Transitional Investment Manager's ESG policies excluded investment in coal
or nuclear fired power, and oil and gas projects.
Scope 2 GHG Emissions 295.9 tCO(2)e 68.2 tCO(2)e
Scope 3 GHG Emissions 18,668.2 tCO(2)e 598.7 tCO(2)e
Total GHG Emissions 18,971.2 tCO(2)e 689.9 tCO(2)e
2. Carbon footprint Carbon footprint 749.24 22.2 tCO(2)e/EUR m
tCO(2)e/
EUR m
3. GHG intensity of investee companies GHG intensity of investee companies 4,795.57 tCO(2)e/ EUR m revenue 213.6 tCO(2)e/EUR m revenue
4. Exposure to companies active in the fossil fuel sector Share of investments in companies active in the fossil fuel sector 0 0
5. Share of nonrenewable energy Share of non-renewable energy consumption and non-renewable energy production a) 57% (note, all energy consumption was from non renewable sources)) a) 100% (all consumption from nonrenewable sources) Calculating the proportion of non-renewable energy consumption to renewable The Transitional Investment Manager will continue to work with companies to
of investee companies from non-renewable energy sources compared to renewable
energy consumption was not possible across all investee companies and quarters explore opportunities to reduce their consumption of non-renewable energy and
energy sources, expressed as a percentage of total energy sources b) 0% (all production from renewable sources) b) 0% (all production from renewable sources) owing to periods of no energy consumption. This limitation in the calculation improve energy efficiency.
approach has skewed the share percentage to 58%. In actuality, all recorded
energy consumption across the investee companies originated from non-renewable
energy sources.
The investment portfolio is focused on renewable energy production. However,
some non-renewable energy is used through diesel generator sets for backup
power and purchasing electricity from the grid to support overnight functions
for the solar portfolio.
6. Energy consumption intensity per high impact climate sector Energy consumption in GWh per million EUR of revenue of investee companies, 0.055 GWh/ EURm 0.075GWh/ EURm Renewable energy generation is allocated to the NACE sector "electricity, gas,
per high impact climate sector steam and air conditioning supply" (NACE code D/35) classified in total as
high impact climate sector. For the purposes of this PAI indicator regulation
2022/1288 does not differentiate between renewable energy generation and other
forms of energy generation which have a high climate impact.
Biodiversity 7. Activities negatively affecting biodiversity - sensitive areas Share of investments in investee companies with sites/operations located in or 0% 0% None. To ensure no significant harm to biodiversity and ecosystems, environmental
near to biodiversity-sensitive areas where activities of those investee screening is conducted for all investments.
companies negatively affect those areas
Water 8. Emissions to Water Tonnes of emissions to water generated by investee companies per million EUR 0.000 tonnes 0.002 tonnes As the current portfolio comprises entirely of solar plants, these emissions The Transitional investment Manager will continue to monitor this critical
invested, expressed as a weighted average are not associated with their operations. issue.
Waste 9. Hazardous waste and radioactive waste ratio Tonnes of hazardous waste and radioactive waste generated by investee 0.03 tonnes 0.04 tonnes Small amounts of waste generated as part of normal site maintenance and/or The Transitional Investment Manager will continue to explore opportunities to
companies per million EUR invested, expressed as a weighted average construction activities. Contractors on site dispose of the hazardous waste reduce the production of hazardous waste and promote circular economy
responsibly in line with waste management policies, where applicable. approaches.
Indicators for Social and Employee, Respect for Human Rights, Anti-Corruption
and Anti-Bribery Matters
Social and Employee 10. Violations of UN Global Compact principles and Organisation for Economic Share of investments in investee companies that have been involved in 0% 0% No violations have been reported. Further engagement with investee companies will strengthen their
Matters Cooperation and Development (OECD) Guidelines for Multinational Enterprises violations of the UNGC principles or OECD Guidelines for Multinational implementation of the OECD Guidelines for Multinational Enterprises and the
Enterprises effectiveness of grievance mechanisms.
11. Lack of processes and compliance mechanisms to monitor compliance with UN Share of investments in investee companies without policies to monitor 0% 0% All investee companies have grievance mechanisms in place through which any The Transitional Investment Manager will continue to work closely with the
Global Compact principles and OECD Guidelines for Multinational Enterprises compliance with the UNGC principles or OECD Guidelines for Multinational stakeholder can raise concerns about their project implementation frameworks, investee companies to identify and action areas where implementation of these
Enterprises or grievance /complaints handling mechanisms to address violations and complaints lodged through these mechanisms are reported to the frameworks can be further enhanced, make information about the functioning of
of the UNGC principles or OECD Guidelines for Multinational Enterprises Transitional Investment Manager. these mechanisms more readily available, and establish appropriate policies to
promote respect for human rights in all activities, including with their
suppliers.
12. Unadjusted gender pay gap Average unadjusted gender pay gap of investee companies 14% 37% Gender pay-gap analysis was not possible at SolarArise and VSS given no The Transitional Investment Manager will continue to monitor and encourage
employees. At NISPI the gender pay gap was 32%. investee companies to consider diversity and equality in their operating
priorities, local culture and needs.
13. Board gender diversity Average ratio of female to male board members in investee companies, expressed 91% 74% The increase in ratio from the previous year can be attributed to the The Transitional Investment Manager will look to advocate for gender equality
as a percentage of all board members acquisition of VSS portfolio that only has male board members. across investee company governance.
14. Amount of accumulated earnings in noncooperative tax jurisdictions Amount of accumulated earnings at the end of the relevant financial year from 0 N/A - new for 2023 The Company does not have any investments in non-cooperative tax
investee companies where the total consolidated revenue on their balance sheet jurisdictions.
date for each of the last two consecutive financial years exceeds total EUR
750M in jurisdictions that appear on the revised EU list of noncooperative
jurisdictions for tax purposes
15. Exposure to controversial weapons (antipersonnel mines, cluster munitions, Share of investments in investee companies involved in the manufacture or 0% 0% Not applicable due to exclusion. Not applicable. These sectors are excluded.
chemical weapons and biological weapons) selling of controversial weapons
16. Exposure to companies involved in the cultivation and production of Share of investments in investee companies involved in the cultivation or 0% N/A - new for 2023 Not applicable due to exclusion. Not applicable. These sectors are excluded.
tobacco production of tobacco
17. Interference in the formation of trade unions or elections of worker Share of investments in investee companies without commitments on their 0% N/A - new for 2023 The Transitional Investment manager's Supplier Code of Conduct considers The Transitional Investment Manager will continue to monitor alignment of
representatives non-interference in the formation of trade unions or election of worker freedom of association and the right to collective bargaining. investee companies to its Supplier Code of Conduct.
representatives
18. Share of employees in investee companies earning less than adequate wage Average percentage of employees in investee companies earning less than the 0% N/A - new for 2023 The majority of investee companies do not have employees. The investee company N/A
adequate wage with employees had 0% of employees earning less than adequate wage.
Additional climate and other environment-related Indicators
Water 6. Water Usage (a) Average amount of water consumed by the investee companies (in cubic a) 1,107.6 m3/EURm (a) 751.7 m(3)/ EUR m Water consumption at investee companies fluctuated over the course of 2023, Efforts to improve water consumption efficiency reflecting the level of water
meters) per million EUR of revenue of investee companies (b) percentage of
with less consumption during rainy periods, and substantially higher scarcity at site level are needed at all sites. The Transitional Investment
water recycled and reused by investee companies b) 0.19% (b) 0% consumption during periods of high pollution that result in a greater need for Manager will continue to engage with investee companies to explore site
solar panel cleaning. A nearby cement factory emitted significant pollution, appropriate responses. The Transitional Investment Manager will encourage
necessitating increased cleaning of the solar panels at one of AEIT's assets. higher rates of water recycling and reuse.
Water recycling and reuse started to be tracked during the period, however the
rate was low.
Additional social and employee, respect for human rights, anti-corruption and
anti-bribery matters indicator
Social and employee 3. Number of days lost to injuries, accidents, fatalities or illness Number of workdays lost to injuries, accidents, fatalities or illness of 0 0 Investee companies reported no workdays lost to health and safety related Continued vigilance in monitoring incidents at managed sites is needed, and
matters investee companies expressed as a weighted average issues. sustained efforts to maintain high health and safety standards are required.
4. Lack of a supplier code of conduct Share of investments in investee companies without any supplier code of 0% N/A - new for 2023 The Transitional Investment Manager has a Supplier Code of Conduct and
conduct (against unsafe working conditions, precarious work, child labour and requires the Company's investee companies to either adhere to the Transitional
forced labour) Investment Manager's Supplier Code of Conduct or adopt one that is equally
robust.
Anti-corruption and anti-bribery 20. Lack of anti-corruption and anti-bribery policies Share of investments in entities without policies on anti-corruption and 0% N/A - new for 2023 The Transitional Investment Manager has an anti-bribery policy and all The Transitional Investment manager will continue to formalise its approach in
anti-bribery consistent with the United Nations Convention against Corruption investee companies either align to the Transitional Investment Manager's or assessing the alignment of key portfolio service providers to these standards.
have adopted their own policy.
Other indicators used to identify and assess additional principal adverse
impacts on a sustainability factor
Other Number of community complaints Number of community complaints received by investee companies 0 N/A - new for 2023 The Transitional Investment Manager will continue to engage with community
stakeholders and find innovative ways to realise benefits for the community.
Description of policies to identify and prioritise principal adverse impacts
on sustainability factors
The Transitional Investment Manager has a Responsible Investment Policy
(https://a.storyblok.com/f/154679/x/4bc5613407/oegen-responsible-investment-policy-june-2023-vf.pdf)
that sets out the approach to identifying and managing environmental, social
and governance ("ESG") matters and the principles that they adopt. These
principles are in line with the UN Principles for Responsible Investment (UN
PRI) to which the Transitional Investment Manager is a signatory. These
policies outline risks and mitigations aligned to potential adverse impacts on
sustainability factors.
The Transitional Investment Manager seeks is embedding the principles set out
in the Responsible Investment Policy into investment decisions and ongoing
management of investments to actively manage sustainability risks. In addition
to having a no fossil fuel or nuclear energy-related investments policy, ESG
risk management is ingrained in the way the Transitional Investment Manager
originates and executes investment decisions, as well as in ongoing portfolio
and asset management. AEIT's approach is based on a triple-return approach
that considers social and environmental objectives alongside the financial
returns of the Company.
The Company is currently undertaking a strategic review and at this time, no
new investments will be made. The outcome of the strategic review will
determine the appointment of a long-term Investment Manager and the investment
processes and polices that will be put in place to manage sustainability
factors during the investment cycle.
The principle adverse impacts, those that are most likely to be material to
renewable energy investments, are outlined in the table above. No PAI
indicators were available within the SFDR RTS for community relations,
therefore a bespoke metric has been included on a voluntary basis as
communities form an important backbone to energy investments.
Ongoing data collection in line with the PAI Indicators is requested either
directly from investee companies or as part of counterparty contracts from
operations and maintenance providers, HSE providers, and/or external asset
managers. Ongoing management and oversight of principle adverse impacts is the
responsibility of the Asset Management or Development Team. Any issues are
escalated to the Octopus Energy Generation Asset Board before being escalated
to the Company's ESG committee as appropriate. All data is consolidated,
reviewed, and signed off by the ESG team before being put forward to the AEIT
ESG Board Committee for approval.
The Transitional Investment Manager obtains information concerning the PAIs
directly from investee companies. To ensure the reliability and accuracy of
the data, the Transitional Investment Manager works closely with specialised
external advisors, particularly carbon consultants. These advisors thoroughly
review the Transitional Investment Managerʼs methodologies in regards to GHG
emission PAIs and offer valuable insights based on industry best practices.
The data collection process:
· KPI data is primarily sourced directly from the Investee
Companies or the third party service providers that help manage them. This
information is then complemented, as needed and where relevant, by the
expertise of the Transitional Investment Manager's own asset managers and ESG
team and by the carbon consultants. This information is sourced from the
periodic reports from Company's Operations and Maintenance (O&M) service
providers, Asset Managers or other service providers. These reports consist of
a standardised set of KPIs, as well as qualitative factors like health and
safety, adherence to applicable laws and regulations, engagement with local
communities, and biodiversity metrics, whenever relevant.
· Carbon footprint indicators are measured in line with the iCI and
ERM Greenhouse Gas Accounting and Reporting Guide for the Private Equity
Sector (2022). This methodology was developed to complement both the World
Resources Institute's Greenhouse Gas Protocol Standards and the Partnership
for Carbon Accounting Financials' Standard for the financial industry. This
approach consolidates the organisational boundary according to the operational
control approach. For more information on the carbon footprint methodology and
definitions, see the carbon footprint section of the Impact report. The
calculations of emissions are verified by third-party consultants.
· The Transitional Investment Manager may need to resort to
estimates or proxy data where data is unavailable. The proportion of estimates
and proxies used varies depending on investee company but overall, use of
estimates and proxies are infrequent and constitute only a minority of the
data used. When estimated data is used, it is based on reasonable assumptions
and appropriate comparators.
Engagement policies
The Company recognises the importance of active stewardship in responsible
investment and is dedicated to engaging with stakeholders relevant to its
portfolio, ensuring the Company continues to contribute to its financial,
environmental and social return objectives. The Transitional Investment
Manager seeks to establish long-term value for the Company and its portfolio
of relevant stakeholders through active management of its assets. The
Transitional Investment Manager has published its Engagement and Stewardship
Policy outlining their approach. This can be viewed on the website here:
https://a.storyblok.com/f/154679/x/5eeb87e6d3/oegen-engagement-and-stewardship-policy-june-2023-vf.pd
(https://a.storyblok.com/f/154679/x/5eeb87e6d3/oegen-engagement-and-stewardship-policy-june-2023-vf.pdf)
f.
The majority of the Company's renewable energy assets under management are
wholly owned subsidiaries of the Company. Where investee companies are fully
owned subsidiaries, directorship services are either provided by the
Transitional Investment Manager or through AEIT nominee directors ensuring
consistency in governance and in the application of the ESG Policy which
applies to investee companies. Due to this, the Company does not put in place
investee company engagement policies. There are no voting matters to report on
as the Transitional Investment Manager actively manages and make decisions as
directors of the investee companies. The Transitional Investment Manager
directly controls the investee companies' strategy, financial and
non-financial performance and risk, capital structures, social and
environmental impact and corporate governance on behalf of the Company as well
as appointment of 3(rd) party operators of the assets who are actively engaged
with to ensure appropriate decision-making oversight. Conflicts of interest
are governed by the Transitional Investment Manager's Conflicts of Interest
policy.
In circumstances where the Company does not hold a controlling interest in the
relevant investee company, the Company will secure shareholder rights through
contractual and other arrangements, to, inter alia, ensure that the renewable
energy asset is operated and managed in a manner that is consistent with the
Company's investment and ESG Policy. In this case, the Transitional Investment
Manager will always take up Board seats and attend Board meetings. Regular
reporting data is provided to the Board on investee performance, including any
environmental or social issues or risks. The Transitional Investment Manager
will directly use their influence to monitor and support investee companies on
relevant matters including strategy, financial and non-financial performance
and risk, capital structuring and social and environmental impact. They look
to galvanise other shareholders in line with the Company's ESG Policies and
minimise the Company's principle adverse impacts.
The Transitional Investment Manager works with a range of external service
providers to manage the portfolio of investments, for example construction
managers, operations and maintenance providers, and external asset managers.
To address any adverse impacts on a continuous basis, the Transitional
Investment Manager actively engages with service providers, provide decision
making oversight and carry out an annual ESG review on each material
third-party service provider and this includes reviewing policies in relation
to human rights, anti-corruption and anti-bribery. This seeks to ensure that
strategies to reduce any new adverse impacts are put in place in a timely
manner. Adverse impacts associated with health and safety are assessed and
monitored continuously by the Asset Management Directors and/or HSE
consultants.
References to international standards
In line with AEIT's triple return investment objective, which aim to provide
financial, environmental and social returns, the investments support the
environmental objective of climate change mitigation as set out in Article 9
of the EU Taxonomy by generating, transmitting, storing, distributing or using
renewable energy. AEIT's investments in sustainable energy target countries
where greenhouse gas (GHG) emissions are growing rapidly. The investments
address the climate change mitigation priorities set out in those countries'
Nationally Determined Contributions under the Paris Agreement on Climate
Change, as well as their efforts to achieve the Sustainable Development Goals
(SDGs), by avoiding GHG emissions and having a positive effect on the
communities in which they work. The Transitional Investment Manager has also
signed up to achieve net zero by 2050 and are in the process of validating
targets in line with the Science Based Targets Initiative (SBTi).
The Transitional Investment Manager maintains a list of relevant responsible
investment partner organisations and memberships which create potential
synergies and provide valuable insights and benefits for the Company. The
Transitional Investment Manager is currently a member or supporter of the
following organisations:
· United Nations Principles for Responsible Investment ("UN PRI")
· The Institutional Investors Group on Climate Change (IIGCC)
· UN Sustainable Development Goals
· Science Based Targets Initiative (SBTi)
· Taskforce of climate-related financial disclosure (TCFD)
The Transitional Investment Manager also utilises the following data sources:
· EU Taxonomy
· Transparency International (corruption index)
· Climate Scale (climate change risk assessments)
The Transitional Investment Manager also uses a number of partner
organisations to support due diligence on investments including legal and
technical advisors.
As part of the Transitional Investment Manager's due diligence, alignment to
the EU Taxonomy is evaluated, and climate change risk assessments are carried
out on all investments. This is performed either by technical advisors, or
through utilising Climate Scale, which provides high resolution climate data
in a 2- and 4-degree scenario for climate change risk assessments. PAI data is
collected directly from the investee companies, reviewed and challenged by the
ESG team before being consolidated.
Historical comparison
The year-on-year comparison indicates consistent performance across the
portfolio, with only significant variations observed in carbon emissions,
water consumption, gender pay gap, and board diversity. Construction
activities at TT9 were the primary source of the portfolio's carbon emissions,
leading to a significant rise in AEIT's emissions. In response to the
increased water consumption and to underscore the importance of sustainable
water use, the Transitional Investment Manager has requested the asset manager
to start monitoring the recyclability rate of water used by the assets.
Through proactive engagement in this area, the aim is to explore avenues for
minimising water dependency. Although the gender pay gap has narrowed, the
acquisition of a company with an exclusively male board has impacted gender
diversity at the board level negatively. This development highlights an area
for potential enhancement in the future. Meanwhile, a notable rise in
renewable energy consumption represents an accomplishment for the portfolio,
emphasising the Company's dedication to moving away from non-renewable energy
sources.
Appendix 2: SFDR Periodic Disclosure
Template periodic disclosure for the financial products referred to in Article
9, paragraphs 1 to 4a, of Regulation (EU) 2019/2088 and Article 5, first
paragraph, of Regulation (EU) 2020/852
Product name: Asian Energy Investment
Trust plc
Legal entity identifier: 254900V23329JCBR9G82
Sustainable investment means an investment in an economic activity that
contributes to an environmental or social objective, provided that the
investment does not significantly harm any environmental or social objective
and that the investee companies follow good governance practices.
The EU Taxonomy is a classification system laid down in Regulation (EU)
2020/852 establishing a list of environmentally sustainable economic
activities. That Regulation does not include a list of socially sustainable
economic activities. Sustainable investments with an environmental objective
might be aligned with the Taxonomy or not.
Sustainable investment objective
Does this financial product have a sustainable investment objective?
●● x Yes ●●o No
x It made sustainable investments with an environmental objective: 100% o It promoted Environmental/Social (E/S) characteristics and while it did not
have as its objective a sustainable investment, it had a proportion of ___% of
x in economic activities that qualify as environmentally sustainable under sustainable investments
the EU Taxonomy
o with an environmental objective in economic activities that qualify as
o in economic activities that do not qualify as environmentally environmentally sustainable under the EU Taxonomy
sustainable under the EU Taxonomy
o with an environmental objective in economic activities that do not
qualify as environmentally sustainable under the EU Taxonomy
o with a social objective
o It made sustainable investments with a social objective: ___% o It promoted E/S characteristics, but did not make any sustainable investments
To what extent was the sustainable investment objective of this financial
product met?
Asian Energy Infrastructure Trust plc ("AEIT") is a renewable energy
investment trust providing direct access to sustainable energy infrastructure
in fast-growing and emerging economies in Asia. In line with AEIT's triple
return objectives, which aim to provide financial, environmental and social
returns, the investments support the environmental objective of climate change
mitigation as set out in Article 9 of the EU Taxonomy by generating,
transmitting, storing, distributing or using renewable energy. AEIT's
investments in sustainable energy target countries where greenhouse gas (GHG)
emissions are growing rapidly. The investments address the climate change
mitigation priorities set out in those countries' Nationally Determined
Contributions under the Paris Agreement on Climate Change, as well as their
efforts to achieve the Sustainable Development Goals (SDGs), by avoiding GHG
emissions and having a positive effect on the communities in which they work.
In the year ended 31 December 2023, investments were made in 233 MW of
operating solar capacity in India and 6 MW in Vietnam, and 200 MW of in
construction solar capacity in India.
Sustainability indicators measure how the sustainable objectives of this
financial product are attained.
How did the sustainability indicators perform?
AEIT's investments substantially contributed to climate change mitigation as
reflected in the technical screening criteria listed in section 4 Annex 1
regulation 2021/2139. The construction and operation of new renewable energy
infrastructure in Asia helped improve energy access and security, create jobs,
and avoid GHG emissions. These positive impacts were measured using the
following key performance indicators, which align with SDG 7 (Affordable and
Clean Energy) and SDG 13 (Climate Action):
Installed renewable capacity - MW 271
Renewable energy generated - MWh 391,683
CO(2) emissions avoided - CO(2)e tonnes 311,752
Note: Figures are based on AEIT's proportional share of the investment
portfolio as at 31 December 2023.
and compared to previous periods?
Sustainability indicator 2022 2023
Installed renewable capacity - MW 132 271
Renewable energy generated - MWh 85,199 391,683
CO(2) emissions avoided - tCO(2)e 62,770 311,752
In January 2023 and May 2023, AEIT completed acquisitions of the remaining 57%
of the SolarArise portfolio and 99.8% of the VSS portfolio, respectively.
These acquisitions significantly increased the MW capacity of the operating
portfolio, resulting in increased renewable energy generation and associated
avoided emissions in 2023 compared with 2022.
How did the sustainable investments not cause significant harm to any
sustainable investment objective?
Environmental, social and governance (ESG) considerations are integral to
AEIT's investment objective, and AEIT's Former Investment Manager during the
period had environmental and social policies that drew on the International
Finance Corporation's environmental and social performance standards. These
policies provide a framework that help identify and manage potential
significant harm to any environmental or social objectives, including water;
biodiversity and ecosystems; circular economy; pollution prevention. From 1
November 2023, Octopus Renewables Limited, trading as Octopus Energy
Generation ("OEGEN" or "Octopus Energy Generation"), was appointed as a
transitional Investment Manager (the "Transitional Investment Manager") for
the Company and assumed all day-to-day portfolio management responsibilities
for the Company from this date. The Former investment manger also undertook a
review of the specific renewable energy assets in relation to the EU Taxonomy
screening criteria in the period to confirm whether the investments continued
to meet the qualification criteria. AEIT's investments met the criteria for do
no significant harm.
How were the indicators for adverse impacts on sustainability factors taken
into account?
Data related to the mandatory indicators for Principle Adverse Impacts listed
under Table 1 Annex 1 of regulation 2022/1288 have been collected. These
indicators are also monitored continuously over the life of an investment.
AEIT's 2023 Annual Report includes its Annual PAI Statement completed using
Annex I of regulation 2022/1288.
Were sustainable investments aligned with the OECD Guidelines for
Multinational Enterprises and the UN Guiding Principles on Business and Human
Rights?
No major controversies or violations were reported during the period. The
Transitional Investment Manager will continue to engage with investee
companies to strengthen implementation frameworks, and enhance the practical
effectiveness of established grievance mechanisms.
Principal adverse impacts are the most significant negative impacts of
investment decisions on sustainability factors relating to environmental,
social and employee matters, respect for human rights, anti‐corruption and
anti‐bribery matters.
The list includes the investments constituting the greatest proportion of
investments of the financial product during the reference period which is: Jan
1 - December 31 2023.
Asset allocation describes the share of investments in specific assets.
How did this financial product consider principal adverse impacts on
sustainability factors?
The issues addressed by the PAIs were expressly covered by the Former and
Transitional Investment Manager's sustainability and responsible investment
policies. Social and environmental issues were considered during due diligence
phases of the investment process and KPIs were monitored post-acquisition. In
2023, the Transitional Investment Manager worked with investee companies to
carry out a more robust greenhouse gas accounting exercise, which led to
higher levels of reported activity and spend data across all three Scopes.
AEIT's 2023 Annual Report includes its Annual PAI Statement containing
information on the mandatory PAI indicators in Table 1 Annex 1 regulation
2022/1288 for the AEIT investments collected using best efforts.
What were the top investments of this financial product?
Largest investments Sector % Country
SolarArise Energy 63 India
NISPI Energy 31 Philippines
VSS Energy 6 Vietnam
Note: Figures are based on AEIT's investment portfolio's NAV as at 31 December
2023.
What was the proportion of sustainability-related investments?
100%
AEIT invests in sustainable energy solutions and infrastructure assets that
align with the EU Green Taxonomy environmental objective of climate change
mitigation. In 2023, 100% of AEIT investments were used to meet its
sustainable investment objective, in accordance with the binding elements of
the investment strategy. Due to the unusual circumstances of the Company
whereby the Company is undergoing a strategic review that prevents new
investments being made, this calculation excludes cash held at the PLC level
held in liquid accounts which cannot currently be invested in assets.
Given AEIT held a significant proportion of cash during the period, AEIT
decided to also disclose the proportion of sustainability-related investments
if investors classify AEIT's cash as 'unsustainable'. This is calculated to be
51.7%(47).
Should the outcome of the strategic review be a relaunch of the Company, the
cash being held in liquid assets will be invested into assets that are
expected to meet the sustainable investment criteria as per the Investment
Strategy's mandate.
Investments #1 Sustainable 100% Environmental Taxonomy-aligned 100%
#2 Not sustainable
#1 Sustainable covers sustainable investments with environmental or social
objectives.
#2 Not sustainable includes investments which do not qualify as sustainable
investments.
What was the asset allocation?
100% of the sustainable investments were held indirectly through Special
Purpose Vehicles and intermediate entities.
In which economic sectors were the investments made?
Energy - Electricity generation using solar photovoltaic technology
(47) Refer to the APM for detailed calculations.
To comply with the EU Taxonomy, the criteria for fossil gas include
limitations on emissions and switching to fully renewable power or low-carbon
fuels by the end of 2035. For nuclear energy, the criteria include
comprehensive safety and waste management rules.
Enabling activities directly enable other activities to make a substantial
contribution to an environmental objective Transitional activities are
economic activities for which low-carbon alternatives are not yet available
and that have greenhouse gas emission levels corresponding to the best
performance.
Taxonomy-aligned activities are expressed as a share of:
· turnover reflecting the share of revenue from green activities of
investee companies
· capital expenditure (Capex) showing the green investments made by
investee companies, e.g. for a transition to a green economy.
· operational expenditure (OpEx) reflecting green operational
activities of investee companies.
To what extent were sustainable investments with an environmental objective
aligned with the EU Taxonomy?
100%
All investments made by AEIT in 2023 were in companies that exclusively
generate solar photovoltaic electricity, thereby meeting the substantial
contribution criteria of the technical screening criteria of the EU Taxonomy
in section 4.1 Annex 1 of regulation 2021/2139 (electricity generation using
solar photovoltaic technology). The MWh produced have been reported above and
detailed in 2023 AEIT's Annual Report. To ensure no significant harm to
biodiversity and ecosystems, environmental screening was conducted for all
investments prior to acquisition, reflecting the Former Investment Manager's
ESG policies and national law. Physical climate risk and vulnerability
assessments were completed for all existing investments in collaboration with
a third-party sustainability advisory. This screening and assessments have
been reviewed by the Transitional Investment Manager. Investee companies have
sought to use durable equipment.
The alignment of existing investments with EU Taxonomy was not subject to an
assurance provided by an auditor. Such alignment was substantiated by in-house
experts, on the basis of inputs from third-party technical advisors, publicly
available information, information provided directly by investee companies, as
well as third-party data sources.
Did the financial product invest in fossil gas and/or nuclear energy related
activities complying with the EU Taxonomy(48)?
o Yes
o In fossil gas
o In nuclear energy
x No
The graphs below show in green the percentage of investments that were aligned
with the EU Taxonomy. As there is no appropriate methodology to determine the
taxonomy-alignment of sovereign bonds*, the first graph shows the Taxonomy
alignment in relation to all the investments of the financial product
including sovereign bonds, while the second graph shows the Taxonomy alignment
only in relation to the investments of the financial product other than
sovereign bonds.
1. Taxonomy-alignment of investments including sovereign bonds*
2. Taxonomy-alignment of investments excluding sovereign bonds*
Note: AEIT does not make any investments in Fossil gas or Nuclear.
* For the purpose of these graphs, 'sovereign bonds' consist of
all sovereign exposures.
(48) Fossil gas and/or nuclear related activities will only comply
with the EU Taxonomy where they contribute to limiting climate change
("climate change mitigation") and do no significant harm to any EU Taxonomy
objective - see explanatory note in the left-hand margin. The full criteria
for fossil gas and nuclear energy economic activities that comply with the EU
Taxonomy are laid down in Commission Delegated Regulation (EU) 2022/1214.
are sustainable investments with an environmental objective that do not take
into account the criteria for environmentally sustainable economic activities
under the EU Taxonomy.
Reference benchmarks are indexes to measure whether the financial product
attains the sustainable objective.
What was the share of investments made in transitional and enabling
activities?
0%
How did the percentage of investments aligned with the EU Taxonomy compare
with previous reference periods?
Not Applicable.
What was the share of sustainable investments with an environmental objective
that were not aligned with the EU Taxonomy?
0%
What was the share of socially sustainable investments?
Not applicable for Article 9 SFDR classification purposes. All AEIT
investments aim to have a positive effect on the communities in which they
work and support social development. In 2023, AEIT investments directly
supported 197 full time equivalent jobs, including four full time salaried
employee positions.
What investments were included under "not sustainable", what was their purpose
and were there any minimum environmental or social safeguards?
No investments were included under not sustainable.
What actions have been taken to attain the sustainable investment objective
during the reference period?
The sustainability objectives achieved are the direct result of implementation
of the binding elements of our investment strategy. AEIT invests in a
diversified portfolio of sustainable energy infrastructure assets in
fast-growing and emerging economies in Asia. The investments meet the AEIT's
aim of building a diversified portfolio of assets in the areas of renewable
energy generation. The 2023 portfolio consists entirely of solar photovoltaic
electricity generation. The Transitional Investment Manager has worked with
the investee companies to monitor progress towards attainment of these
sustainability objectives using the key performance indicators specified
above, which align with SDG 7 (Affordable and Clean Energy) and SDG 13
(Climate Action). Avoided emissions were calculated using the standards of the
International Financial Institutions Joint Standards for GHG Accounting for
Grid Connected Renewable Energy Projects. The avoided emissions attributable
to the AEIT portfolio on this basis substantially exceeded the Scope 1, 2 and
3 emissions associated with operating these assets as reported in AEIT's
Annual PAI Statement which is annexed to its 2023 Annual Report. The
sustainability indicators presented in this disclosure and in the Annual
Report have been reviewed by the Board.
How did this financial product perform compared to the reference sustainable
benchmark?
Not Applicable.
How did the reference benchmark differ from a broad market index?
Not Applicable as AEIT does not use any reference benchmarks.
How did this financial product perform with regard to the sustainability
indicators to determine the alignment of the reference benchmark with the
sustainable investment objective?
Not Applicable.
How did this financial product perform compared with the reference benchmark?
Not Applicable.
How did this financial product perform compared with the broad market index?
Not Applicable.
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