REG - Ecofin US Renewables - Final Results
14/04/2023 07:00
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RNS Number : 1834W Ecofin US Renewables Infrastr.Trust 14 April 2023
LEI: 2138004JUQUL9VKQWD21
14 April 2023
Ecofin U.S. Renewables Infrastructure Trust PLC
Annual Financial Report for the year ended 31 December 2022
Ecofin U.S. Renewables Infrastructure Trust plc ("RNEW" or the "Company") is
pleased to announce its audited results for the year ended 31 December 2022
("Year").
Objective
The Company's investment objective is to provide Shareholders with an
attractive level of current distributions by investing in a diversified
portfolio of mixed renewable energy and sustainable infrastructure assets
predominantly located in the U.S. with prospects for modest capital
appreciation over the long term.
Highlights
Financial
As at 31 December 2022
Net Asset Value ("NAV") per share NAV Share price
94.3 cents $130.2 million 83.3 cents(2)
78.0 pence(1) £107.7 million(1) 68.5 pence(2)
Leverage
33.3%(3)
For the year ended 31 December 2022 ("Year")
NAV total return Share price total return Dividends per share declared
1.1%(4) -10.8%(4) 5.6 cents
Operational
Weighted average remaining term of revenue contracts Assets Equivalent number of households supplied in 2022
65
14.6 years(5) ~31,400
Portfolio generating capacity CO(2)e avoided in 2022 Clean electricity generated in 2022
177 MW(6) ~203,500 tonnes(7) 335 GWh(6)
Figures reported either as at the referenced date or over the year ended 31
December 2022. All references to cents and dollars ($) are to the currency of
the U.S., unless stated otherwise.
1. 31 December 2022 exchange rate of £0.8273 = $1.00
2. RNEW & RNEP LSE closing price as at 31 December 2022
3. Calculated based on Gross Asset Value ("GAV") and aggregate
debt. Additional information can be found in the financing section of the
Investment Manager's Report in the Annual Financial Report.
4. These are alternative performance measures. ("APMs").
Definitions of how these APMs and other performance measures used by the
Company have been calculated can be found in the Annual Financial Report.
5. Includes all construction-stage and committed assets.
6. Represents the Company's share of portfolio generating
capacity (including assets under construction).
7. CO(2)e based on the Company's proportionate ownership
interest in the assets. CO(2)e calculations are derived using the U.S.
Environmental Protection Agency's ("EPA") Emissions & Generation Resources
Integrated Database.
Portfolio
Investment Name Sector Capacity Number of State Ownership(2) Phase Acquisition Remaining
(MW)(1)
assets
Status
revenue
contract term
(years)
SED Solar Portfolio Commercial Solar 11.3 52 Massachusetts, Connecticut 100% Operational Completed Dec. 2020 13.6
Ellis Road Solar Commercial 7.1 1 Massachusetts 100% Operational Completed 18.5
Solar Dec. 2020
Oliver Solar Commercial Solar 4.8 1 California 100% Operational Completed Dec. 2020 12.9
Beacon 2 Utility-Scale 29.5 1 California 49.5% Operational Completed 20.0
Solar Feb. 2021
Beacon 5 Utility-Scale 23.9 1 California 49.5% Operational Completed 20.0
Solar Feb. 2021
Skillman Solar Commercial 2.6 1 New Jersey 100% Operational Completed 14.6
Solar Sept. 2021
Delran Solar Commercial 2.0 1 New Jersey 100% Operational Completed 12.5
Solar Oct. 2021
Wind 59.8 1 Texas 100% Operational Completed 5.0
Whirlwind Oct. 2021
Echo Solar - MN Commercial 13.7 1 Minnesota 100% Operational Completed 25.0
Solar Oct. 2021
Echo Solar - VA 1 Commercial 2.7 1 Virginia 100% Operational Completed 25.0
Solar Jun. 2022
Echo Solar - VA 2 Commercial 4.2 1 Virginia 100% Construction Completed 25.0
Solar Jun. 2022
Echo Solar - VA 3 Commercial 6.5 1 Virginia 100% Construction Completed 25.0
Solar Aug. 2022
Echo Solar - VA 4 Commercial 2.9 1 Virginia 100% Construction Completed 25.0
Solar Aug. 2022
Echo Solar - DE 1 Commercial 5.9 1 Delaware 100% Construction Completed 25.0
Solar Aug. 2022
Total(3) 176.9 65 14.6(4)
1. Capacity reflects RNEW's proportionate ownership interest in
the assets.
2. Cash equity ownership.
3. Membership Interest Purchase Agreement ("MIPA") for remainder
of Echo Solar Portfolio (VA/DE) comprising five projects was terminated in
December 2022 and an 18-month Right of First Offer agreement was executed for
these five projects that were not closed and are not included in the table
above.
4. Average remaining revenue contract term (years).
Our Business Model
Investment Objective
The Company's investment objective is to provide Shareholders with an
attractive level of current distributions by investing in a diversified
portfolio of Renewable Assets predominantly located in the U.S. with prospects
for modest capital appreciation over the long term.
Structure
The Company's business model follows that of an externally managed investment
trust. As such, the Company does not have any employees and outsources its
activities to third party service providers, including the Investment Manager
and Administrator who are the principal service providers.
The Company makes its investments through a wholly-owned U.S. holding company,
RNEW Holdco LLC ("Holdco"), other intermediate holding companies and
underlying special purpose vehicles ("SPVs", organised as U.S. limited
liability companies or LLCs) that hold the Renewable Assets. The Company has
the ability to use short and long-term debt at the Company, Holdco and SPV
levels subject to limits defined in its gearing policy. On 19 October 2021,
the Company, through a wholly-owned U.S. subsidiary, RNEW Capital, LLC,
entered into a $65 million secured Revolving Credit Facility ("RCF") with
KeyBank, one of the premier lenders to the U.S. renewable energy industry. The
RCF comprises a $50 million, two-year tranche priced at London Interbank
Offered Rate ("LIBOR") plus 1.75% and a $15 million, three-year tranche
priced at LIBOR plus 2.00%. The RCF also includes an accordion option for an
additional $20 million of capital which can be accessed subject to certain
conditions. The RCF has been structured to provide RNEW with operational
flexibility and liquidity to advance its pipeline and continue to grow. As a
result of active discussions with KeyBank, it is anticipated that the RCF will
be renewed or extended on substantially similar terms in second half of 2023,
at which time the Secured Overnight Financing Rate ("SOFR") will replace
LIBOR. Additionally, through the Company's acquisition of a 49.5% stake in the
Beacon 2 and 5 operating solar assets, it assumed its share of non-recourse
amortising project term loans secured on those projects that totalled $45.8
million as at 31 December 2022.
Management of the Company
The Company has an independent board of four non-executive Directors (details
of whom can be found in the Directors' Experience and Contribution section of
the Corporate Governance Statement). The Board's role is to manage the
governance of the Company in the interests of Shareholders and other
stakeholders. In particular, the Board monitors adherence to the Investment
Policy and gearing policy limits, determines the risk appetite, sets Company
policies and monitors the performance of the Investment Manager and other key
service providers. The Board meets a minimum of four times a year for regular
Board meetings, with additional ad hoc meetings taking place dependent upon
the requirements of the business. The Board reviews the performance of all key
service providers on an annual basis through its Management Engagement
Committee.
The Company has appointed Ecofin as its AIFM and Investment Manager to provide
portfolio and risk management services to the Company. The Board takes advice
from the Investment Manager on matters concerning the market, the portfolio
and new investment opportunities. Day-to-day management of the Company's
portfolio is delegated to the Investment Manager, with investment decisions in
line with the Company's Investment Policy delegated to an Investment Committee
consisting of senior members of the Investment Manager. Further information on
the Investment Manager is provided in the Investment Manager's Report.
As an investment trust, the Company does not have any employees and is reliant
on third party service providers for its operational requirements. Likewise,
the SPVs which hold the portfolio assets do not have any employees and
services are provided through third party providers. The Board has delegated
administration, fund accounting and company secretarial services to Apex
Listed Companies Services (UK) Limited (formerly Sanne Fund Services (UK)
Limited). Each service provider has an established track record and has in
place suitable policies and procedures to ensure it maintains high standards
of business conduct and corporate governance.
Investment Manager
· Manages the portfolio of Renewable Assets to achieve the
Company's Investment Objective
· Sources, evaluates and implements the pipeline of new
investments
· Monitors financial performance against Company targets
and forecasts
· Advises the Board on investment strategy and portfolio
composition to achieve the desired target returns within the agreed risk
appetite
· Manages the process and analysis for semi-annual
valuations (March/September) and coordinates the process with the independent
valuer (June/December)
· Ensures good financial and cash management of the Company
and its assets having regard to accounting, tax and debt usage and covenants
· Manages the Company's investor reporting and investor
relations activities
Chair's Statement
Introduction
On behalf of the Board, I am pleased to present the annual report for Ecofin
U.S. Renewables Infrastructure Trust PLC for the year ended 31 December 2022
("Annual Report").
The Company has made sound progress during the Year:
· In May, the Company raised $13.1 million in new equity
(before costs) at a share price of 101.5 cents per share through a placing and
retail offer. The net proceeds were deployed into new investments and used to
pay down debt drawn on the Company's RCF;
· In June, the Company closed on the acquisition of two
ground-mounted solar projects at the construction stage in Virginia ("VA")
totalling 6.9MWdc, forming part of the Echo Solar Portfolio;
· In August, the Company closed on three further
ground-mounted solar projects at the construction stage in VA and Delaware
("DE") totalling 15.3MWdc, which also form part of the Echo Solar Portfolio;
· In October, the Company successfully entered into a $17.7
million tax equity commitment which will be used to fund the Echo Solar
Portfolio; and
· In December, two of the projects in the Echo Solar
portfolio came into commercial operation following construction. The remaining
four projects in this sub-portfolio currently under construction are expected
to reach commercial operation in Q2 2023.
Investment Manager
On 24 October 2022, the Company announced that the Investment Manager had
appointed Eileen Fargis as group lead and portfolio manager for RNEW. Eileen
has over 20 years' industry experience, most recently as Head of Investments
for InterEnergy Holdings (UK) Limited, an independent developer, owner and
operator of 2.1GW of energy generation assets and a utility in the Caribbean
and Latin America. Eileen is also the former Co-Head of the $1 billion
International Finance Corporation ("IFC") African, Latin American and
Caribbean Fund LP, a private equity fund investing on behalf of IFC.
The appointment of Eileen followed the resignations in July, of portfolio
managers Jerry Polacek, Matthew Ordway and Prashanth Prakash, who decided to
leave their roles at Ecofin in order to pursue a new venture. The Board was
very disappointed by these resignations, particularly as the short notice
periods in the U.S. meant that there was no opportunity to effect an immediate
hand-over to a new team.
Following the resignations, the Board asked Ecofin to concentrate on two
priorities: recruitment of a new leadership team and portfolio management.
The Board welcomed Eileen's appointment and believes she and the wider Ecofin
team have the ability and credentials to keep growing RNEW's asset base and to
deliver value on behalf of Shareholders. Since joining, Eileen has spent a
significant part of her time visiting a number of RNEW's assets and meeting
investors and analysts.
The Board has engaged regularly with the wider Ecofin team to ensure continued
focus on portfolio management.
Portfolio management
As at 31 December 2022, RNEW continued to benefit from a high-quality
portfolio of 65 solar and wind assets with a combined capacity of 177MW across
eight states: California, Connecticut, DE, Massachusetts, Minnesota,
New Jersey, Texas and VA.
The assets all benefit from long term contracted revenues with investment
grade quality off-takers and an overall weighted average remaining contract
term of 14.6 years. Entering into long-term contracts means that revenue
streams from RNEW's investments are insulated from short term volatility in
power and/or gas prices (the latter tending to drive power prices in most U.S.
power markets) and are therefore that much more predictable and reliable.
As at 31 December 2022, 61 assets were in operation and four assets were under
construction, with operating assets making up 89% of the portfolio valuation.
Total generation during the year was 335 GWh (2021: 169 GWh), 5.5% below
budget. Overall, output from solar assets was 3.7% below budget while our wind
asset delivered output 7.0% below budget. This was due to a combination of
circumstances including construction delays, inverter outages, and the impact
of storms in late 2022. This is described further in the Portfolio Production
Update section of the Investment Manager's Report.
The clean electricity generated by the Company's assets in 2022 avoided the
emission of approximately 203,500 tonnes of CO(2)e.
Details of each asset and its performance are set out in the Investment
Manager's Report.
Results
NAV as at 31 December 2022 was 94.3 cents per Share (31 December 2021: 98.9
cents per Share). Over the Year, NAV per share decreased by 4.7% due to a
number of factors as described further in the Portfolio Valuation section of
the Investment Manager's Report.
The Directors' valuation of the portfolio as at 31 December 2022 was supported
by an independent valuation carried out by Marshall & Stevens. In the
valuation, projected cash flows were discounted at an underlying weighted
average pre-tax discount rate of 7.5% (31 December 2021: 7.2%). Discount rates
were increased by 25 basis points as at 30 June 2022 against a background of
interest rate increases and rising bond yields, but as at 31 December 2022,
the view of the Company's independent valuer was that no further change was
required.
RNEW's profit before tax for the Year ended 31 December 2022 was $1.2 million
(31 December 2021: $3.4 million). Earnings per Share were 0.9 cents (31
December 2021: 3.7 cents per Share).
The Company's total gearing at 31 December 2022 was 33.3% (31 December 2021:
30.2%) based on a GAV of $193.4 million and aggregate debt of $64.4 million.
The Company had non-recourse debt at project level ($45.8 million secured on
the two Beacon solar projects in California) and debt at group level,
consisting of $18.6 million drawn under the Company's RCF.
Dividends
During the Year, the Company paid four interim quarterly dividends each of 1.4
cents per Share, which included one in respect of the previous financial
period ended 31 December 2021. On 31 January 2023, after the year end, the
Board declared a fourth interim dividend of 1.4 cents per Share for the
quarter ended 31 December 2022. Together the four dividends declared and paid
for FY 2022 totalled 5.6 cents, meeting the Company's stated annual target(1)
dividend range of 5.25 to 5.75 cents.
The dividend was supported by net cash flow from the Company's assets and
dividend cover(2) at both RNEW and Holdco level for the year ended 31 December
2022 was 1.0 times(2). The Board and Ecofin are particularly focused on
dividend cover at both the RNEW and Holdco level and expect it to be broadly
maintained during 2023 as a result of a focus on cost reductions and, as
referred to above, as assets currently under construction from the Echo Solar
portfolio become operational.
Share price
At 31 December 2022, the share price was 83.25 cents per Share, representing
an 11.7% discount to NAV of 94.3 cents per Share at the same date. The share
price has traded at a discount to NAV since the Ecofin management resignations
in July noted above, and this has prevented the Company from issuing further
equity to support the growth of the asset base.
The current discount to NAV is obviously disappointing. Both the Board and the
Investment Manager believe that the strong fundamentals of the Company and its
portfolio, together with continued confidence in the target(1) dividend yield
into 2023, provide a positive platform for the share price to increase from
its current level.
Board
There are four members of the Board (two women and two men) who together have
a good balance of sector and financial knowledge, accounting, investment trust
experience, and other relevant experience, including the benefit of geographic
market knowledge from U.S. residency and citizenship. Appointments to the
Board will always be made on merit. In due course, the Board would like to
appoint a further director with an ethnic minority background, recognising the
benefits of having greater diversity on the Board. At present, given the
Company's size, cost base and the early stage of its development, the
Directors do not feel it is currently appropriate to increase the size of the
Board.
I would like to thank my fellow Directors, the Ecofin team and all our
advisers for the significant contribution they have made during 2022.
Annual General Meeting
We look forward to welcoming Shareholders at the Company's Annual General
Meeting ("AGM") to be held on 1 June 2023 at the offices of the Company
Secretary located at 6(th) Floor, 125 London Wall, EC2Y 5AS, London. For more
information, please see the enclosed AGM Notice.
1. The target returns and dividends set out above are targets
only and are not profit forecasts. There can be no assurance that these
targets can or will be met and they should not be seen as an indication of the
Company's expected or actual results or returns. The Company's ability to
distribute dividends will be determined by the existence of sufficient
distributable reserves, legislative requirements and available cash reserves.
Accordingly, investors should not place any reliance on these targets in
deciding whether to invest in the Shares or assume that the Company will make
any distributions at all.
2. Calculated based on portfolio net cash distributions divided
by dividends paid in respect of the quarters ended 31 March 2022, 30 June 2022
and 30 September 2022 and the dividend declared in respect of the quarter
ended 31 December 2022.
Outlook
The U.S. renewable energy sector continues to offer strong prospects for
investment and growth.
The passage of the Inflation Reduction Act ("IRA") in August 2022 represents
an unprecedented long-term policy boost for U.S. renewable energy with some
$369 billion allocated to climate infrastructure and energy security. The IRA
includes provisions for extending tax credits for solar and wind energy until
2035 and also introduced a new tax credit for standalone battery storage. As
solar panel manufacturing is increasingly onshored in the U.S. in response to
the IRA's green subsidies, solar installation timelines are expected to
benefit. In addition, as set out in more detail in the Investment Manager's
report, the IRA coincides with two other significant pieces of U.S.
legislation, the intent of which is to allocate billions of U.S. dollars into,
inter alia, zero-carbon businesses, clean energy research and grid
modernisation. These additional pieces of legislation will also benefit
renewable energy expansion in the U.S., for which there is strong support at
both federal and individual state level.
RNEW continues to play an important role in the global drive for a more
sustainable future, as an owner and operator of existing Renewable Assets and
in bringing new assets from construction into operation.
While the Company's investment pipeline remains strong, Ecofin is at present
primarily focused on managing RNEW's portfolio and on overseeing assets
currently under construction to ensure they move successfully into operation.
As stated above, the Board was pleased to see the appointment of Eileen Fargis
as group lead and portfolio manager for RNEW. Eileen has strong credentials in
the sector and has quickly familiarised herself with the portfolio and the
business. As a Board, we are strong believers in the opportunities within the
U.S. renewable energy sector and in the Company's investment strategy. Against
this background, we believe that Ecofin has the capability and bandwidth to
deliver growth for the Company. Together, these provide strong fundamentals
for the share price to trade above NAV and for RNEW to raise new funds to take
advantage of the growth opportunities available. However, as stated in our
half-year report, we are also very conscious of our duties to Shareholders and
remain open to exploring all options for the future of RNEW consistent with
good governance.
Patrick O'D Bourke
Chair of the Board
13 April 2023
Investment Manager's Report
About Ecofin
Ecofin Investments, LLC, the parent company of the Investment Manager, is a
sustainable investment firm with roots dating to the 1990s and an
international footprint with offices in the U.S. and UK. As at 31 December
2022, Ecofin Investments, LLC had assets under management of $2.2 billion
across several listed U.S. and UK funds, private funds, and separately managed
accounts.
Eileen Fargis joined Ecofin as the Group Lead for Ecofin's Private Equity
Sustainable Infrastructure team in October 2022 and was appointed as the
Ecofin group lead and portfolio manager for the Company. In her role, Eileen
works closely with Ecofin's team of experienced professionals, originating and
managing the firm's U.S. Renewable Assets. Eileen has over 20 years' industry
experience, most recently as Head of Investments for InterEnergy Holdings (UK)
Ltd, an independent developer, owner, and operator of 2.2 GW of energy
generation assets and a utility in the Caribbean and Latin America. Working
closely with Eileen is Jason Benson, who has been heavily involved with RNEW
since IPO. Jason also oversees portfolio management and funding activities for
the Company.
The Finance and Asset Management team, led by Nancy Johnson, has over 45 years
of combined experience in the energy industry. The team works with Eileen and
Jason to onboard new assets seamlessly and strives to attain operational
excellence for each of the Renewable Assets in order to maximise profitability
for Shareholders. The team interfaces with engineers and plant operators to
ensure plant optimisation. Strong relationships and constant communication
with our outsourced asset management and O&M service providers are key to
smooth operations and have remained unchanged since the IPO. Continuous
process improvement is at the forefront for the team to steadily advance the
effectiveness of data analytics. Additionally, the team is focused on keeping
current with new accounting guidance and reporting requirements that impact
the portfolio.
While the status of the near-term new project pipeline remains strong, Ecofin
is currently maintaining its focus on managing RNEW's existing assets and
near-term funding obligations until opportunities for new capital and
deployment become available.
Senior Management Team
Eileen Fargis
Eileen has over 20 years' industry experience, most recently as Head of
Investments for InterEnergy Holdings (UK) Ltd, an independent developer,
owner, and operator of 2.2 GW of energy generation assets and a utility in the
Caribbean and Latin America. She is the former Co-Head of the $1 billion IFC
African, Latin American and Caribbean Fund LP, a private equity fund investing
alongside the International Finance Corporation on behalf of the Company's
investors. Eileen started her career in energy and infrastructure with Skadden
Arps and spent nine years at GE Capital Markets, GE Energy Financial Services
and GE Structured Finance with a focus on global energy and infrastructure
assets. She has previously served on the boards of InterEnergy Holdings,
CityExpress Hotels and SURA Asset Management. Eileen is a graduate of Hamilton
College and the John Hopkins School of Advanced International Studies.
Jason Benson
Jason is a member of Ecofin's Private Equity Sustainable Infrastructure
investment team focused on construction-ready and operating, commercial and
utility-scale solar and wind assets, supporting origination, valuation &
underwriting and financing. Jason started his career as an investment banker
with Greentech Capital Advisors (now Nomura Greentech) where he focused on
M&A advisory in the renewable energy, energy storage and energy efficiency
sectors. He also held similar positions with Cowen and Company and Murray
Devine, focusing on broad industrials sectors. Jason earned a Master of
Science degree in finance from Villanova University and a Bachelor of Science
degree with a concentration in finance and a minor in economics from Seton
Hall University.
Nancy Johnson, CPA
Nancy manages the accounting, financial reporting and analysis and asset
management for the RNEW portfolio. She has over 12 years experience in the
industry. Prior to Ecofin, Nancy was at NextEra Energy where her primary focus
was on Energy Trading Accounting and Process Improvements. Nancy is a graduate
of the University of Florida and earned her Master of Accounting degree from
Florida Atlantic University. She is also a certified public accountant.
Investments - Summary of the year
During the Year, the Investment Manager continued to focus on maximising
operating activity of the portfolio and meeting dividend targets, while
optimising the Company's financing structure. The portfolio delivered 335 GWh
of clean electricity to its offtakers. While this was 5.5% below budget, net
cash flow generated was able to cover $7.7 million of dividends, or 5.6 cents
per Share, meeting the Company's stated annual target(1) dividend range of
5.25% to 5.75%.
While the majority of IPO proceeds were deployed in the 12 months following
the Company's launch, there was significant funding activity during the Year,
relating primarily to construction projects and tax equity financings. The
Investment Manager closed on two tax equity partnerships, providing financing
for the Skillman Solar project as well as the Echo Solar Portfolio. Coinciding
with these financings, the Investment Manager brought three new projects to
commercial operation, including Skillman Solar, Echo Solar - MN and Echo Solar
- VA 1.
The Company successfully closed on a placing and retail offer of new Shares in
May 2022, raising $13.1 million (before costs), the proceeds of which were
used to repay the drawn balance on the RCF as well as fund the June and August
2022 acquisitions of projects within the Echo Solar Portfolio.
Investment Activity
2022
7 January 2022 - the Company obtained a $15.9 million non-recourse
construction loan from Seminole Financial Services, LLC, a U.S. specialist
renewable lender, for the construction of the Echo Solar - MN project.
28 January 2022 - the Company closed a tax equity partnership for the Skillman
Solar project.
23 March 2022 - the Company finalised a negotiation for a buyout wherein the
Company sold one 41 kWdc asset within the SED Solar Portfolio, as per the
terms of the PPA, reducing the total number of assets remaining in the SED
Solar Portfolio to 52 (11.3 MWdc) and the Company's total assets to 60 at the
time.
25 March 2022 - the Company declared mechanical completion of the Skillman
Solar project and completed a major milestone tax equity funding.
28 June 2022 - the Company closed on the acquisition of two ground mount solar
projects in VA at construction stage in the Echo Solar Portfolio, comprising
the 2.7 MWdc Monroe Solar Partners, LLC project (Echo Solar - VA 1) and the
4.2 MWdc Randolf Solar Partners, LLC project (Echo Solar - VA 2) with an
aggregate closing value of $2.6 million, bringing the Company's total assets
to 62 at the time. Future fundings of these projects would be sourced from tax
equity commitments and the Company's RCF.
29 July 2022 - the Company declared mechanical completion of the Echo Solar -
MN project.
22 August 2022 - the Company closed on the acquisitions of three additional
ground mount solar projects at construction stage in the Echo Solar Portfolio,
comprising the 6.5 MWdc Hemings Solar Partners, LLC project in VA (Echo Solar
- VA 3), the 2.9 MWdc Small Mouth Bass Solar Partners, LLC project in Virginia
(i.e., Echo Solar - VA 4), and the 5.9 MWdc Heimlich Solar Partners, LLC
project in DE (Echo Solar - DE 1) and with an aggregate closing value of
approximately $5.5 million, bringing the Company's total assets to 65. This
deployed the balance of the $12.9 million net proceeds from the placing and
retail share offer completed in May 2022. Future fundings of these projects
are expected to be sourced from tax equity commitments and the Company's RCF.
26 September 2022 - the Company declared substantial completion of the
Skillman Solar project and closed the final tax equity funding, completing the
financing of the project, after having achieved commercial operation on 15
August 2022.
7 October 2022 - the Company closed a tax equity commitment of $17.7 million
for the Echo Solar Portfolio, which will be funded upon the achievement of
sequential construction milestones at each project within the portfolio.
5 December 2022 - the Company negotiated a partial termination of the MIPA for
the five remaining unclosed Echo Solar Portfolio projects, which included an
18-month Right of First Offer on the unclosed projects.
16 December 2022 - the Company declared commercial operation at the Echo Solar
- MN project, after receiving permission to operate from the utility on 13
December 2022. The system was fully energised and delivering power
immediately.
30 December 2022 - the Company declared commercial operation at the Echo Solar
- VA 1 project, after receiving permission to operate from the utility on 16
November 2022. The system was fully energised and delivering power
immediately.
As at 31 December 2022, the portfolio was heavily weighted towards operating
assets with 89% of NAV invested in operating assets held at fair market value
("FMV"). The portfolio benefits from geographic diversification spanning eight
U.S. states to provide risk mitigation against regulatory and resource
exposures. Furthermore, RNEW's portfolio reflects diversification across three
renewable energy sectors: utility scale solar (18%) commercial solar (49.5%)
and wind (33%), to mitigate resource, regulatory, technology and market risks.
Portfolio Summary(1)
FMV by asset name
Asset name Portfolio %
Beacon 2&5 18%
SED Solar Portfolio 12%
Oliver Solar 5%
Ellis Road Solar 7%
Skillman Solar 3%
Delran Solar 2%
Whirlwind 33%
Echo Solar 20%
FMV by sector
Sector Portfolio %
Utility scale solar 18%
Commercial solar 49%
Wind 33%
FMV by operating/construction status
Operating - 89%
Construction - 11%
1. Includes closed and committed assets based on equity exposure
at FMV.
Summary of Investments
1. SED Solar Portfolio
The SED Solar Portfolio consists of 51 predominantly rooftop commercial solar
projects in Massachusetts and 1 rooftop commercial solar project in
Connecticut, totalling 11.3 MW. The projects' output is fully contracted to a
variety of investment grade quality schools, universities, municipalities and
corporations under long term fixed price PPAs. This investment demonstrates
many of the most favourable aspects of Ecofin as a highly experienced manager
specialising in the middle market. The transaction came about through a
bilateral negotiation with a vendor who was considering monetising its
interest in the portfolio which it had successfully developed and operated for
several years. The Investment Manager represented an acquirer who had the
expertise to efficiently underwrite and reliably execute an acquisition
spanning 52 assets and dozens of revenue counterparties. Ecofin closed the
acquisition just days after completing RNEW's IPO in December 2020. Following
the transaction, Ecofin secured a fixed price revenue contract with an
investment grade rated electric power company to hedge the price risk for 100%
of SED Solar Portfolio's Solar Renewable Energy Credit ("SREC") through 2027.
2. Ellis Road Solar
Ellis Road Solar is a 7.1 MW ground mount solar project in Massachusetts that
commenced operations in 2021. This project sells 100% of its output to an
investment grade utility on a fixed price basis for 20 years through the state
of Massachusetts's renewable incentive program, Solar Massachusetts Renewable
Target (SMART). Ellis Road was initially sourced bilaterally by Ecofin through
its relationship with a commercial solar developer focused on Northeastern
U.S. markets and became one of the four seed assets identified as part of
RNEW's IPO. Following the closing of the acquisition in December 2020, Ecofin
actively monitored the remaining construction process through to its
successful completion and secured a tax equity investment on customary terms
from a large U.S. corporate with which Ecofin has previously transacted.
3. Oliver Solar
Oliver Solar is a 4.8 MW commercial solar project in San Joaquin County,
California that commenced operations in 2021. The project is strategically
located on a major logistics and distribution centre owned by the world's
largest global e-commerce company that also serves as the power purchaser
under a long-term fixed price PPA. The project experienced construction delays
due to Covid-19 related impacts and inspection delays. Shortly after
energisation, the offtake/ building owner requested that the project be
de-energised for further testing/ recommissioning, after they had experienced
an arch event and fire on another one of their facilities, instigating extreme
scrutiny and oversight on their entire fleet of rooftop projects including
Oliver Solar. Re-energisation has been delayed until a second inspection
occurs; this inspection has been delayed due to a requirement for
sub-contractors to obtain a specific safety compliance certificate in order to
be allowed on the offtaker's roof. Since closing the acquisition, Ecofin has
secured a tax equity investment on customary terms from a large U.S. corporate
with which it has previously transacted. Despite delays, Ecofin has continued
with billing and collecting revenue from the offtaker under the contract on
modelled P50 production.
4. Beacon Solar 2
Beacon Solar 2 is a 59.6 MW utility scale solar project in Kern County,
California that has been operating since December 2017. The project's location
in the Mojave desert of Southern California contributes to its strong solar
resource. In addition, the project has in place a fixed price PPA with an
investment grade rated utility for 100% of its output on an as generated basis
to provide a long-term stable source of revenues. Ecofin secured this
acquisition bilaterally from a leading infrastructure investor where there
existed a longstanding relationship and the vendor valued reliable execution
to close in 2020 over achieving the best price. RNEW obtained a 49.5%
ownership interest to align with the structuring objectives of the vendor. An
equivalent 49.5% ownership interest was sold to an international
infrastructure company. Since closing in December 2020, Ecofin has established
a strong operating relationship with its new partner through monthly
operations meetings and quarterly Board meetings. Both parties share a mutual
objective of optimising operations and cash flow. Of note, we have expanded
the use of NextTracker's TrueCapture technology designed to increase project
output through real-time tracker adjustments to reduce row-to-row shading that
occurs at different points of the day. We have also collaborated with the
operator to assess the level of equipment spares and procure an increased
level of solar module spares to reduce downtime over the coming year.
5. Beacon Solar 5
Beacon Solar 5 is a 48.2 MW utility scale solar project in Kern County,
California that has been operating since December 2017. The project was
developed in parallel with Beacon Solar 2 and shares an almost identical
project contractual structure including a PPA with the same offtaker. The
project is located in close proximity to Beacon Solar 2 which provides
operating and maintenance synergies. Beacon Solar 5 was acquired in parallel
with Beacon Solar 2 from the same vendor and has the same ownership structure
in place. For additional information, see the summary above on Beacon Solar 2.
6. Skillman Solar
Skillman Solar is a 2.6 MW commercial solar project in New Jersey that
completed construction in Q1 2022 and achieved its Commercial Operations Date
("COD") on 25 March 2022. The project provides power under a long-term
fixed-price PPA to a corporate campus of a privately held financial, software,
data, and media corporation that is a global leader in its respective
segments. The project also generates substantial revenues through the state of
New Jersey's fixed-price feed-in-tariff style renewable incentive program for
a 15-year period. This project was originated bilaterally through a
longstanding relationship with a commercial solar developer with which Ecofin
has transacted in the past. While this project did experience some
construction delays, Ecofin actively managed the process with the construction
firm through its contractual rights to ensure RNEW was not adversely impacted.
Due to the investment structure, no negative impact has occurred to the
investment valuation as a result of these delays.
7. Echo Solar Portfolio
As at 31 December 2022, the Company had closed on six solar projects in
Minnesota, Virginia and Delaware totalling 35.9 MW within the Echo Solar
Portfolio. As at 31 December 2022, two of these projects declared commercial
operation. The remaining four projects are expected to complete construction
and begin operations during Q2 2023. The Echo Solar Portfolio sells 100% of
its output to two investment grade rated utilities under long term fixed price
PPAs. This portfolio was originated through a leading global renewable energy
company with which Ecofin has a longstanding relationship and has transacted
with in the past, which provided the vendor with confidence in Ecofin's
reliable execution. Ecofin is actively managing the construction process
through weekly calls with the construction firm to approve milestone-based
payments and address any issues as they arise.
8. Delran Solar
Delran Solar is a 2.0 MW commercial rooftop solar project in New Jersey that
commenced operations in 2020. The project provides power under a long-term
fixed-price PPA to a logistics centre owned by a large publicly traded U.S.
media corporation. The project also generates substantial revenues through the
state of New Jersey's fixed-price feed-in-tariff style renewable incentive
program for a remaining 12.5-year period. This project was originated
bilaterally through a longstanding relationship with a commercial solar
developer with whom Ecofin had transacted in the past.
9. Whirlwind
Whirlwind is a proven operating wind asset, placed in service in December
2007, using 26 Siemens 2.3 MW wind turbine generators by Siemens Gamesa under
a long-term O&M agreement. It benefits from a fixed-price PPA with an
investment grade electric utility with approximately five years remaining on
the initial contract term, providing predictable cash flow. Whirlwind is
located in Texas, which is experiencing sustained growth in electricity demand
due to population growth and corporations migrating to this business-friendly
state. With electricity prices linked to natural gas prices, which have been
rising, these factors provide a good backdrop for recontracting in the future
and potential for inflation protection. Whirlwind demonstrates Ecofin's
sourcing network breadth beyond solar and was originated bilaterally with the
vendor. We believe this type of bilateral negotiation generates increased
value for RNEW's investors. As part of our portfolio management strategy,
Ecofin will continue to evaluate the potential to repower this asset at the
appropriate time and/or develop co-located battery storage as battery costs
decline and/or tax credits are expanded for batteries. Given the deregulated
nature of the Texas powermarket, it represents one of the most attractive for
siting battery storage and offers the potential for enhancing Whirlwind's
offering of dispatchable power under medium term recontracting scenarios.
Portfolio Production Update
During the twelve months ended 31 December 2022, the portfolio generated 335
GWh of clean energy, 5.5% below budget. Of the total, solar assets generated
150.0 GWh, 3.7% below budget (see project variances and explanations below)
and wind assets generated 184.6 GWh, 7.0% below budget principally due to low
wind resource and curtailments caused by Winter Storm Elliott, which impacted
large parts of the U.S. including Texas, in Q4 2022.
The performance of the underlying operating portfolio combined with its 100%
contracted revenue structure generated revenues of $13.4 million for the
Company. Overall, cash flows were below budget by 11.4%. While Echo Solar - MN
and Echo Solar - VA 1 achieved commercial operation in Q4 2022, both
experienced construction delays. There were also lower than expected cash
distributions from Beacon 2 & 5 due to overheating fuse holders throughout
the year. Ellis Road also experienced inverter outages in Q3 2022 and inverter
replacements in Q4 2022, while Winter Storm Elliott caused a utility shutdown
at Skillman in December 2022. This was partially offset by higher than
expected cash flows from the SED Solar Portfolio and Skillman during the
summer due to high insolation and a strong Q2 2022 from Whirlwind due to
increased wind resource.
Net Production Variance vs. Budget (GWh)
Investment Name(2) Sector State Actual Budget GWh Above % Above
(GWh) (GWh) (Below) Budget (Below) Budget
Beacon 2(1) Utility-Scale Solar California 63.1 65.7 (2.6) (4.0%)(a)
Beacon 5(1) Utility-Scale Solar California 50.7 51 (0.3) (0.6%)(b)
SED Solar Portfolio Commercial Solar Massachusetts, Connecticut 13.2 12.3 0.9 7.3%(c)
Ellis Road Solar Commercial Solar Massachusetts 8.3 8.6 (0.3) (3.5%)(d)
Oliver Solar(2) Commercial Solar California 7.5 7.5 - -
Delran Solar Commercial Solar New Jersey 2.4 2.4 - -
Skillman Solar Commercial Solar New Jersey 2.5 3.1 (0.6) (19.4%)(e)
Echo Solar - MN Commercial Solar Minnesota 2.0 5.0 (3.0) (60.0%)(f)
Echo Solar - VA 1(1) Commercial Solar Virginia 0.3 0.2 0.1 50.0%(f)
Solar Subtotal 150.0 155.8 (5.8) (3.7%)
Whirlwind Wind Texas 184.6 198.4 (13.8) (7.0%)(g)
Wind Subtotal 184.6 198.4 (13.8) (7.0%)
Total 334.6 354.2 (19.6) (5.5%)
Values and totals have been rounded to the nearest decimal.
1. Reflects RNEW's pro forma share of production based on
ownership.
2. Oliver Solar reached COD on 29 November 2021 and has been
accruing PPA revenue based on P50 modelled production since that date.
However, due to some commissioning and testing delays with the offtaker, the
world's largest e-commerce company, the system had not been energised as at 31
December 2022.
Production variance summary:
a, b Underperformance due to overheating fuse holders. Corrective
actions ongoing.
c Outperformance primarily due to higher than expected
insolation.
d Underperformance due to inverter faults in Q3 and early Q4;
replacements have been completed.
e Underperformance due to construction delays in the first
half of the year and Winter Storm Elliott which resulted in utility shutdown
for a 10‑day period in Q4.
f Variances due to construction delays and timing of
obtaining commercial operation.
g Underperformance due to lower wind resource in Q1, Q3 and Q4
and curtailments caused by Winter Storm Elliott in Q4.
Revenues
As at 31 December 2022, RNEW's portfolio had 100% of its revenue contracted
with a weighted average remaining term of 14.6 years; this includes all
construction and committed assets. Approximately 99% of the portfolio benefits
from fixed-price revenues, many with annual escalators of 1-2%, through PPAs,
contracted SREC, and fixed rents under leases. These fixed price contracts
mitigate market price risk for the term of the contracts.
Less than 1% of the portfolio has a variable form of revenue contract. These
contracts are set at a discount to a defined Massachusetts utility electricity
rate, which provides an ongoing economic benefit to the customer (i.e., the
offtaker/rooftop owner), as opposed to receiving the higher utility electric
rate when consuming electricity from the grid. While the variable rate
contract introduces an element of price volatility, it also offers the
potential to hedge inflation risk as utility rates in Massachusetts have
appreciated 3.0% on average per annum from 1990-2022.
The revenue profile below(3,4) represents a projection of RNEW's existing
revenue contracts as at 31 December 2022 and does not assume any replacement
revenue contracts following the expiry of these contracts. With increased
adoption of renewable energy in the U.S. and rising natural gas prices (which
tend to result in higher power prices in U.S. markets where natural gas is the
marginal fuel), Ecofin is confident that RNEW's prospects for re-contracting
at the end of revenue contract terms are positive.
RNEW Portfolio Revenue Breakdown
Year Contracted - Fixed Price Revenue Contracted - Variable Price Revenue Contracted - Fixed Price Incentive Revenue Uncontracted - Market Revenue
2022 86.2% 0.4% 13.4% 0.0%
2023 87.8% 0.9% 11.3% 0.0%
2024 89.6% 0.9% 9.5% 0.0%
2025 89.4% 2.1% 8.5% 0.0%
2026 88.9% 2.2% 8.9% 0.0%
2027 91.1% 2.3% 6.6% 0.0%
2028 53.3% 2.8% 3.1% 40.8%
2029 52.7% 2.8% 2.7% 41.8%
2030 51.9% 2.8% 2.7% 42.6%
2031 51.3% 2.9% 2.7% 43.1%
2032 51.3% 2.9% 2.7% 43.1%
2033 50.8% 3.0% 2.7% 43.5%
2034 50.2% 3.0% 2.6% 44.2%
2035 50.0% 2.9% 2.0% 45.1%
2036 46.7% 2.8% 1.3% 49.2%
2037 45.4% 2.7% 0.9% 51.0%
2038 82.9% 3.4% 0.0% 13.7%
2039 83.1% 0.3% 0.0% 16.6%
2040 83.1% 0.0% 0.0% 16.9%
2041 78.9% 0.0% 0.0% 21.1%
2042 76.6% 0.0% 0.0% 23.4%
3. The increase in uncontracted market revenue from 2028 onwards is
due to the maturity of the Whirlwind PPA.
4. The decrease in uncontracted market revenue from 2038 onwards is
due to Whirlwind reaching the conclusion of its technical useful life.
Active Management
Ecofin maintains an active approach to managing RNEW's portfolio and is in the
process of bringing certain previously outsourced asset management functions
in-house. For operating assets, Ecofin's process involves actively monitoring
production through direct, real-time system access, review of monthly O&M
and asset management reports, and meeting at least monthly with project
operators and asset managers to review and enhance performance. For
construction stage assets, the process is appropriately structured for more
frequent engagement with the relevant EPC contractor to review project
milestones and troubleshooting issues, review and approve payments in
accordance with contracts.
Financing
As at 31 December 2022, the Company's U.S. subsidiaries at a project level had
debt balance of $45.8 million, with an additional $18.6 million drawn down
under the RCF. This total debt balance corresponds to approximately 33.3% of
GAV and compares to the maximum limit of 65% in the Company's Investment
Policy, as further detailed in the table below. Given that the Company's
portfolio primarily comprises operating assets that have long-term fixed-price
revenue contracts with investment grade counterparties, construction and term
loan financing opportunities at both a project and group level are widely
available on attractive terms. With that in mind, the Company's Investment
Manager and Board favour a measured approach to using leverage to mitigate
interest rate and default risk. The Company has proactively and successfully
put in place both an RCF and non-recourse construction loan at its U.S.
subsidiaries as described below:
· On 19 October 2021, RNEW Capital, LLC, entered into a
$65.0 million secured RCF with KeyBank, one of the premier lenders to the U.S.
renewable energy industry. The RCF comprises a $50.0 million, two-year tranche
priced at LIBOR plus 1.75% and a $15.0 million, three-year tranche priced at
LIBOR plus 2.00%. The RCF is secured upon certain of the Company's investment
assets and offers the ability to substitute reference assets. The RCF also
includes an accordion option which provides access to an additional $20.0
million of capital which can be accessed subject to certain conditions. This
substantial commitment with attractive pricing and terms reflects the high
quality of RNEW's portfolio. As at 31 December 2022, this RCF was drawn at
$18.6 million. Ecofin is in dialogue with KeyBank on extending and refinancing
the RCF, as well as gauging the market for alternative lenders. Ecofin
anticipates being able to renew or extend the RCF on similar terms, coinciding
with a switch in reference rate from LIBOR to SOFR.
· On 7 January 2022, a wholly-owned U.S. subsidiary of
RNEW, Westside Solar Partners, LLC ("Echo Solar - MN"), entered into a $15.9
million non-recourse construction loan related to and secured by the 13.7 MW
Minnesota commercial solar asset (Echo Solar - MN) within the Echo Solar
Portfolio. The outstanding balance on the facility was repaid on 21 September
2022 and the facility was retired.
Through the 49.5% acquisition of the Beacon 2 and 5 operating solar assets,
the Company assumed its share of amortising project term loans secured on
those projects that totalled $45.8 million at 31 December 2022, as referred to
above.
On 31 December 2022, the Company had GAV of $193.4 million, and total recourse
and non-recourse debt of $64.4 million, resulting in total leverage of 33.3%.
The borrowing facilities available to the Company and its subsidiaries at 31
December 2022 are as set out in the table below:
Loan type Provider Borrower Facility Amount Maturity Applicable
amount drawn rate
($m) ($m)(5)
Revolving credit facility KeyBank RNEW Capital, LLC(6) $50.0 $18.6 Oct-23 LIBOR+1.75%
Revolving credit facility KeyBank RNEW Capital, LLC(6) $15.0 $0.0 Oct-24 LIBOR+2.00%
Term loan KeyBank Beacon Solar 2 $25.3 $25.3 May-26 LIBOR+1.25%
Term loan KeyBank Beacon Solar 5 $20.5 $20.5 May-26 LIBOR+1.25%
Total Debt $110.8 $64.4
5. As at 31 December 2022.
6. Includes security interests in the borrower and several of
its direct and indirect subsidiaries.
Portfolio Valuation
Valuation of the Company's portfolio is performed on a quarterly basis. A
discounted cash flow ("DCF") valuation methodology is applied which is
customary for valuing privately owned operating Renewable Assets. The
valuation is performed by Ecofin at 31 March and 30 September, and by an
independent third‑party valuation firm at 30 June and 31 December.
Fair value for each investment is derived from the present value of the
investment's expected future cash flows, using reasonable assumptions and
forecasts for revenues and operating costs, and an appropriate discount rate.
More specifically, such assumptions include annual energy production,
curtailment, merchant power prices, useful life of the assets, and various
operating expenses and associated annual escalation rates often tied to
inflation, including O&M, asset management, balance of plant, land leases,
insurance, property and other taxes, and decommissioning bonds, among other
items.
At IPO on 22 December 2020, the Company raised $125.0 million (before costs)
by issuing 125,000,000 Shares. Subsequently, on 10 May 2022, the Company
announced a placing and retail offer of new ordinary shares ("New Ordinary
Shares") of $0.01 each at an issue price of $1.015 per New Ordinary Share. The
Company raised $13.1 million (before costs) by issuing a total of 12,927,617
New Ordinary Shares. Admission of these New Ordinary Shares to the LSE became
effective on 24 May 2022.
2022 NAV Bridge ($MM)
NAV 31 Dec 2021 $123.7
Capital Raised $12.9
Change in ProjectCo DCF Roll Forward ($0.7)
Change in ProjectCo DCF - Discount Rates ($3.5)
Change in ProjectCo DCF - Assumptions $2.1
Distributions from ProjectCos to RNEW $9.9
Dividends to Shareholders ($7.5)
Expenses Paid ($2.4)
Changes in Financial Assets ($3.0)
Changes in Deferred Tax ($1.3)
NAV 31 Dec 2022 $130.2
Capital raised: Represents proceeds raised from the May 2022 placing and
retail offer net of commissions retained by brokers, fees to intermediaries
and other transaction expenses.
Change in project company DCF: Represents the impact on RNEW NAV from changes
to DCF depreciation and quarterly cashflow roll-forward and change in
project-level debt outstanding balances, including principal amortisation.
Change in project company DCF Discount Rates: Represents the impact on RNEW
NAV from an increase to the discount rates applied to the DCF models of each
project company. As at 31 December 2022, the weighted average unlevered
pre-tax discount rate was 7.5% (31 December 2021: 7.2%), which was increased
by 25 basis points principally due to the rise in inflation and interest
rates.
Change in project company DCF merchant curves: Represents the impact on RNEW
NAV from changes to the forward merchant price curves used in the DCF models
of each project company. The increase was principally due to the update of the
DCF models with the most recently published regional market forward power
prices by the U.S. Energy Information Administration ("EIA").
Distributions from project companies to RNEW: Represents cash generated by
project companies, which was distributed up to RNEW during the Year.
Dividends to shareholders: Dividends for Q4 2021, Q1 2022, Q2 2022, and Q3
2022 of $7.5 million (5.6 cents per Share) were paid during the Year. After
the Year end, the Company declared a further dividend of 1.4 cents per Share
in respect of the quarter ended 31 December 2022. Over the twelve-month period
ended 31 December 2022, the portfolio generated net revenue sufficient to
cover the dividend approximately 1.0 times.
Expenses paid: Represents the impact on RNEW NAV due to management fees and
expenses paid during the Year.
Change in financial assets: Represents the impact on RNEW NAV due to increases
or decreases in cash, receivables, payables and other net working capital
account balances.
Deferred tax liability: Represents the impact on RNEW NAV due to accruals
arising from operations in the Year and from a project level prior period
adjustment at RNEW Holdco, LLC, the Company's wholly-owned U.S. subsidiary,
which is subject to U.S. income taxes.
Portfolio Valuation Sensitivities
The figure below shows the impact on the portfolio valuation of changes to the
key input valuation assumptions ("sensitivities") with the horizontal x-axis
reflecting the impact on NAV per Share. The valuation sensitivities are based
on the portfolio of assets as at 31 December 2022. For each sensitivity
illustrated, it is assumed that potential changes occur independently with no
effect on any other assumption. It should be noted that the relatively
moderate impact of a change in forecast merchant power prices reflects the
long-term fixed price contracted revenues of the Company's portfolio, with a
weighted average remaining contracted term of 14.6 years as at 31 December
2022. Similarly, the moderate impacts due to variations in operational
expenses reflect a number of the Company's assets having fixed price,
long-term operating expenses including O&M, property leases and payments
in lieu of taxes.
Sensitivity Impact on NAV per Share
Energy Production P75/P25 (6.3%) to 6.5%
Merchant Power Prices +/- 10.0% (5.2%) to 5.4%
Discount Rates +/- 50 bps (4.9%) to 5.4%
Operating Expenses +/- 10.0% (4.1%) to 4.3%
Curtailment +/- 50% (3.9%) to 3.6%
Market Outlook
The U.S. renewables industry's prospects for growth are more encouraging than
ever. Predicted highlights for 2023‑24 include a steady rise in energy
demand and increased private investment, backed by strong long-term incentives
creating powerful tailwinds. For some time to come, renewable energy is
projected to be one of the more promising investment themes in the U.S. Not
only does it support sustainability and preserve the environment for future
generations, but investments in the sector are also well-positioned to
outperform most other sectors. This is as a result of relevant U.S.
legislation which is discussed in more detail below. Clean energy of the kind
owned and operated by RNEW is a safe, smart, potentially recession-resistant,
government-supported asset class for investors seeking attractive
risk-adjusted yields.
The enactment of the IRA in summer 2022 was positively received by U.S.
renewables producers, investors, and workers, as was emphasised in our
half-year report. The IRA combines the dual objectives of reducing domestic
inflation (brought on in part by rising global energy prices) while addressing
climate change issues. It is significant in many important ways. This is the
first time the U.S. renewables sector has seen 10-year incentives (versus 2-5
years previously) which provides certainty for and de-risks long term
projects. The legislation is also historic in size. A total of $369 billion
has been committed to renewables and related sectors dedicated to improving
energy security and achieving emission reduction goals. This includes funding
for carbon capture, utilisation and storage projects, battery storage,
electric vehicles and related infrastructure, as well as traditional
(solar/wind) renewables, representing incentives that are more widely spread
than previous incentives. Further important aspects of the IRA are production
tax credits (PTCs), investment tax credits (ITCs), credit transferability and
flexibility in how the incentives are used.
We concur with many analysts that the $369 billion figure anticipated to be
spent under the IRA significantly understates the amount of investment this
legislation could ultimately spur in the U.S. renewable energy sector. Several
of the IRA's most significant measures, such as its incentives for zero-carbon
electricity and electric vehicles, are "uncapped" tax credits, i.e. so long as
you abide by the conditions they will be awarded.
As such, the amount of money that the federal government can spend under this
legislation is not constrained by a budget or other legal provisions. The
amount that the IRA is expected to commit toward combating climate change is
largely based on the U.S. government's projection of how much these tax
credits will be utilised. But the IRA's ultimate spending could far exceed
this projection, and during the next decade, total climate spending could
reach well over $1.5 trillion, with federal spending stimulating further
state, local and private investment.
The Biden Administration has also passed two additional significant pieces of
legislation. A further $280 billion under the CHIPS and Science Act, which was
passed around the same time as the IRA, will be used to revive the U.S.
semiconductor industry. Of this, $67 billion (or around 25%) has been set
aside to promote the expansion of zero‑carbon businesses (such as renewable
energy) and climate-related research. The Infrastructure Investment and Jobs
Act (IIJA)(1), also referred to as the Bipartisan Infrastructure Law, which
was passed in November 2021, provides $1.2 trillion to support, among other
things, grid modernisation and clean energy research and deployment. Of that
amount, $65 billion has been allocated for the transmission of clean energy
and improvements to the nation's electrical infrastructure. In the U.S.,
utility-scale clean power is expected to increase by 525 to 550 GW by 2030,
according to projections.
There are numerous other drivers of significant growth worth noting,
including:
· The desire for greater energy security and energy
independence in the U.S. - this involves both national security concerns and
economic motivations such as reducing volatility from exposure to energy price
fluctuations and creating jobs in the U.S. renewables sector. It also reflects
the desire to re-domesticate the production of energy equipment and reduce the
dual vulnerabilities the country faces to Russian and Middle Eastern oil and
gas and Chinese production of most of the world's polysilicon and PV solar
panels. Building domestic manufacturing capacity for renewable energy
equipment would ensure the security of industrial supply chains, reduce
dependency on China for critical products and materials, and enhance job
opportunities and living standards for working class Americans.
· Increasing demand for energy overall - especially as the
U.S. seeks to decarbonise industry and electrify transportation and other
sectors of the economy. Rising energy demand over the next few years could
compound already existing supply chain limitations and interconnection
bottlenecks, which may cause prices to rise and could extend project timelines
on average, but these are short-term problems that are already sorting
themselves out.
· Societal concerns about climate change - concerns about
more frequent and increasingly severe natural disasters, and the desire to
save the planet for future generations, spurred the Biden Administration to
rejoin the Paris Climate Accord and reinforced global commitments to achieve
net-zero by 2050.
· Steadily declining costs of installing solar and onshore
wind generation - which on a combined basis, have decreased by over 70% in the
last decade (even before the recent trio of relevant legislation was passed),
despite supply chain and import tariff issues of recent years, have led to
greater cost competitiveness for renewables. While supply chain challenges may
lead to higher renewable energy costs in the short term, renewable generation
like solar and wind will likely persist as the cheapest energy sources. With
inflation high and the war in Ukraine continuing, fuel costs for conventional
generation have been rising faster than renewable costs. Meanwhile, a virtuous
cycle of increased investment in solar and other technologies is driving more
innovation, which in turn further drives down costs and attracts more
investment.
· The size and relative under-penetration of the U.S.
renewables market versus its peers in the UK and Europe ‑ the U.S. power
market is 12 times the size of the UK power market and 1.3 times the size of
the European power market. This creates abundant opportunities for RNEW. The
U.S. needs to install at least 40‑60 GW (estimates vary) of wind and solar
capacity each year to achieve its carbon reduction goals by 2050.
It should be noted that these structural forces are not political in nature
and should prevail irrespective of the political administration in the U.S.
Twenty-two states and the District of Columbia are aiming towards carbon-free
power or 100% renewable energy by the year 2050, frequently through mandates
and incentives for clean and renewable energy. State incentives tend to cross
party lines. In the race to construct more renewable capacity, so-called "red"
or conservative states are among the front-runners, with Texas exceeding New
York and California combined in terms of onshore wind and solar capacity.
States like Texas, Wyoming, and Montana stand to gain significantly from IRA
spending, and create many new jobs.
Despite all these growth drivers and incentives, there are still problems
preventing the U.S. renewables market from expanding more quickly. Three of
the largest market obstacles at the moment are trade policy issues, permitting
complications and delays, and transmission and interconnection constraints.
According to estimates, the U.S. must build 60% more transmission lines by
2050 in order to achieve its carbon reduction targets. Furthermore, in order
for the nation to swiftly construct enough power lines and sustainable energy
infrastructure, permitting bottlenecks must be resolved. Regarding customs and
tariff issues, a ruling in an important trade case in early December 2022
reinvigorated fears that trade policy could disrupt the U.S. solar industry.
Tariffs on solar modules manufactured by certain Chinese companies may resume
in 2024 and it is unlikely that U.S. manufacturing capacity will be sufficient
by that time to totally satisfy U.S. demand for solar modules. Other negative
forces include a) higher interest rates making financing more expensive and
harder to secure and b) IRA standards like worker training, competitive wages
and domestic component requirements, which may slow progress toward building a
new supply chain in the short term.
However, the net effect of all of these drivers, positive and negative, is
that RNEW should benefit from significant, long-term, structural tailwinds
that are poised to supercharge the U.S. renewables market in the coming decade
and beyond. The market opportunity and addressable pipeline for RNEW in the
U.S. renewables sector significantly exceeds the current size of the Company.
RNEW has a large and attractive pipeline of investment opportunities and will
continue for the foreseeable future. Furthermore, Ecofin has the industry
relationships and experience to identify and pursue the most attractive of
these projects for RNEW.
1 The IIJA includes:
• $90 billion in new infrastructure funding and
reauthorisations
• $65 billion in funding for clean energy transmission and
power infrastructure upgrades
• $66 billion in funding for Amtrak maintenance and
development
• $40 billion in new funding for bridge repair,
replacement, and rehabilitation
• $55 billion in funding for clean drinking water
• $65 billion in funding to create universal access to
reliable high-speed internet
Impact Report
ESG Integration and Impact
The Company's and Ecofin's strategy is to allocate capital using an ESG
integrated investment process to build and operate a diversified portfolio of
Renewable Assets that achieves RNEW's investment objective.
RNEW is focused on allocating capital using an investment process which fully
integrates ESG considerations and analysis to build and operate a diversified
portfolio of Renewable Assets consistent with RNEW's investment objective.
Ecofin, through its parent company, is a signatory to the Principles for
Responsible Investment (PRI) and incorporates ESG analysis into its investment
and reporting process. All of Ecofin's investment strategies for renewables
infrastructure are designed to provide investors with attractive long-term
returns and a level of impact that aligns with United Nations Sustainable
Development Goals:
This strategy seeks to achieve positive impacts that align with the following
UN Sustainable Development Goals
· 7 Affordable and clean energy
· 8 Decent work and economic growth
· 9 Industry, innovation and infrastructure
· 11 Sustainable cities and communities
· 13 Climate action
The Investment Manager's sustainability and impact policy is further described
in the Sustainability & Impact section of its website
ecofininvest.com/sustainability-impact.
ESG integration
The Company has been established to offer investors direct exposure to
renewable energy and sustainable infrastructure assets including solar, wind,
and battery storage that reduce greenhouse gas ("GHG") emissions and promote a
positive environmental impact. The Investment Manager integrates analysis of
ESG issues throughout the lifecycle of its investment activities spanning due
diligence, investment approval, and ongoing portfolio management.
Environmental criteria analysis considers how an investment performs as a
steward of nature; social criteria analysis examines its impact and
relationships with employees, suppliers, customers and the communities in
which it operates; and governance criteria analysis examines internal
controls, business ethics, compliance and regulatory status associated with
each investment.
Ecofin has developed a proprietary ESG due diligence risk assessment framework
("ESG Risk Assessment") that combines both qualitative and quantitative data.
This ESG Risk Assessment is embedded in Ecofin's investment memoranda and
systematically applied by the investment team to all opportunities prior to
investment authorisation by Ecofin's Investment Committee. Each of the
Company's eight closed and committed investments spanning 65 assets was
analysed through Ecofin's ESG Risk Assessment prior to investment commitment.
Ecofin believes this approach to assessing ESG issues serves to mitigate risk
and enhance RNEW's impact. Environmental factors affecting climate risk are
reviewed to determine an investment's impact and ability to reduce GHG
emissions, air pollution and water consumption.
Analysis of environmental issues also considers the impact that the investment
will have on land use and considers mitigation plans when issues are
identified. Analysis of social issues may encompass an investment's impact on
the local community and consider health and safety together with the
counterparties to be engaged to construct and operate the assets. Governance
is reviewed in partnership with qualified third-party legal counsel to ensure
compliance with all laws and regulations, strong ongoing corporate governance
through strict reporting protocols with qualified operators, project asset
managers and annual independent financial statement audits.
Ecofin applies a systematic approach to ESG monitoring once acquisitions are
closed. Through Ecofin's engagement with third party O&M and asset
management service providers, Ecofin reviews asset level reporting on health
and safety metrics, environmental matters and compliance. Issues identified
are reviewed and addressed with service providers through periodic meetings
such as monthly operations meetings.
Importantly, ESG factors are analysed then reported in a transparent manner so
that investors and key stakeholders can measure their impact.
Impact
RNEW's portfolio produced approximately 335 GWh of clean electricity during
2022, enough to power approximately 31,400 homes, offsetting approximately
203,500 tonnes of CO(2)e and avoiding the consumption of approximately 42,300
million litres of water. RNEW focuses on investments that have a positive
environmental impact by reducing GHG emissions, air pollution and water
consumption. Ecofin seeks to analyse and report on ESG factors on a consistent
basis to maximise the impact of its investment activities. To assess
environmental impact, Ecofin goes beyond measuring CO(2) emissions avoided and
quantifies other GHG emissions, such as methane and nitrous oxide, and also
measures the contribution that investments make to save water consumption.
Water is consumed by thermoelectric (i.e. coal and gas) power plants in the
cooling process associated with steam turbine generators. Water savings occur
in the same way that renewable energy generation offsets CO(2) emissions from
thermoelectric generators. Ecofin calculates estimated water savings by
reference to the EIA thermoelectric cooling water data by location and
applying it to the production from RNEW's portfolio.
Ecofin's methodology for calculating the environmental impact of investments
relies on trusted data sources including the U.S. EPA and the EIA.
Portfolio impact
~203,500 ~42,300M
Tonnes of CO(2)e Reduction Litres of water savings
~31,400 ~16,900
Households supplied Olympic size swimming pools
Task Force on Climate-related Financial Disclosures
Investment in renewables is considered an important component of climate
change mitigation as replacing fossil fuel‑based forms of electrical
generation is key in helping the global energy sector transition to a lower
carbon economy. While investment in renewables helps mitigate the effects of
climate change, renewable investments are not exempt from the potential
impacts of climate change. RNEW routinely identifies climate-related risks and
opportunities that may have a material financial impact on the performance of
its investments.
The Task Force on Climate-Related Financial Disclosures ("TCFD") was
established to develop voluntary, consistent climate-related financial risk
disclosures for use by companies in providing information to investors,
lenders, insurers, and other stakeholders. The TCFD recommends that all
organisations provide climate-related disclosures in their annual reports and
accounts, providing a framework to help companies assess the risks and
opportunities associated with climate change.
The FCA issued a proposal at the start of 2020 that required all premium
listed commercial companies with a financial year end from December 2021 to
align their reporting to the TCFD framework. While RNEW, as a UK Investment
Trust, is currently exempt from this reporting requirement, RNEW has decided
to make specific disclosures on opportunities and risks the Company faces
relating to climate change. An outline of RNEW's current approach to the
recommendations suggested by TCFD is included below.
TCFD Recommendation RNEW Disclosure
Governance
Disclose the organisation's governance around climate-related risks and The Company has an board of four non-executive independent Directors. The
opportunities. Board's role is to oversee the governance of the Company in the interests of
Shareholders and other stakeholders. In particular, the Board monitors
adherence to the Investment Policy, determines the risk appetite, sets Company
policies and monitors the performance of the Investment Manager and other key
service providers. The Board is responsible for the ongoing identification,
evaluation and management of the principal risks (including climate-related
risks and opportunities) faced by the Company and the Board has established a
process for the regular review of these risks and their mitigation. The Board
meets a minimum of six times a year for scheduled Board meetings, with
additional ad hoc meetings taking place dependent upon the requirements of the
business. The Board reviews the performance of all key service providers on an
annual basis through its Management Engagement Committee. Under their ongoing
supervision, the Directors have delegated responsibility for managing the
assets in the RNEW portfolio to Ecofin.
In managing the RNEW portfolio to achieve its investment objective, Ecofin
employs an institutional level investment process to identify and mitigate
risk (including climate-rated risks) covering sourcing, underwriting, due
diligence and portfolio management.
Strategy
Disclose the actual and potential impacts of climate‑related risks and Consideration of climate-related opportunities and risks is embedded
opportunities on the organisation's businesses, strategy, and throughout RNEW's business and investment strategies, as implemented by
financial planning where such information is material. Ecofin. Examples of areas considered include:
● Consideration of changing weather conditions that may
positively or negatively impact renewable energy generation or cause issues
related to the physical placement of assets.
● Political conditions that may or may not make a 2.0 degree
centigrade rise in temperature more likely through increasing / impairing the
value and pace of investment in Renewable Assets.
● Changes in technology or the cost of technology that could
make a 2.0 degree centigrade rise in global temperature more or less likely
and positively / negatively impact the value of existing and future Renewable
Assets investments.
● How the deployment of renewable energy and future technology
may impact commodity prices including the future price of electricity and have
a positive or negative impact on existing and future investment in Renewable
Assets.
As these and other material or potentially material risks and opportunities
are identified, Ecofin seeks to incorporate structural mitigation (i.e. obtain
insurance for those risks) and/or perform sensitivities on power price
forecasts and adjust required returns on investment.
Risk Management
Disclose how the organisation identifies, assesses, and manages The Directors and Ecofin understand that climate change could impact RNEW's
climate-related risks. strategy and underlying assets and include the consideration of climate change
opportunities and risks throughout the investment process. When conducting due
diligence on new investment opportunities, Ecofin uses its ESG Risk Assessment
framework to evaluate the impact of CO(2) and other GHG emissions /
pollutants, assess the impact on the site (through review of a Phase I
Environmental Site Assessment), and compliance with permits and regulations.
Environmental factors are considered during both the initial screening process
as well as during the project-focused due diligence stage in concert with
specialist environmental consultants and legal advisers, as needed. These
environmental factors and risks are documented in Ecofin's investment
memoranda that are reviewed by its Investment Committee prior to investments
being approved.
When a new asset is added to the portfolio, Ecofin establishes a monitoring
plan that is aligned with mitigating the key risks and achieving RNEW's
investment objective. Environmental factors are included in the ongoing
analysis and reporting process for each asset in the portfolio.
Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant Due to the nature of the Renewable Assets in the portfolio, the Scope 1 &
climate-related risks and opportunities where such information is material. 2 emissions for RNEW are de minimis. The power generated from the Renewable
Assets displaces electricity generated from marginal fossil fuel emitting
sources. As part of the investment diligence and monitoring, Ecofin attempts
to quantify the negative environmental factors avoided from the actual or
anticipated generation of its assets.
Ecofin analyses and considers several environmental factors including GHG
emissions from CO(2), methane (CH(4)) and nitrous oxide (N(2)O), air
pollutants such as sulphur dioxide (SO(2)) and nitrogen oxides (NOX) as well
as the project's water consumption to provide a broad view of environmental
impact. For calculating the emission reductions from Ecofin investments in
Renewable Assets, non-baseload fossil fuel generation emission rates are
appropriate. Non-baseload fossil fuel generation represents the generation
most likely to be reduced or replaced by energy efficiency projects or
renewable energy projects. Ecofin aggregates and evaluates data according to
the EPA's eGrid subregions in the U.S. These subregions are defined by the EPA
to establish an aggregated area where emission rates are anticipated to most
accurately represent the generation and emissions from the power plants
operating within that region. This allows the environmental impact from an
Ecofin investment in Renewable Assets to be more accurately quantified from
the asset's operation.
For reporting purposes, non-CO(2) GHG emissions are often converted to CO(2)
equivalent and reported in aggregate as CO(2)e.
Investment Objective and Investment Policy
The Company's investment objective and investment policy (including defined
terms) are as set out in its 2020 IPO prospectus.
Investment objective
The Company's investment objective is to provide Shareholders with an
attractive level of current distributions by investing in a diversified
portfolio of mixed renewable energy and sustainable infrastructure assets
("Renewable Assets") predominantly located in the United States with prospects
for modest capital appreciation over the long term.
Investment policy and strategy
The Company intends to execute its investment objective by investing in a
diversified portfolio of Renewable Assets predominantly in the United States,
but it may also invest in other OECD countries.
Whilst the principal focus of the Company will be on investment in Renewable
Assets that are solar and wind energy assets ("Solar Assets" and "Wind Assets"
respectively), sectors eligible for investment by the Company will also
include different types of renewable energy (including battery storage,
biomass, hydroelectric and microgrids) as well as other sustainable
infrastructure assets such as water and waste water.
The Company will seek to invest primarily through privately-negotiated middle
market acquisitions of long-life Renewable Assets which are
construction-ready, in-construction and/or currently in operation with
long-term PPAs or comparable offtake contracts with investment grade quality
counterparties, including utilities, municipalities, universities, schools,
hospitals, foundations, corporations and others. Long-life Renewable Assets
are those which are typically expected by Ecofin to generate revenue from
inception for at least 10 years.
The Company intends to hold the Portfolio over the long term, provided that it
may dispose of individual Renewable Assets from time to time.
Investment restrictions
The Company will invest in a diversified portfolio of Renewable Asset subject
to the following investment limitations which, other than as specified below
shall be measured at the time of the investment:
· once the Net Initial Proceeds are substantially fully
invested, a minimum of 20 per cent. of Gross Assets will be invested in Solar
Assets;
· once the Net Initial Proceeds are substantially fully
invested, a minimum of 20 per cent. of Gross Assets will be invested in Wind
Assets;
· a maximum of 10 per cent. of Gross Assets will be
invested in Renewable Assets that are not Wind Assets or Solar Assets;
· exposure to any single Renewable Asset will not exceed 25
per cent. of Gross Assets;
· exposure to any single Offtaker will not exceed 25 per
cent. of Gross Assets;
· once the Net Initial Proceeds are substantially fully
invested, investment in Renewable Assets that are in the construction phase
will not exceed 50 per cent. of Gross Assets, but prior to such time
investment in such Renewable Assets will not exceed 75 per cent. of Gross
Assets. The Company expects that construction will be primarily focused on
Solar Assets in the shorter term until the Portfolio is more substantially
invested and may thereafter include Wind Assets in the construction phase;
· exposure to Renewable Assets that are in the development
(namely pre-construction) phase will not exceed 5 per cent. of Gross Assets;
· exposure to any single developer in the development phase
will not exceed 2.5 per cent. of Gross Assets;
· the Company will not typically provide Forward Funding
for development projects. Such Forward Funding will, in any event, not exceed
5 per cent. of Gross Assets in aggregate and 2.5 per cent. of Gross Assets per
development project and would only be undertaken when supported by customary
security;
· Future Commitments and Developer Liquidity Payments, when
aggregated with Forward Funding (if any), will not exceed 25 per cent. of
Gross Assets;
· once the Net Initial Proceeds are substantially fully
invested, Renewable Assets in the United States will represent at least 85 per
cent. of Gross Assets; and
· any Renewable Assets that are located outside of the
United States will only be located in other OECD countries. Such Renewable
Assets will represent not more than 15 per cent. of Gross Assets. References
in the investment restrictions detailed above to "investments in" or "exposure
to" shall relate to the Company's interests held through its Investment
Interests.
For the purposes of the 2020 IPO Prospectus, the Net Initial Proceeds will be
deemed to have been substantially fully invested when at least 75 per cent. of
the Net Initial Proceeds have been invested in (or have been committed in
accordance with binding agreements to investments in) Renewable Assets.
The Company will not be required to dispose of any investment or to rebalance
the Portfolio as a result of a change in the respective valuations of its
assets. The investment limits detailed above will apply to the Group as a
whole on a look-through basis, namely, where assets are held through a Project
SPV or other intermediate holding entities or special purpose vehicles, and
the Company will look through the holding vehicle to the underlying assets
when applying the investment limits.
Gearing policy
The Group primarily intends to use long-term debt to provide leverage for
investment in Renewable Assets and may utilise short-term debt, including, but
not limited to, a revolving credit facility, to assist with the acquisition of
investments.
Long-term debt shall not exceed 50 per cent. of Gross Assets and short-term
debt shall not exceed 25 per cent. of Gross Assets, provided that total debt
of the Group shall not exceed 65 per cent. of Gross Assets, in each case,
measured at the point of entry into or acquiring such debt.
The Company may employ gearing either at the level of the relevant Project SPV
or at the level of any intermediate subsidiary of the Company. Gearing may
also be employed at the Company level, and any limits set out in this
Prospectus shall apply on a consolidated basis across the Company, the Project
SPVs and any such intermediate holding entities (but will not count any
intra-Group debt). The Company expects debt to be denominated primarily in
U.S. Dollars.
For the avoidance of doubt, financing provided by tax equity investors and any
investments by the Company in its Project SPVs or intermediate holding
companies which are structured as debt are not considered gearing for this
purpose and are not subject to the restrictions in the Company's gearing
policy.
Currency and hedging policy
The Group may use derivatives for the purposes of hedging, partially or fully:
· electricity price risk relating to any electricity or
other benefit including renewable energy credits or incentives, generated from
Renewable Assets not sold under a PPA, as further described below;
· currency risk in relation to any Sterling (or other
non-U.S. Dollar) denominated operational expenses of the Company;
· other project risks that can be cost-effectively managed
through derivatives (including, without limitation, weather risk); and
· interest rate risk associated with the Company's debt
facilities.
In order to hedge electricity price risk, the Company may enter into
specialised derivatives, such as contracts for difference or other hedging
arrangements, which may be part of a tripartite or other PPA arrangement in
certain wholesale markets where such arrangements are required to provide an
effective fixed price under the PPA.
Members of the Group will only enter into hedging or other derivative
contracts when they reasonably expect to have an exposure to a price or rate
risk that is the subject of the hedge.
Cash management policy
Until the Company is fully invested the Company will invest in cash, cash
equivalents, near cash instruments and money market instruments and treasury
notes ("Near Cash Instruments"). Pending re-investment or distribution of cash
receipts, the Company may also invest in Near Cash Instruments as well as
Investment Grade Bonds and exchange traded funds or similar ("Liquid
Securities"), provided that the Company's aggregate holding in Liquid
Securities shall not exceed 10 per cent. of Gross Assets measured at the point
of time of acquiring such securities.
Amendments to the investment objective, policy and investment restrictions
In the event that the Board considers it appropriate to amend materially the
investment objective, investment policy or investment restrictions of the
Company, Shareholder approval to any such amendment will be sought by way of
an ordinary resolution proposed at an annual or other general meeting of the
Company.
Risk Management
Principal Risks
The Board is responsible for the ongoing identification, evaluation and
management of the principal risks faced by the Company. On behalf of the
Board, the Risk Committee has established a process for the regular review of
these risks and their mitigation. This process principally involves a
semi-annual review of the Company's risk matrix and accords with the UK
Corporate Governance Code (the "UK Code") and the Financial Reporting
Council's ("FRC") Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting. The Directors have carried out a robust
assessment of the principal risks facing the Company, including those that
would threaten its business model, future performance, solvency and liquidity.
The following sections detail the risks the Board considers to be the most
significant to the Company:
Risk Possible Consequences Change in risk assessment during the Year Risk Mitigation And Controls
Electricity Price Lower electricity prices in the U.S. could negatively impact the Company's No change The Company's policy is to reduce its exposure to electricity price risk by
returns and/or the value of its investments. investing in Renewable Assets which sell their output under long term offtake
arrangements with credit worthy counterparties. As at 31 December 2022, the
portfolio benefited from a weighted average revenue contract term of 14.6
years. In its asset valuations, the Company uses long-term electricity price
forecasts prepared by independent third parties. Ecofin also performs a
sensitivity analysis to show the impact of a 10% increase/ decrease in
electricity prices during each project's remaining economic useful life. As at
31 December 2022, a 10% increase in electricity prices from forecast levels
would increase NAV by 5.4% and a 10% decrease in electricity prices from
forecast levels would reduce NAV by 5.2%.
Interest Rate, Currency and Inflation The Company may be adversely affected by changes in interest, currency Higher Interest, currency and inflation rates are monitored regularly by the Company.
exchange and inflation rates. Rising interest rates may lead to higher The Company may implement interest and currency rate hedging by fixing a
discount rates. portion of the Company's exposure to any floating rate obligation using
interest or currency rate swaps or other means. Where possible, the Company
enters into medium to long term contracts to fix costs. Inflation risk can
also be partly mitigated where projects' revenue offtake arrangements are
subject to indexation.
In light of the macro-economic situation brought about by the Russian invasion
of Ukraine, the Directors fully considered each of the Company's investments.
The Directors do not foresee any immediate material risk to the Company's
investment portfolio and income from underlying SPVs.
Discount rates are reviewed regularly by the Investment Manager, and on a
semi-annual basis by the independent valuer.
Investment Performance The Company may not achieve its investment objective; No change Ecofin has a well-defined investment strategy and processes in place which are
regularly reviewed and monitored by the Board. Ecofin has significant
The Company may fail to deliver its dividend target; experience originating, underwriting, and managing Renewable Assets and
applies its experience to mitigate risks and achieve the Company's investment
The Company may not be able to acquire suitable Renewable Assets consistent objective. The Board reviews the portfolio quarterly and discusses new
with its investment policy; and investments, the investment rationale, and the performance of the Company at
each Board meeting.
The Company's revenue can vary due to variations in the amount of power that
can be generated and sold. By their nature, solar irradiation and wind speed are outside the Company's
control, albeit some projects' returns are neither wholly nor directly linked
to the volume of power produced.
Investment Valuation The valuation of assets is inherently subjective and uncertain. Projections No change Ecofin has significant experience in the valuation of Renewable Assets and
are based on the independent valuer's and the Investment Manager's assessment through its investment activities is continually exposed to the prices paid
at the date of valuation and are only estimates of future results. Actual for Renewable Assets in the U.S. market. The Board and Ecofin review asset
results may vary significantly from projected amounts. valuations quarterly. The Company has appointed an independent valuer to
conduct a valuation of its assets, including a review of discount rates, on a
semi-‑annual basis.
Political Future investment opportunities and/or the value of existing investments may No change Both the current U.S. Administration and individual states are supportive of
be impacted by changes in government policy (e.g. increased property taxes, renewable energy. Ecofin has significant experience investing in Renewable
lower tax credits), in government policy incentives or in U.S. tax laws. Assets and undertakes due diligence at purchase with support from its legal
advisers and performs ongoing monitoring of political and regulatory risks.
When incentive programs are changed, the changes typically affect projects
that have yet to be built. Existing projects are usually grandfathered and
retain the benefits associated with the incentive scheme in place when they
were constructed. Ecofin seeks to reduce exposure to political and regulatory
risk by entering into long term contracts to fix both revenue streams
associated with incentives and costs (e.g. property taxes). Ecofin also
actively monitors potential changes in policy that could affect RNEW's
portfolio.
Discount Management The Shares may trade at a discount to NAV, which may make it more difficult Higher The Company's Brokers monitor the market for the Company's Shares and report
for the Company to raise new equity for future investments. at quarterly Board meetings. The Board regularly reviews the relative level of
discount against the sector. The Board has authority to buy back Shares.
Cyber Ecofin's information and technology systems and those of other service No change The Company relies on the systems of its service providers. Cyber security
providers to the Company may be vulnerable to cyber security breaches and policies and procedures are maintained by key service providers and are
identity theft which could adversely impact the Company's ability to continue reported to the Board periodically. Ecofin, the Administrator and the Board
to operate without interruption. include cyber risk in their reviews of counterparties.
Service Provider Reliance The Company has no employees and is reliant on the performance of third-party No change The Board meets with Ecofin and the Administrator on a quarterly basis to
service providers. review their work and monitor their performance. Service providers' resources
are also discussed. Additionally, through its Management Engagement Committee,
the Board conducts a formal assessment of each key service provider's
performance once a year. To assist its ability to properly oversee the
Company's service providers, the Board requires them to notify it as soon as
reasonably practicable following any material breach of their contracts with
the Company.
Counterparty There is the potential for losses to be incurred due to default by an offtaker No change A fundamental part of the Investment Manager's due diligence process involves
or other counterparty. reviewing the most recent credit rating of the offtaker provided by a third
party credit rating agency or performing an independent credit review of the
offtaker's credit status.
The credit status of other counterparties (e.g. banks) is also assessed and
monitored..
Pandemic A new pandemic, such as COVID‑19, could create operational challenges for Lower Updates on operational resilience are received from the Investment Manager,
the Company's service providers and with the construction and operation of the Administrator and other key service providers. In addition, the Investment
Company's assets. Manager is in close contact with each asset's O&M provider.
Climate The Company is exposed to the impacts of climate change i.e. risks relating to No change When conducting due diligence on potential investments, the Investment Manager
weather conditions and performance of equipment. considers the potential impact the weather may have on electricity production.
Ecofin also considers the impact of storms and other weather conditions when
determining the appropriate level of insurance coverage for an asset.
Investing in diverse projects spread across the U.S. mitigates the impact of
any localised, potentially unfavourable weather conditions.
ESG Risks such as health and safety, respect for human rights, bribery, No change ESG is embedded in Ecofin's investment process via a formal ESG rating matrix.
corruption, environmental management practices, duty of care and compliance The Company monitors the portfolio and quantifies the ESG impact of its
with relevant laws and regulations, may also arise. investments.
Each service provider has and is responsible for its own health and safety
policies and procedures.
Financing The Company may be unable to obtain debt financing on acceptable terms, either New The Company has access to a wide range of debt providers and has to date
at a project or at a holding company level. successfully raised debt finance both for asset construction and for general
purposes.
Portfolio allocations and debt limits are monitored by Ecofin and reviewed by
the Board.
Risks are managed and mitigated by the Board through continual review, policy
setting, and regular reviews of the Company's risk matrix by the Risk
Committee to ensure that procedures are in place with the intention of
minimising the impact of the above-mentioned risks.
Members of the Risk Committee bring external knowledge of the renewable
energy, investment trust (and financial services generally) marketplace,
trends, threats etc. as well as macro/ strategic insight. The Risk Committee
carried out a formal risk assessment at its meetings held on 27 July 2022 and
25 January 2023.
The Investment Manager advises the Board at quarterly Board meetings on
industry trends, providing insight on the political and regulatory environment
in which the Company's assets operate, and future challenges in these markets.
The Company's Brokers regularly report to the Board on markets, the investment
company sector and the Company's peer group. The Investment Manager works with
reputable EPC firms to reduce the risk that any materials sourced from vendors
employing the use of forced labour end up in the Company's projects and
actively monitors developments on this issue. The Company is not aware of any
such materials having been used in the Company's projects.
The Company Secretary briefs the Board on forthcoming legislation/regulatory
change in the UK that might impact the Company. The Auditor also provides an
annual update on regulatory changes relevant to the Company.
The Company is a member of the Association of Investment Companies ("AIC"),
which provides regular technical updates as well as drawing members' attention
to forthcoming industry/ regulatory issues and advising on compliance
obligations.
When required, experts are employed to provide information and technical
advice, including legal and tax.
Key Performance Indicators
The Company's Board of Directors meets regularly and at each meeting reviews
performance against a number of key performance indicators which include the
following:
· Performance;
· Dividends;
· Premium/discount of share price to NAV per Share; and
· Ongoing charges ratio.
Performance
As the Company's objective is to seek to provide Shareholders with an
attractive level of distributions with prospects of modest capital growth over
the long term, performance is best measured in terms of total return. The
Company's NAV and share price total returns for the Year were 1.1% and (10.8)%
respectively. There is no single index against which the Company's performance
may be meaningfully assessed. Therefore, the Board refers to a variety of
relevant data and this is reflected in both the Chair's Statement and the
Investment Manager's Report contained in the Annual Financial Report.
As explained in the Chair's Statement, the Board has reviewed the performance
in the Year and is satisfied with the longer term prospects of the portfolio.
The Company's NAV per Share is shown on the Statement of Financial Position in
the Annual Financial Report.
Dividends
Dividends form a key component of the Company's investment objective. The
Company declared four interim dividends in respect of the Year (total of 5.6
cents per Share), in line with the Company's dividend target.
The Board's Dividend Payment Policy is to pay dividends on a quarterly basis
in May, August, November and February in respect of each accounting year. The
timing of these regular three-monthly payments means that Shareholders do not
have an opportunity to vote on a final dividend. Recognising the importance of
shareholder engagement, although not required by any regulation, Shareholders
will be given an opportunity to vote on this policy at the forthcoming AGM.
Premium/discount of share price to NAV per Share
The Board monitors the price of the Company's Shares in relation to NAV and
the premium/discount at which the Shares trade. The Company has Shareholder
authority to issue and buy back Shares, which could assist short term
management of premium and discount respectively. However, the level of
discount or premium is mostly a function of investor sentiment and associated
demand for the Shares, over which the Board may have limited influence. The
share price stood at a 11.7% discount to NAV as at 31 December 2022.
Ongoing charges ratio
The expenses of managing the Company are carefully monitored by the Board. The
standard performance measure of these is the ongoing charges ratio ("OCR"),
which is calculated by dividing the sum of such expenses over the course of
the year, including those charged to capital, by the average NAV over the
year. This ratio provides a guide to the effect on performance of annual
operating costs. The Company's OCR for the year to 31 December 2022 was 1.8%
(IPO to 31 December 2021: 1.5%).
Business Review
The Strategic Report in the Annual Financial Report has been prepared to
provide information to Shareholders to assess how the Directors have performed
their duty to promote the success of the Company.
The Strategic Report contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the information
available to them up to the time of their approval of this report and such
statements should be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any such
forward-looking information.
The Company is an alternative investment fund ("AIF") under the European
Union's alternative investment fund managers' directive ("AIFMD") and has
appointed Ecofin Advisors, LLC as its AIFM.
The Directors are responsible for managing the business affairs of the Company
in accordance with the Articles and have overall responsibility for the
Company's activities including the review of investment activity and
performance and the overall supervision of the Company. The Directors may
delegate certain functions to other parties such as the Investment Manager,
the Administrator and the Registrar. In particular, the Directors have
delegated responsibility for managing the portfolio to the Investment Manager.
All the Directors are non-executive. All the Directors were considered by the
Board to be independent of the Investment Manager upon and since appointment.
A description of the role of the Board can be found in the Corporate
Governance Statement.
Statement of Directors' Responsibilities in Respect of the Financial
Statements
Directors' responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 (the "Act") and
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year 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 for the Company for that
period. The Directors are also required to prepare financial statements in
accordance with UK adopted international accounting standards.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and accounting estimates that are
reasonable and prudent;
· state whether they have been prepared in accordance with
international accounting standards in conformity with the requirements of the
Act, subject to any material departures disclosed and explained in the
financial statements
· state whether they have been prepared in accordance with
UK adopted International accounting standards, subject to any material
departures disclosed and explained in the financial statements;
· prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Company will continue in
business; and
· prepare a Directors' Report, a Strategic Report and
Directors' Remuneration Report which comply with the requirements of the Act.
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 Act and,
as regards the financial statements, Article 4 of the IAS Regulation.
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 and 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 the Annual Report and 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 Investment Manager and the
Directors. The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors' responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
· The financial statements have been prepared in accordance
with the applicable set of accounting standards and Article 4 of the IAS
Regulation and give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Company; and
· The Annual 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.
Patrick O'D Bourke
Chair of the Board
13 April 2023
Statement of Comprehensive Income
For the year ended 31 December 2022
For the period from
For the year ended 31 December Incorporation on 12 August 2020
2022 to 31 December 2021
Revenue Capital Total Revenue Capital Total
Notes $'000 $'000 $'000 $'000 $'000 $'000
Losses on investment 4 - (6,368) (6,368) - (322) (322)
Net foreign exchange gains/(losses) - 4 4 - (334) (334)
Income 5 9,878 - 9,878 6,130 - 6,130
Investment management fees 6 (1,300) - (1,300) (872) - (872)
Other expenses 7 (1,033) - (1,033) (1,056) (103) (1,159)
Profit/(loss) on ordinary activities before
taxation 7,545 (6,364) 1,181 4,202 (759) 3,443
Taxation 9 - - - - - -
Profit/(loss) on ordinary activities after
taxation 7,545 (6,364) 1,181 4,202 (759) 3,443
Earnings per Share (cents) - basic and diluted 8 5.68c (4.79c) 0.89c 4.54c (0.82c) 3.72c
The total column of the Statement of Comprehensive Income is the profit and
loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the Year.
Profit on ordinary activities after taxation is also the total comprehensive
profit for the Year. The notes contained in the Annual Financial Report form
part of these financial statements.
Statement of Financial Position
As at 31 December 2022
As at As at
31 December 31 December
2022 2021
Notes $'000 £'000
Non-current assets
Investment at fair value through profit or loss 4 127,375 118,882
Current assets
Cash and cash equivalents 3,394 5,362
Trade and other receivables 10 11 1
3,405 5,363
Current liabilities: amounts falling due within one year
Trade and other payables 11 (593) (522)
Net current assets 2,812 4,841
Net assets 130,187 123,723
Capital and reserves: equity
Share capital 12 1,381 1,251
Share premium 12,732 29
Special distributable reserve 14 121,250 121,250
Capital reserve (7,123) (759)
Revenue reserve 1,947 1,952
Total Shareholders' funds 130,187 123,723
Net assets per Share (cents) 15 94.3c 98.9c
Approved and authorised by the Board of directors for issue on 13 April 2023.
Patrick O'D Bourke
Chair of the Board
Statement of Changes in Equity
For the year ended 31 December 2022
Special
Share Share distributable Capital Revenue
capital premium reserve reserve reserve Total
Notes $'000 $'000 $'000 $'000 $'000 $'000
Opening equity as at
1 January 2022 1,251 29 121,250 (759) 1,952 123,723
Transactions with Shareholders
Shares issued during the Year 12 129 13,027 - - - 13,156
Shares issued to Investment
Manager 12 1 94 - - - 95
Share issue costs - (418) - - - (418)
Dividend distribution 13 - - - - (7,550) (7,550)
Total transactions with
shareholders 130 12,703 - - (7,550) 5,283
Profit/(loss) and total
comprehensive income for the Year - - - (6,364) 7,545 1,181
Closing equity as at
31 December 2022 1,381 12,732 121,250 (7,123) 1,947 130,187
Statement of Changes in Equity
For the year ended 31 December 2022
Special
Share Share distributable Capital Revenue
capital premium reserve reserve reserve Total
Notes $'000 $'000 $'000 $'000 $'000 $'000
Opening equity as at
12 August 2020 - - - - - -
Transactions with Shareholders
Shares issued at IPO 12 1,250 123,750 - - - 125,000
Shares issued to Investment
Manager 12 1 52 - - - 53
Share issue costs - (2,523) - - - (2,523)
Transfer to Special distributable
reserve - (121,250) 121,250 - - -
Dividend distribution 13 - - - - (2,250) (2,250)
Total transactions with shareholders 1,251 29 121,250 - (2,250) 120,280
Profit/(loss) and total comprehensive
income for the period - - - (759) 4,202 3,443
Closing equity as at 31 December 2021 1,251 29 121,250 (759) 1,952 123,723
The Company's distributable reserves consist of the Special distributable
reserve, the Capital reserve attributable to realised gains and losses and the
Revenue reserve. Total distributable reserves as of 31 December 2022 were
$123.2 million (31 December 2021: $123.2 million).
The Company may use its distributable reserves to fund dividends, redemptions
of Shares and share buy backs.
Statement of Cash Flows
For the year ended 31 December 2022
For the period from
Incorporation on
For the year ended 12 August 2020 to
31 December 2022 31 December 2021
Notes $'000 $'000
Operating activities
Profit on ordinary activities before taxation 1,181 3,443
Adjustment for unrealised losses on investments 6,368 322
Adjustment for non-cash investment management fee 95 53
Increase in trade and other receivables (10) (1)
Increase in trade and other payables 71 522
Net cash flow from operating activities 7,705 4,339
Investing activities
Purchase of investments 4 (14,861) (119,204)
Net cash flow used in investing (14,861) (119,204)
Financing activities
Proceeds of share issues* 12 12,897 122,977
Share issue costs* (159) (500)
Dividends paid 13 (7,550) (2,250)
Net cash flow from financing 5,188 120,227
(Decrease)/Increase in cash (1,968) 5,362
Cash and cash equivalents at start of Year/Period 5,362 -
Cash and cash equivalents at end of Year/Period 3,394 5,362
* The net proceeds from share issues and the share issue costs are being
shown net after the money due to the underwriter of $259,000 (2021:
$2,023,000) which related to their commission was retained.
As at 31 December As at
2022 31 December 2021
$'000 $'000
Cash and cash equivalents
Cash at bank - 1
Money market cash deposits 3,394 5,361
Total cash and cash equivalents at end of Year/Period 3,394 5,362
The notes below form part of these financial statements.
Notes to the Financial Statements
For the year ended 31 December 2022
1. General Information
Ecofin U.S. Renewables Infrastructure Trust PLC ("RNEW" or the "Company") is a
public company limited by shares incorporated in England and Wales on 12
August 2020 with registered number 12809472. The Company is a closed ended‑
investment company with an indefinite life. The Company commenced operations
on 22 December 2020 when its Shares were admitted to trading on the LSE. The
Directors intend, at all times, to conduct the affairs of the Company so as to
enable it to qualify as an investment trust for the purposes of section 1158
of the Corporation Tax Act 2010, as amended.
The registered office and principal place of business of the Company is 6th
Floor, 125 London Wall, London, EC2Y 5AS.
The Company's investment objective is to provide Shareholders with an
attractive level of current distributions, by investing in a diversified
portfolio of mixed renewable energy and sustainable infrastructure assets
predominantly located in the U.S. with prospects for modest capital
appreciation over the long term.
The financial statements comprise only the results of the Company, as its
investment in RNEW Holdco, LLC ("Holdco") is included at fair value through
profit or loss ("FVTPL") as detailed in the key accounting policies below.
The Company's AIFM and Investment Manager is Ecofin Advisors, LLC.
Apex Listed Companies Services (UK) Limited (formerly Sanne Fund Services (UK)
Limited), provides administrative and company secretarial services to the
Company under the terms of an administration agreement between the Company and
the Administrator.
2. Basis of Preparation
The financial statements have been prepared in accordance with applicable law
and the UK-adopted international accounting standards. The financial
statements have been prepared on the historical cost basis, as modified for
the measurement of certain financial instruments at FVTPL.
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 ("SORP") issued by the AIC in July 2022.
The functional currency of the Company is U.S. Dollars as this is the currency
of the primary economic environment in which the Company operates and where
its investments are located. The Company's investment in Holdco is denominated
in U.S. Dollars and a substantial majority of its income is receivable, and of
its expenses is payable, in U.S. Dollars. Also, a majority of the Company's
cash and cash equivalent balances is retained in U.S. Dollars. Accordingly,
the financial statements are presented in U.S. Dollars rounded to the nearest
thousand dollars.
Comparative financial information is at 31 December 2021 and for the period
from the Company's Incorporation on 12 August 2020 to 31 December 2021
("Period"), being the Company's first accounting period.
Basis of consolidation
The Company has adopted the amendments to IFRS 10 which state that investment
entities should measure all of their subsidiaries that are themselves
investment entities at fair value.
The Company owns 100% of its subsidiary Holdco and invests in SPVs through its
investment in Holdco. The Company and Holdco meet the definition of an
investment entity as described by IFRS 10. Under IFRS 10, investment entities
measure subsidiaries at fair value rather than consolidate them on a
line-by-line basis, meaning Holdco's cash, debt and working capital balances
are included in investments held at fair value rather than in the Company's
current assets and liabilities. Holdco has one investor, which is the Company.
In substance, Holdco is investing the funds of the investors in the Company on
its behalf and is effectively performing investment management services on
behalf of such unrelated beneficiary investors.
Characteristics of an investment entity
Under the definition of an investment entity, the Company should satisfy all
three of the following tests:
· Company obtains funds from one or more investors for the
purpose of providing those investors with investment management services;
· Company commits to its investors that its business purpose
is to invest funds solely for returns from capital appreciation, investment
income, or both; and
· 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:
· the Company has multiple investors and obtains funds from
a diverse group of shareholders who would otherwise not have access
individually to investing in renewable energy and sustainable infrastructure
investments ("Renewable Assets") due to high barriers to entry and capital
requirements;
· the Company intends to hold its Renewable Assets for the
remainder of their useful lives for the purpose of investment income. The
Renewable Assets are expected to generate renewable energy output for 25 to
30 years from their relevant COD and the Directors believe the Company is
able to generate returns to investors during that period; and
· 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 uses fair value information as a primary
measurement to evaluate the performance of all of the Company's investments
and in decision making.
The Directors are of the opinion that the Company meets all the
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.
Going concern
The Directors have adopted the going concern basis in preparing the financial
statements. In reaching their conclusion, the Directors considered the
Company's cash flow forecasts, cash and net debt position, and the financial
covenants in its borrowing facilities. The Company's net assets at 31 December
2022 were $130.2 million (31 December 2021: $123.7 million). As at 31
December 2022, the Company held $3.4 million in cash (31 December 2021: $5.4
million) and had borrowings of $64.4 million (31 December 2021: $52.1
million) and $46 million headroom on its RCF (31 December 2021: $60 million).
The Directors are confident that the Company's RCF, which is currently due
to expire in October 2023, will be extended or renewed during the second half
of 2023. Active discussions are currently taking place to agree specific
terms.
The Company's holds 100% of the share capital of Holdco which in turn holds
investments in renewable energy project companies through SPVs. Underlying SPV
revenues are derived from the sale of electricity by project companies under
PPAs in place with creditworthy utilities, municipalities, and corporations.
Most of these PPAs are contracted over a long period with a weighted average
remaining life as at 31 December 2022 of 14.6 years (31 December 2021: 16.7
years).
The Company continues to meet its day-to-day liquidity needs through its cash
resources. Total expenses for the year ended 31 December 2022 were $2.3
million Period from incorporation to 31 December 2021: $2.0 million), which
represented approximately 1.8% of average net assets during the Year (Period
from incorporation to 31 December 2021: 1.6%). At the date of approval of this
Annual Report, based on the aggregate of investments and cash held, the
Company had substantial cover for its operating expenses.
The major cash outflows of the Company are the acquisition of new investments
and the payment of dividends. The Directors review financial reporting and
forecasts at each quarterly Audit Committee meeting, which includes reporting
related to indebtedness, compliance with borrowing covenants and fund
investment limits. The Directors are confident that the Company has sufficient
cash balances, borrowing headroom and anticipated tax equity arrangements in
order to fund the commitments detailed in note 19 to the financial statements,
should they become payable.
As a result of the macro-economic situation brought about by the Russian
invasion of Ukraine and the recovery from the COVID-19 pandemic, the Directors
have fully considered each of the Company's investments. The Directors do not
foresee any immediate material risk to the Company's investment portfolio
and/or the income it receives from underlying SPVs. A prolonged and deep
market decline could lead to falling values in the underlying investments or
interruptions to cashflow, however the Company currently has sufficient
liquidity available to meet its future obligations. The Directors are also
satisfied that the Company would continue to remain viable under downside
scenarios, including decreasing U.S. government regulated tax credits and a
decline in long term power price forecasts.
The Company's ability to continue as a going concern has been assessed by the
Directors for a period of at least 12 months from the date the financial
statements were authorised for publication.
Critical accounting judgements, estimates and assumptions
Preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amount of assets, liabilities, income and
expenses. Estimates are, by their nature, based on judgement and available
information, hence actual results may differ from these judgements, estimates
and assumptions. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying value of assets and liabilities
are those used to determine the fair value of the investments as disclosed in
note 4 to the financial statements.
Key judgements
As disclosed above, the Directors have concluded that both the Company and
Holdco meet the definition of an investment entity as defined in IFRS 10. This
conclusion involved a degree of judgement and assessment as to whether the
Company met the criteria outlined in IFRS 10.
Key estimation and uncertainty: Investments at fair value through profit or
loss
The Company's investments in unquoted investments are valued by reference to
valuation techniques approved by the Directors and in accordance with the
International Private Equity and Venture Capital Valuation (IPEV) Guidelines.
The Company uses discounted cash flow ("DCF") models to determine the fair
value of the underlying assets in Holdco. The value of Holdco includes any
working capital not accounted for in the DCF models (deferred tax liabilities,
cash plus any receivables or payables at the entity and not at the asset
level). The fair value of each asset is derived by projecting its future cash
flows, based on a range of operating assumptions for revenues and expenses,
and discounting those future cash flows to the present using a discount rate
appropriately calibrated to the risk profile of the asset and market dynamics.
The key estimates and assumptions used within the DCF include discount rates,
annual energy production, curtailment, merchant power prices, useful life of
the assets, and various operating expenses and associated annual escalation
rates often tied to inflation, including O&M, asset management, balance of
plant, land leases, insurance, property and other taxes and decommissioning
bonds, among other items. An increase/(decrease) in the key valuation
assumptions would lead to a corresponding decrease/(increase) in the fair
value of the investments as described in note 4 to the financial statements.
The Company's investments at fair value are not traded in active markets.
The estimates and assumptions used to determine the fair value of investments
are disclosed in note 4 to the financial statements.
Segmental reporting
The Chief Operating Decision Maker, which is the Board, is of the opinion that
the Company is engaged in a single segment of business, being investment in
renewable energy infrastructure assets to generate investment returns whilst
preserving capital. The financial information used by the Chief Operating
Decision Maker to manage the Company presents the business as a single
segment.
All of the Company's income is generated within the U.S. All of the Group's
non-current assets are located in the U.S.
New Standards, Interpretations and Amendments adopted from 1 January 2022
A number of new standards, amendments to standards are effective for annual
periods beginning after 1 January 2022. None of these have a significant
effect on the measurement of the amounts recognised in the financial
statements of the Company.
New Standards and Amendments issued but not yet Effective
The relevant new and amended standards and interpretations that are issued,
but not yet effective, up to the date of issuance of the Company's financial
statements are disclosed below. These standards are not expected to have a
material impact on the entity in future reporting periods and on foreseeable
future transactions.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to
specify the requirements for classifying liabilities as current or
non-current. The amendments are effective for annual reporting periods
beginning on or after 1 January 2023. This amendment is not yet endorsed in
the UK.
Definition of Accounting Estimates - Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which it introduced
a definition of 'accounting estimates'. The amendments are effective for
annual reporting periods beginning on or after 1 January 2023.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice
Statement 2 Making Materiality Judgements. The amendments to IAS 1 are
applicable for annual periods beginning on or after 1 January 2023.
3. Significant Accounting Policies
Financial Instruments
Financial assets
The Company's financial assets principally comprise an investment held at
FVTPL (investment in Holdco) and trade and other receivables.
The Company's investment in Holdco, being classified as an investment entity
under IFRS 10, is held at FVTPL in accordance with IFRS 9. Gains or losses
resulting from movements in fair value are recognised in the Company's
Statement of Comprehensive Income at each valuation point.
Trade and other receivables are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest rate
method.
Financial liabilities
The Company's financial liabilities include trade and other payables and other
short term monetary liabilities which are initially recognised at fair value
and subsequently measured at amortised cost using the effective interest rate
method.
Recognition, derecognition and measurement
Financial assets and financial liabilities are recognised in the Company's
Statement of Financial Position when the Company becomes a party to the
contractual provisions of the instrument. Financial assets and financial
liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than financial assets and
financial liabilities at FVTPL) are added to or deducted from the fair value
of the financial assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at FVTPL are recognised immediately
in profit or loss.
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.
A financial liability (in whole or in part) is derecognised when the Company
has extinguished its contractual obligations, it expires or is cancelled.
Subsequent to initial recognition, financial assets at FVTPL are measured at
fair value. Gains and losses resulting from movements in fair value are
recognised in the Statement of Comprehensive Income.
Financial liabilities are subsequently measured at amortised cost using the
effective interest rate method.
Taxation
The following accounting policies for taxation and deferred tax are in respect
of UK tax and deferred taxation.
Investment trusts which have approval under Section 1158 of the Corporation
Tax Act 2010 are not liable for taxation on capital gains. Shortly after
listing the Company received approval as an Investment Trust by HMRC. Current
tax is the expected tax payable on the taxable income for the Year, using tax
rates that have been enacted or substantively enacted at the date of the
Statement of Financial Position.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited to the Statement of Comprehensive Income except when it
relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off tax assets against tax liabilities and when they
relate to income taxes levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a net basis.
Income
Income includes investment income from financial assets at FVTPL and finance
income.
Dividend income is recognised when received and is reflected in the Statement
of Comprehensive Income as Investment Income. Bank deposit interest income is
earned on bank deposits on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the Statement of
Comprehensive Income, all expenses, including the Investment Management fee,
are presented in the revenue column of the Statement of Comprehensive income
as they are directly attributable to the operations of the Company with the
exception of costs incurred in the acquisition of the seed assets in the
Period ended 31 December 2021, which were charged as a capital item in the
Statement of Comprehensive Income.
Details of the Company's fee payments to the Investment Manager are disclosed
in note 6 to the financial statements.
Foreign currency
Transactions denominated in foreign currencies are translated into U.S.
Dollars at actual exchange rates as at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the Year end are
reported at the rates of exchange prevailing at the Year end. Any gain or loss
arising from a change in exchange rates subsequent to the date of the
transaction is included as an exchange gain or loss to capital or revenue in
the Statement of Comprehensive Income as appropriate. Foreign exchange
movements on investments are included in the Statement of Comprehensive Income
within gains on investments.
Cash and cash equivalents
Cash and cash equivalents include deposits held at call with banks and other
short-term deposits with original maturities of three months or less.
Share capital and share premium
Shares are classified as equity. Costs directly attributable to the issue of
new Shares (that would have been avoided if there had not been an issue of new
Shares) are recognised against the value of the Share premium account.
Repurchases of the Company's own Shares are recognised and deducted directly
in equity. No gain or loss is recognised in profit or loss on the purchase,
sale, issue or cancellation of the Company's own equity instruments.
Nature and purpose of equity and reserves:
Share capital represents the nominal value (1 cent per share) of the issued
share capital. The Share premium account arose from the net proceeds of new
Shares.
The Special distributable reserve, which can be utilised to fund distributions
to the Company's Shareholders, was created following confirmation of the
Court, through the cancellation and transfer of $121,250,000 in January 2021
from the Share premium account.
The capital reserve reflects any:
· gains or losses on the disposal of investments;
· exchange movements of a capital nature;
· the increases and decreases in the fair value of
investments which have been recognised in the capital column of the Statement
of Comprehensive Income; and
· expenses which are capital in nature.
The revenue reserve reflects all income and expenditure recognised in the
revenue column of the Statement of Comprehensive Income and is distributable
by way of dividend.
The Company's distributable reserves consists of the Special distributable
reserve, the Capital reserve attributable to realised profits and the Revenue
reserve.
Dividend payable
Dividends payable are recognised as distributions in the financial statements
when the Company's obligation to make payment has been established.
4. Investment Held at Fair Value Through Profit or Loss
As at 31 December 2022, the Company had one investment, being Holdco. The cost
of the investment in Holdco was US$ 134,065,052 (31 December 2021:
US$119,203,824).
31 December 31 December
2022 2021
Total Total
$'000 $'000
(a) Summary of valuation
Analysis of closing balance:
Investment at fair value through profit or loss 127,375 118,882
Total investment as at 31 December 127,375 118,882
(b) Movements during the Year/Period:
Opening balance of investment, at cost 119,204 -
Additions, at cost 14,861 119,204
Cost of investment as at 31 December 134,065 119,204
Revaluation of investment to fair value:
Unrealised movement in fair value of investment (6,690) (322)
Fair value of investment as at 31 December 127,375 118,882
(c) Losses on investment in Year/Period
Unrealised movement in fair value of investment brought forward (322) -
Unrealised movement in fair value of investment during the year (6,368) (322)
Losses on investment (6,690) (322)
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following three levels:
Level 1
The unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable
(i.e. developed using market data) for the asset or liability, either directly
or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the
asset or liability.
31 December 2022
Level 1 Level 2 Level 3 Total
$'000 $'000 $'000 $'000
Investment at fair value through profit or loss
Equity investment in Holdco - - 127,375 127,375
Total investment as at 31 December 2022 - - 127,375 127,375
31 December 2021
Level 1 Level 2 Level 3 Total
$'000 $'000 $'000 $'000
Investment at fair value through profit or loss
Equity investment in Holdco - - 118,882 118,882
Total investment as at 31 December 2021 - - 118,882 118,882
Due to the nature of the underlying investments held by Holdco, the Company's
investment in Holdco is always expected to be classified as Level 3. There
have been no transfers between levels during the Year/Period.
The movement on the Level 3 unquoted investment during the Year/Period is
shown below:
As at As at
31 December 31 December
2022 2021
$'000 $'000
Opening balance 118,882 -
Additions during the Year/Period 14,861 119,204
Unrealised loss on investment (6,368) (322)
Closing balance 127,375 118,882
Valuation methodology
The Company owns 100% of its subsidiary Holdco through which the Company has
acquired all its underlying investments in SPVs.
As discussed in Note 2, the Company meets the definition of an investment
entity as described by IFRS 10, and as such the Company's investment in Holdco
is valued at fair value. In accordance with Company policy, the Investment
Manager has engaged an independent valuation firm, Marshall & Stevens, to
carry out fair market valuations of the underlying investments as at 31
December 2022.
Fair value of operating assets is derived using a DCF methodology, which
follows International Private Equity Valuation and Venture Capital Valuation
Guidelines. DCF is deemed the most appropriate methodology when a detailed
projection of future cash flows is possible. The fair value of each asset is
derived by projecting the future cash flows of an asset, based on a range of
operating assumptions for revenues and expenses, and discounting those future
cash flows to the present day with a pre-tax discount rate appropriately
calibrated to the risk profile of the asset and market dynamics. Due to the
asset class and available market data over the forecast horizon, a DCF
valuation is typically the basis upon which renewable assets are traded in the
market. Assets that are not yet operational and still under construction at
the time of the valuation are held at cost as an estimate of fair value,
provided no significant changes to key underlying economic considerations
(such as major construction impediments or natural disasters) have arisen.
The Company measures the total fair value of Holdco by its net asset value,
which is made up of cash, working capital balances and the aforementioned fair
value of the underlying investments as determined using the DCF methodology.
The Directors have satisfied themselves as to the methodology, the discount
rates used and key assumptions applied and the valuation.
Valuation Sensitivities
A sensitivity analysis is carried out to show the impact on NAV of changes to
key assumptions. For each of the sensitivities, it is assumed that potential
changes occur independently of each other with no effect on any other key
assumption, and that the number of investments in the portfolio remains static
throughout the modelled life. The resulting NAV per share impacts are
discussed below.
(i) Discount rates
Pre-tax discount rates applied in the DCF valuations are determined by
Marshall & Stevens using a multitude of factors, including pre-tax
discount rates disclosed by the Company's global peers and comparable
infrastructure asset classes as well as the internal rate of return inherent
in the original purchase price when underwriting the asset. The DCF valuations
utilize two classes of pre-tax discount rates:
a) contracted discount rate applied to the contracted cash flows of each asset
and b) uncontracted discount rate (higher) applied to the uncontracted (or
"merchant") cash flows of each investment which will occur after the initial
PPA and/or other contract term.
The pre-tax discount rates used in the DCF valuation of the investments are
considered the most significant observable input through which an increase or
decrease would have a material impact on the fair value of the investments at
FVTPL. As of 31 December 2022, the blended pre-tax discount rates (i.e., the
implied discount rate of both the contracted and uncontracted discount rates
of each investment) applied to the portfolio ranged from 6.7% to 8.0% (2021:
6.5% to 7.8%) with an overall weighted average of 7.5% (2021: 7.2%).
An increase or decrease of 0.5% in the discount rates would have the following
impact on NAV:
Discount Rate + 50 bps - 50 bps
Increase/(decrease) in NAV ($'000) (6,402) 6,998
NAV per Share 89.6c 99.4c
NAV per Share Change (4.6c) 5.1c
Change (%) (4.9%) 5.4%
(ii) Energy Production
Solar and wind assets are subject to variation in energy production over time.
An assumed "P75" level of energy yield (i.e. a level of energy production that
is below "P50", with a 75% probability of being exceeded) would cause a
decrease in the total portfolio valuation, while an assumed "P25" level of
power output (i.e. a level of energy production that is above "P50", with a
25% probability of being achieved) would cause an increase in the total
portfolio valuation.
Energy production, as measured in MWh per annum, assumed in the DCF valuations
is based on a "P50" energy yield profile, representing a 50% probability that
the energy production estimate will be met or exceeded over time. An
independent engineer has derived this energy yield estimate for each asset by
taking into account a range of irradiation, weather data, ground-based
measurements and design/site-specific loss factors including module
performance, module mismatch, inverter losses, and transformer losses, among
others. The "P50" energy yield case includes a 0.5% annual degradation for
solar assets and 1.0% annual degradation for wind assets through the entirety
of the useful life. In addition, the P50 energy yield case includes an
assumption of availability, which ranges from 98.5% to 99% for solar assets
and 96.0% for wind assets, as determined reasonable by an independent engineer
at the time of underwriting the asset.
The application of a P75 and a P25 energy yield case would have the following
impact on NAV:
Energy Production P75 P25
Increase/(decrease) in NAV ($'000) (8,197) 8,446
NAV per Share 88.3c 100.4c
NAV per Share Change (5.9c) 6.1c
Change (%) (6.3%) 6.5%
(iii) Curtailment
Curtailment is the deliberate reduction (by the transmission operator) in
energy output of an asset below what could have been produced in order to
balance energy supply and demand or due to transmission constraints. Due to
the contracted nature of energy production of its renewable energy investments
held by Holdco and with a substantial share of its solar assets being
behind-the-meter and directly connected to the energy consumer, the Company's
NAV is subject to a low overall level of curtailment, which has been factored
into NAV.
An increase or decrease of 50% from the assumed level of curtailment would
have the following impact on NAV:
Curtailment -50% +50%
Increase/(decrease) in NAV ($'000) (5,037) 4,680
NAV per Share 90.6c 97.7c
NAV per Share Change (3.6c) 3.4c
Change (%) (3.9%) 3.6%
(iv) Merchant Power Prices
All of the Company's assets have long-term PPAs and incentive contracts in
place with creditworthy energy purchasers, and thus are not impacted by
fluctuations in regional market energy prices during the contract period.
Future power price forecasts used in the DCF valu-ations are derived from
regional market forward prices provided by the EIA, with a 10-50% discount
applied based on the characteristics of the asset as reasonably determined by
Marshall & Stevens. Inflationary pressures over the long-term could
present a circumstance of variability and increase merchant power prices from
previous forecasts.
An increase or decrease of 10% in future merchant power price assumptions
would have the following impact on NAV:
Merchant Power Prices -10.0% +10.0%
Increase/(decrease) in NAV ($'000) (6,801) 7,021
NAV per Share 89.4c 99.4c
NAV per Share Change (4.9c) 5.1c
Change (%) (5.2%) 5.4%
(v) Operating Expenses
Operating expenses include O&M, balance of plant, asset management, site
leases and easements, insurance, property taxes, equip-ment reserves,
decommissioning bonds and other costs. Most operating expenses for solar and
wind assets are contracted with annual escalation rates, which typically range
from 2-3% to account for normalised inflation. As such, there is typically
little variation in annual operating expenses. However, there may be incidents
when certain expenses may be recontracted. Inflationary pressures over the
long-term could also affect future operating expenses.
An increase or decrease of 10% in operating expenses would have the following
impact on NAV:
Operating Expenses +10.0% -10.0%
Increase/(decrease) in NAV ($'000) (5,382) 5,599
NAV per Share 90.4c 98.3c
NAV per Share Change (3.9c) 4.1c
Change (%) (4.1%) 4.3%
5. Income
For the year For the Period
ended ended
31 December 31 December
2022 2021
$'000 £'000
Income from investment
Dividends from Holdco 9,850 6,115
Deposit interest 28 15
Total Income 9,878 6,130
6. Investment Management Fees
For the year ended 31 December 2022 For the Period ended 31 December 2021
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
Investment management fees 1,300 - 1,300 872 - 872
The Investment Management Agreement ("IMA") dated 11 November 2020 between the
Company and Ecofin Advisors, LLC, appointed the AIFM to act as the Company's
Investment Manager for the purposes of the AIFM Directive. Accordingly, the
AIFM is responsible for providing portfolio management and risk management
services to the Company.
Under the IMA, the Investment Manager receives a management fee of 1.00% per
annum of NAV up to and including $500 million; 0.90% per annum of NAV in
excess of $500 million up to and including $1 billion; and 0.80% per annum of
NAV in excess of $1 billion, invoiced quarterly in arrears. Until such time as
90% of the Net Initial Proceeds of the Company's IPO was committed to
investments, the Investment Manager fee was only charged on the committed
capital of the Company. No performance fee or asset level fees are payable to
the AIFM under the IMA.
The Investment Manager reinvests 15% of its annual management fee in Shares
(the "Management Fee Shares"), subject to a rolling lock-up of up to two
years, subject to certain limited exceptions. The Management Fee Shares are
issued on a quarterly basis. Where the Shares are trading at a premium to NAV,
the Company will issue new Shares to the Manager equivalent in value to the
management fee reinvested. Where the Shares are trading at a discount to NAV,
the Management Fee Shares will be purchased by the Company's Brokers at the
prevailing market price.
The calculation of the number of Management Fee Shares to be issued is based
upon the NAV as at the relevant quarter-end concerned. The Investment Manager
is also entitled to be reimbursed for out-of-pocket expenses reasonably and
properly incurred in respect of the performance of its obligations under the
IMA.
Unless otherwise agreed by the Company and the Investment Manager, the IMA may
be terminated by the Company or the Investment Manager on not less than 12
months' notice to the other party, such notice not to expire earlier than 36
months from the Effective Date of the IMA (11 November 2020). The IMA may be
terminated by the Company with immediate effect from the time at which notice
of termination is given or, if later, the time at which such notice is
expressed to take effect in accordance with the conditions set out in the IMA.
The Company has issued or the Company's Broker has purchased the following
Shares to settle investment management fees in respect of the year under
review:
Investment
management
fee Issue price Number of
Shares issued ($) (cents) Shares Date of issue
1 January 2022 to 31 March 2022 44,559 97.64 45,636 03 May 2022
1 April 2022 to 30 June 2022 50,359 97.32 51,745 28 July 2022
Investment
management
fee Purchase price Number of
Shares purchased ($) (cents) Shares Date of purchase
1 July 2022 to 30 September 2022 49,916 86.50 57,705 01 November 2022
1 October 2022 to 31 December 2022 49,346 83.50 59,096 01 February 2023
7. Other Expenses
For the year ended 31 December 2022 For the period ended 31 December 2021
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 £'000 £'000 £'000
Secretary and Administrator fees 175 - 175 223 - 223
Directors' fees 228 - 228 257 - 257
Directors' other employment costs 36 - 36 31 - 31
Brokers' retainer 115 - 115 62 - 62
Auditor's fees
- Fees payable to the Company's auditor for audit services 160 - 160 123 - 123
- Fees payable to the Company's auditor for audit-related assurance services - - - 62 - 62
FCA and listing fees 56 - 56 168 - 168
Research fees 51 - 51 - - -
Depository and custody fees 5 - 5 6 - 6
Registrar's fees 16 - 16 17 - 17
Marketing fees 9 - 9 10 - 10
Public relations fees 102 - 102 41 - 41
Printing and postage costs 45 - 45 27 - 27
Tax compliance - - - 8 - 8
Other expenses 35 - 35 21 - 21
Seed asset acquisitions - - - - 103 -
Total expenses 1,033 - 1,033 1,056 103 1,159
The Auditor's fee for the statutory audit of the Year is $160,000 including
VAT of $26,800 (2021: $123,000 including VAT of $20,500).
8. Earnings Per Share
Earnings per Share is based on the profit for the year ended 31 December 2022
of $1,181,000 (2021: $3,443,000) attributable to the weighted average number
of Shares in issue of 132,933,277 in the year to 31 December 2022 (2021:
92,475,686). Revenue and capital profit/(loss) are $7,545,000 and ($6,364,000)
respectively (2021: $4,202,000 and ($759,000).
9. Taxation
(a) Analysis of charge in the Year/Period
For the year ended 31 December 2022 For the period ended 31 December 2021
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
Corporation tax - - - - - -
Taxation - - - - - -
(b) Factors affecting total tax charge for the Year/Period:
The UK corporation tax rate applicable to the Company for the Period is
19.00%. The actual tax charge differs from the charge resulting from applying
the standard rate of UK corporation tax.
The differences are explained below:
For the year ended 31 December 2022 For the period ended 31 December 2021
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
Profit/(loss) on ordinary activities before taxation 7,546 (6,364) 1,182 4,202 (759) 3,443
Corporation tax at 19% 1,434 (1,209) 225 798 (144) 654
Effects of:
Dividends received (not subject to tax) (1,877) - (1,877) (1,165) - (1,165)
Loss on investments held at fair value not allowable 1,209 1,209 - 125 125
Unutilised management expenses 443 - 443 367 19 386
Total tax charge for the Year/Period - - - - - -
Investment companies which have been approved by HMRC under section 1158 of
the Corporation Tax Act 2010 are exempt from tax on UK capital gains. Due to
the Company's status as an investment trust, and the intention to continue
meeting the conditions required to obtain approval in the foreseeable future,
the Company has not provided for deferred tax on any capital gains or losses
arising on the revaluation of investments.
As at 31 December 2022, a deferred tax liability of $3,149,000 (2021:
$1,884,000) representing U.S. Federal income taxes deferred had been accrued
and reflected in the valuation of the Company's subsidiary, Holdco.
The Company has excess management expenses of $4,186,000 (2021: $1,853,000)
that are available for offset against future profits. A deferred tax asset of
$1,046,500 (2021: $462,250) has not been recognised in respect of these losses
as they will be recoverable only to the extent that the Company has sufficient
future taxable profits.
The March 2021 Budget announced an increase to the main rate of UK corporation
tax to 25% effective from 1 April 2023. This increase in the standard rate of
corporation tax was enacted on 24 May 2021.
10. Trade and Other Receivables
As at 31 As at 31
December December
2022 2021
$'000 $'000
Other receivables 9 1
Bank interest receivable 2 -
Total 11 1
11. Trade and Other Payables
As at 31 As at 31
December December
2022 2021
$'000 $'000
Accrued expenses 593 522
Total 593 522
12. Share Capital
For the year ended 31 December 2022 For the period ended 31 December 2021
Nominal Nominal Nominal Nominal
value of value of value of value of
Shares Shares Shares Shares
Allotted, issued and fully paid: No. of Shares £ $ No. of Shares £ $
Opening balance 125,053,498 - 1,250,534.98 - - -
Allotted upon incorporation
Ordinary Shares of 1c each ('Shares') - - - 1 - 0.01
Initial Redeemable Preference Shares paid up to one quarter of their nominal - - - 50,000 12,500.00 -
value ('Initial Redeemable Preference Shares')
Allotted/redeemed following admission to LSE
Shares issued - - - 125,000,000 - 1,250,000.00
Initial Redeemable Preference Shares redeemed - - - (50,000) (12,500.00) -
Placing and retail offer
Shares issued 12,927,617 - 129,276.17 - - -
Management Fee
Shares issued 97,381 - 973.81 53,497 - 534.97
Closing balance as at 31 December 138,078,496 - 1,380,784.96 125,053,498 - 1,250,534.98
The Shares have attached to them full voting, dividend and capital
distribution (including on winding-up) rights. They confer rights of
redemption. The Initial Redeemable Preference Shares did not carry a right to
receive notice of or attend or vote at any general meeting of the Company
unless no other Shares were in issue at that time. The Initial Redeemable
Preference Shares were treated as equity in accordance with the requirements
of IFRS. The Initial Redeemable Preference Shares did not confer the right to
participate in any surplus remaining following payment of such amount.
On incorporation, the issued share capital of the Company was $0.01
represented by one Share, which was subscribed for by Ecofin Advisors, LLC. On
22 October 2020, the 50,000 Initial Redeemable Preference Shares were allotted
to Ecofin Advisors, LLC. The Initial Redeemable Preference Shares were paid up
as to one quarter of their nominal value and were redeemed immediately
following Admission out of the proceeds of the Initial Issue.
On 22 December 2020, the Company was admitted to the premium segment of the
main market of the LSE and to the premium segment of the Official List of the
FCA ("Admission"). Pursuant to this, 125,000,000 Shares were issued at a price
of $1.00 per Share.
On 24 May 2022 the Company issued 12,927,617 Shares at an issue price of
$1.015 per Share pursuant to a placing and retail offer.
During the Year, the Company issued 45,636 Shares with respect to the first
quarter and 51,745 Shares with respect to the second quarter to the Company's
Investment Manager in relation to investment management fees paid during the
Year at an issuance price of $0.9764 and $0.9732 respectively.
The Company's issued share capital at 31 December 2022 comprised 138,078,496
Shares (2021: 125,053,498) and this is the total number of Shares with voting
rights in the Company.
13. Dividends
(a) Dividends paid during the Year
The Company paid the following interim dividends during the Year/Period:
For the year ended 31 December 2022
Special
distributable Revenue
Cents per reserve reserve Total
Share $'000 $'000 $'000
Quarter ended 31 December 2021 1.40c - 1,751 1,751
Quarter ended 31 March 2022 1.40c - 1,933 1,933
Quarter ended 30 June 2022 1.40c - 1,933 1,933
Quarter ended 30 September 2022 1.40c - 1,933 1,933
Total 5.6c - 7,550 7,550
For the period ended 31 December 2021
Special
distributable Revenue
Cents per reserve reserve Total
Share $'000 $'000 $'000
Quarter ended 31 March 2021 0.40c - 500 500
Quarter ended 30 June 2021 0.60c - 750 750
Quarter ended 30 September 2021 0.80c - 1,000 1,000
Total 1.8c - 2,250 2,250
(b) Dividends paid and payable in respect of the financial Year/Period
The dividends paid and payable in respect of the financial Year/Period are the
basis on which the requirements of s1158-s1159 of the Corporation Tax Act 2010
are considered.
For the year ended 31 December 2022
Special
distributable Revenue
Cents per reserve reserve Total
Share $'000 $'000 $'000
Quarter ended 31 March 2022 1.40c - 1,933 1,933
Quarter ended 30 June 2022 1.40c - 1,933 1,933
Quarter ended 30 September 2022 1.40c - 1,933 1,933
Quarter ended 31 December 2022 1.40c - 1,933 1,933
Total 5.6c - 7,732 7,732
For the period ended 31 December 2021
Special
Cents per distributable Revenue
Share reserve reserve Total
$'000 $'000 $'000
Quarter ended 31 March 2021 0.40c - 500 500
Quarter ended 30 June 2021 0.60c - 750 750
Quarter ended 30 September 2021 0.80c - 1,000 1,000
Quarter ended 31 December 2021 1.40c - 1,751 1,751
Total 3.2c - 4,001 4,001
After the Year-end, the Company declared an interim dividend of 1.4 cents per
Share for the period 1 October 2022 to 31 December 2022, which was paid on 27
February 2023 to Shareholders on the register at 10 February 2023.
14. Special Distributable Reserve
Following admission of the Company's Shares to trading on the LSE, the
Directors applied to the Court and obtained a judgement on 29 January 2021 to
cancel the amount standing to the credit of the share premium account of the
Company. The amount of the share premium account cancelled and credited to the
Company's Special distributable reserve was $121,250,000, which can be
utilised to fund distributions to the Company's Shareholders.
15. Net Assets Per Share
Net assets per share is based on $130,187,000 (2021: $123,723,000) of net
assets of the Company as at 31 December 2022 attributable to the 138,078,496
Shares in issue as at the same date (2021: 125,053,498).
16. Related Party Transactions with the Investment Manager and Directors
Investment Manager
Fees payable to the Investment Manager by the Company under the IMA are shown
in the Statement of Comprehensive Income. As at 31 December 2022, the fee
outstanding but not yet paid to the Investment Manager was $329,000 (2021:
$317,000).
As at 31 December 2022, the Investment Manager's total holding of Shares in
the Company was 8,787,792 (2021: 8,606,995).
Directors
The Company is governed by a Board of Directors, all of whom are
non-executive, and it has no employees. Each of the Directors was appointed on
22 October 2020.
Each of the Directors is entitled to receive a fee from the Company at such
rate as may be determined in accordance with the Articles. Each Director
currently receives a fee payable by the Company at the rate of £40,000 per
annum.
The Chair of the Board receives an additional £10,000 per annum. The Chair of
the Audit Committee, the Chair of the Management Engagement Committee and the
Chair of the Risk Committee each receive an additional £6,000 per annum.
The aggregate remuneration and benefits in kind of the Directors in respect of
the Year ended 31 December 2022 which are payable out of the assets of the
Company were $228,500 (period ended 2021: $301,500). The Directors are also
entitled to out-of-pocket expenses incurred in the proper performance of their
duties.
The Directors had the following shareholdings in the Company, all of which
were beneficially owned.
Shares held Shares held
at 31 December at 31 December
Director 2022 2021
Patrick O'D Bourke 104,436 54,436
David Fletcher 59,406 41,165
Tammy Richards 25,000 25,000
Louisa Vincent 34,435 27,710
17. Financial Risk Management
The Investment Manager, AIFM and the Administrator report to the Board on a
quarterly basis and provide information to the Board which allows it to
monitor and manage financial risks relating to the Company's operations. The
Company's activities expose it to a variety of financial risks: market risk
(including price risk, interest rate risk and foreign currency risk), credit
risk and liquidity risk. These risks are monitored by the AIFM. Each risk and
its management is summarised below.
(i) Currency Risk
Foreign currency risk is defined as the risk that the fair values of future
cash flows will fluctuate because of changes in foreign exchange rates. Based
on current operations, as the Company's financial assets and liabilities are
denominated in U.S. Dollars and substantially all of its revenues and expenses
are in U.S. Dollars, the Directors do not expect frequent transactions in
other currencies and therefore currency risk is considered to be low and no
sensitivity to currency risk is presented. The Company's Shares are traded in
both U.S. Dollars and Sterling.
(ii) Interest Rate Risk
The Company's interest rate risk on interest bearing financial assets is
limited to interest earned on money market cash deposits. The Company's
interest and non-interest bearing assets and liabilities as at 31 December
2022 are summarised below:
31 December 2022
Non-interest
Interest bearing bearing Total
US$'000 US$'000 US$'000
Assets
Cash and cash equivalents 3,394 - 3,394
Trade and other receivables - 11 11
Investment at fair value through profit or loss - 127,375 127,375
Total assets 3,394 127,386 130,780
Liabilities
Trade and other payables - (593) (593)
Total liabilities - (593) (593)
31 December 2021
Non-interest
Interest bearing bearing Total
US$'000 US$'000 US$'000
Assets
Cash and cash equivalents 5,361 1 5,362
Trade and other receivables - 1 1
Investment at fair value through profit or loss - 118,882 118,882
Total assets 5,361 118,884 124,245
Liabilities
Trade and other payables - (522) (522)
Total liabilities - (522) (522)
The money market cash deposits and bank accounts included within cash and cash
equivalents bear interest at relatively low interest rates and therefore
movements in interest rates will not materially affect the Company's income
and as such a sensitivity analysis is not necessary.
The Company's subsidiary, Holdco, has interest rate risk through drawings on
the RCF and through certain SPVs' project level loans which are priced by
reference to LIBOR plus a margin. The total exposure to debt through Holdco at
31 December 2022 was $64.4 million (2021: $52.1 million). An increase or
decrease in interest rates of 0.5% would impact the net asset value of Holdco
and the Company by $322,000 (2021: $260,000) negatively or positively
respectively.
Valuation of the Company's investment in Holdco is determined using DCF
methodology. Changes in interest rates can affect the discount rates used. The
sensitivity of the investment valuation to changes in discount rate is shown
in note 4.
(iii) Price Risk
Price risk is defined as the risk that the fair value of a financial
instrument held by the Company will fluctuate. As of 31 December 2022, the
Company held one investment, being its shareholding in Holdco, which is
measured at fair value. The value of the underlying renewable energy
investments held by Holdco varies according to a number of factors, including
discount rate, asset performance, solar irradiation, wind speeds, operating
expenses and forecast power prices. The sensitivity of the investment
valuation to price risk is shown in note 4. The sensitivity shows the impact
on the net asset value, however, the impact on the profit and loss is the
same.
(iv) Credit Risk
Credit risk is the risk of loss due to the failure of a borrower or
counterparty to fulfil its contractual obligations. The Company is exposed to
credit risk in respect of trade and other receivables and cash at bank.
The Company's maximum exposure to credit risk exposure as at 31 December 2022
is summarised below:
As at As at
31 December 2022 31 December 2021
US$'000 US$'000
Cash and cash equivalents 3,394 5,362
Trade and other receivables 11 1
Total 3,405 5,363
Cash and cash equivalents are held with a U.S. Bank whose Standard &
Poor's credit rating is AA-. The Company's credit risk exposure is minimised
by dealing with financial institutions with investment grade credit ratings.
No balances are past due or impaired.
Liquidity Risk
Liquidity risk is the risk that the Company may not be able to meet a demand
for cash or fund an obligation when due. The Investment Manager and the Board
continuously monitor forecast and actual cashflows from operating, financing
and investing activities to consider payment of dividends, repayment of loans,
further investing activities, or other costs.
The following tables detail the Company's expected maturity for its financial
assets (excluding the equity investment in Holdco) and liabilities together
with the contractual undiscounted cash flow amounts:
31 December 2022
Less than 1 year 1-2 years 2-5 years Total
US$'000 US$'000 US$'000 US$'000
Assets
Cash and cash equivalents 3,394 - - 3,394
Trade and other receivables 11 - - 11
Liabilities
Trade and other payables (593) - - (593)
Net financial assets 2,812 - - 2,812
31 December 2021
Less than 1 year 1-2 years 2-5 years Total
US$'000 US$'000 US$'000 US$'000
Assets
Cash and cash equivalents 5,362 - - 5,362
Trade and other receivables 1 - - 1
Liabilities
Trade and other payables (522) - - (522)
Net financial assets 4,841 - - 4,841
Capital management
The Company considers its capital to comprise Share capital, Share premium,
capital reserves, distributable reserves and retained earnings. The Company is
not subject to any externally imposed capital requirements. The Company's
share capital and reserves are shown in the Statement of Financial Position at
a total of $130,187,000 (2021: $123,723,000).
The Company's primary capital management objectives are to ensure the
sustainability of its capital to support continuing operations, meet its
financial obligations and allow for growth opportunities. Generally,
acquisitions are anticipated to be funded with a combination of current cash,
borrowings and equity.
18. Unconsolidated Subsidiaries and Associates
The following table shows subsidiaries and associates of the Company. As the
Company is regarded as an Investment Entity as referred to in note 2, these
subsidiaries and associates have not been consolidated in the preparation of
the financial statements. The ultimate parent undertaking is Ecofin U.S.
Renewables Infrastructure Trust PLC.
Name Ownership Interest Investment Category Country of incorporation Registered address
RNEW Holdco, LLC 100% Holdco Subsidiary entity, owns RNEW Blocker, LLC United States 1209 Orange Street, Wilmington, DE 19801
RNEW Blocker, LLC 100% Holdco Subsidiary entity, owns RNEW Capital, LLC United States 1209 Orange Street, Wilmington, DE 19801
RNEW Capital, LLC 100% Holdco Subsidiary entity, owns underlying SPV Entities United States 1209 Orange Street, Wilmington, DE 19801
TC Renewable Holdco I, LLC 100% Holdco Subsidiary entity, owns CD Global Solar CA Beacon 2 Borrower, LLC and United States 1209 Orange Street, Wilmington, DE 19801
CD Global Solar CA Beacon 5 Borrower, LLC
TC Renewable Holdco II, LLC 100% Holdco Subsidiary entity, owns TCA IBKR 2020 Holdco, LLC and TCA IBKR 2021 United States 1209 Orange Street, Wilmington, DE 19801
Holdco
TC Renewable Holdco III, LLC 100% Holdco Subsidiary entity, owns UCCT Solar Group, LLC, Milford Industrial United States 1209 Orange Street, Wilmington, DE 19801
Solar, LLC, SED Three, LLC, SED Four, LLC, and Solar Energy Partners 1, LLC
TC Renewable Holdco IV, LLC 100% Subsidiary entity, owns Heimlich Solar Partners, LLC, Small Mouth Bass Solar United States 1209 Orange Street, Wilmington, DE 19801
Partners, LLC, Hemings Solar Partners, LLC and Randolf Solar Partners, LLC
TC Renewable Holdco V, LLC 100% Holdco Subsidiary entity, owns Echo Solar 2022 Holdco, LLC United States 1209 Orange Street, Wilmington, DE 19801
TC Renewable Holdco VI, LLC 100% Holdco Subsidiary entity, owns ESNJ-CB-DELRAN, LLC United States 1209 Orange Street, Wilmington, DE 19801
TC Renewable Holdco VII, LLC 100% Holdco Subsidiary entity, owns Whirlwind Energy, LLC United States 1209 Orange Street, Wilmington, DE 19801
TCA IBKR 2020 Holdco, LLC 100%(1) Holdco Subsidiary entity, owns Ellis Road Solar, LLC and Oliver Solar 1, LLC United States 1209 Orange Street, Wilmington, DE 19801
TCA IBKR 2021 Holdco, LLC 100%(1) Holdco Subsidiary entity, owns ESNJ-BL-SKILLMAN, LLC United States 1209 Orange Street, Wilmington, DE 19801
Echo Solar 2022 Holdco, LLC 100%(1) Holdco Subsidiary entity, owns Westside Solar Partners, LLC and Monroe United States 1209 Orange Street, Wilmington, DE 19801
Solar Partners, LLC
CD Global Solar CA Beacon 2 Borrower, LLC 49.5%(1) Subsidiary entity, owns investment in Beacon 2 United States 1209 Orange Street, Wilmington, DE 19801
CD Global Solar CA Beacon 5 Borrower, LLC 49.5%(1) Subsidiary entity, owns investment in Beacon 5 United States 1209 Orange Street, Wilmington, DE 19801
Ellis Road Solar, LLC 100%(1) Subsidiary entity, owns investment in Ellis Road Solar United States 1209 Orange Street, Wilmington, DE 19801
Oliver Solar 1, LLC 100%(1) Subsidiary entity, owns investment in Oliver Solar United States 1209 Orange Street, Wilmington, DE 19801
UCCT Solar, LLC 100% Subsidiary entity, owns one of the 52 solar investments in the SED Solar United States 155 Federal Street, Suite 700, Boston, MA 02110
Portfolio owned by TC Renewable Holdco III, LLC
Milford Industrial Solar, LLC 100% Subsidiary entity, owns two of the 52 solar investments in the SED Solar United States 155 Federal Street, Suite 700, Boston, MA 02110
Portfolio owned by TC Renewable Holdco III, LLC
SED Three, LLC 100% Subsidiary entity, owns 30 of the 52 solar investments in the SED Solar United States 155 Federal Street, Suite 700, Boston, MA 02110
Portfolio owned by TC Renewable Holdco III, LLC
SED Four, LLC 100% Subsidiary entity, owns six of the 52 solar investments in the SED Solar United States 155 Federal St, Suite 700, Boston, MA 02110
Portfolio owned by TC Renewable Holdco III, LLC
Solar Energy Partners 1, LLC 100% Subsidiary entity, owns 13 of the 52 solar investments in the SED Solar United States 155 Federal Street, Suite 700, Boston, MA 02110
Portfolio owned by TC Renewable Holdco III, LLC
ESNJ-BL-SKILLMAN, LLC 100%(1) Subsidiary entity, owns investment in Skillman Solar United States 100 Charles Ewing Blvd., Suite 160, Ewing, NJ 08628
Heimlich Solar Partners, LLC 100% Subsidiary entity, owns investment in Heimlich Solar United States 251 Little Falls Drive, Wilmington DE, 19808
Small Mouth Bass Solar Partners, LLC 100% Subsidiary entity, owns investment in Small Mouth Bass Solar United States 251 Little Falls Drive, Wilmington DE, 19808
Hemings Solar Partners, LLC 100% Subsidiary entity, owns investment in Hemings Solar United States 251 Little Falls Drive, Wilmington DE, 19808
Randolf Solar Partners, LLC 100% Subsidiary entity, owns investment in Randolf Solar United States 251 Little Falls Drive, Wilmington DE, 19808
Westside Solar Partners, LLC 100%(1) Subsidiary entity, owns investment in Westside Solar United States 251 Little Falls Drive, Wilmington DE, 19808
Monroe Solar Partners, LLC 100%(1) Subsidiary entity, owns investment in Monroe Solar United States 251 Little Falls Drive, Wilmington DE, 19808
ESNJ-CB-DELRAN, LLC 100% Subsidiary entity, owns investment in Delran Solar United States 100 Charles Ewing Blvd., Suite 160, Ewing, NJ 08628
Whirlwind Energy LLC 100% Subsidiary entity, owns investment in Whirlwind United States 615 South Dupont Highway, Dover Kentucky 19901
1. Represents percentage ownership of class B membership
interest in the tax equity partnership.
19. Commitments and Contingencies
As at 31 December 2022 the Company had the following future investment
obligations;
The Company had a collective future unlevered net equity commitment amount of
$22.4 million in respect of $17.5 million of pending future equity
obligations on closed construction assets. These commitment figures are
subject to change based on the vendor's ability to deliver on certain
conditions to close, which may impact the price paid for certain projects.
Additional funding required is expected to be facilitated in the short term
through the RCF, and subsequently through a term debt facility as the projects
become operational.
20. Post Balance Sheet Events
Other than as disclosed in this Annual Report, no other post balance sheet
events have occurred.
Alternative Performance Measures
In reporting financial information, the Company presents alternative
performance measures, ("APMs"), which are not defined or specified under the
requirements of IFRS. The Company believes that these APMs, which are not
considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance of the
Company. The APMs presented in this report are shown below:
(Discount)/Premium
The amount, expressed as a percentage, by which the share price is greater or
less than NAV per Share.
As at As at
31 December 31 December
2022 2021
NAV per Share (cents) a 94.3 98.9
Share price (cents) b 83.3 99.0
(Discount)/Premium (b÷a)-1 (11.7)% 0.1%
Total return
Total return is a measure of performance that includes both income and capital
returns. It takes into account capital gains and the assumed reinvestment of
dividends paid out by the Company into its Shares on the ex-dividend date. The
total return is shown below, calculated on both a share price and NAV basis.
Share price
For the year ended 31 December 2022 (cents) NAV cents
Opening at 1 January 2022 a 99.0 98.9
Closing at 31 December 2022 b 83.3 94.3
Dividends paid during the Year c 5.6 5.6
Dividend/income adjustment factor(1) d 0.9939 1.0010
Adjusted closing e = (b +c) x d e 88.3 100.0
Total return (d÷a)-1 -10.8% 1.1%
1. The dividend adjustment factor is calculated on the
assumption that the dividends paid out by the Company are reinvested into the
shares of the Company at NAV at the ex-dividend date.
Share price
For the period from IPO to 31 December 2021 (cents) NAV (cents)
Opening at IPO a 100.0 98.0
Closing at 31 December 2021 b 99.0 98.9
Dividends paid during the Year c 1.80 1.80
Adjusted closing (d=b + c) d 100.8 100.7
Total return (d÷a)-1 0.8% 2.8%
Ongoing charges ratio
A measure, expressed as a percentage of average NAV, of the regular, recurring
annual costs of running an investment company.
For the year For the period
ended from IPO to
31 December 31 December*
2022 2021
Average NAV ($'000) a 129,345 123,744
Annualised expenses ($'000) b 2,332 1,817
Ongoing charges (b÷a) 1.80% 1.47%
* Annualised expenses from IPO on 22 December 2020 to 31
December 2021. Consisting of investment management fees and other recurring
expenses.
FINANCIAL INFORMATION
Year ended 31 December 2022
The figures and financial information for the year ended 31 December 2022 are
extracted from the Company's Annual Financial Statements for that period and
do not constitute statutory financial statements for that year. The Company's
Annual Financial Statements for the year ended 31 December 2022 have been
audited but have not yet been delivered to the Registrar of Companies. The
Independent Auditor's Report on the 2022 Financial Statements was unqualified,
did not include a reference to any matter to which the Auditors drew attention
without qualifying the report, and did not contain any statements under
sections 498(2) and 498(3) of the Companies Act 2006.
Period ended 31 December 2021
The figures and financial information for the period ended 31 December 2021
are extracted from the Company's Financial Statements for that period and do
not constitute statutory financial statements for that period. The Company's
Annual Financial Statements for the period ended 31 December 2021 have been
audited and delivered to the Registrar of Companies. The Independent Auditor's
Report on the 2021 Financial Statements was unqualified, did not include a
reference to any matter to which the Auditors drew attention without
qualifying the report, and did not contain any statements under sections
498(2) and 498(3) of the Companies Act 2006.
ANNUAL REPORT
The Annual Report for the year ended 31 December 2022 was approved on 13
April 2023. The full Annual Report can be accessed via the Company's website
at: https://uk.ecofininvest.com/funds/ecofin-us-renewables-infrastructure-trust-plc/
(https://uk.ecofininvest.com/funds/ecofin-us-renewables-infrastructure-trust-plc/)
The Annual Report will be submitted to the National Storage Mechanism and will
shortly be available for inspection
at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
This announcement contains regulated information under the Disclosure Guidance
and Transparency Rules of the FCA.
ANNUAL GENERAL MEETING ("AGM")
The AGM of Ecofin U.S. Renewables Infrastructure Trust plc will be held at 6th
Floor, 125 London Wall, London, EC2Y 5AS on 1 June 2023 at 3:00pm.
Even if shareholders intend to attend the AGM, all shareholders are encouraged
to cast their vote by proxy and to appoint the "Chair of the Meeting" as their
proxy. Details of how to vote, either electronically, by proxy form or through
CREST, can be found in the Notes to the Notice of AGM in the Annual Report.
Shareholders are invited to send any questions for the Board or the Investment
Manager in advance by email to RNEWMBX@apexfs.group
(mailto:RNEWMBX@apexfs.group) by close of business on 30 May 2023.
14 April 2023
For further information contact:
Company Secretary and registered office:
Apex Listed Companies Services (UK) Limited
6th Floor, 125 London Wall, London, EC2Y 5AS
END
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