REG - Riverstone Energy Ld - Interim Report for the six months to 30 June 2023
16/08/2023 07:15
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RNS Number : 4300J Riverstone Energy Limited 16 August 2023
Riverstone Energy Limited
Financial and Operational Highlights((1))
Investments during the period ended 30 June 2023 Invested a total of $4.5 million((2)(3)) ($4.5 million pursuant to
decarbonisation strategy):
(i) $3.5 million in Enviva, Inc.
(ii) $1.0 million in Our Next Energy, Inc.
Realisations during the period ended 30 June 2023 Realised a total of $54.3 million((2)(3)) ($53.5 million pursuant to legacy
conventional strategy and $0.8 million pursuant to decarbonisation strategy):
(i) $28.1 million from Permian Resources Corporation (formerly
Centennial Resource Development, Inc.)
(ii) $20.2 million from Onyx Power
(iii) $4.6 million from Carrier Energy Partners II LLC
(iv) $0.6 million from Hammerhead Energy, Inc.
(v) $0.4 million from Tritium DCFC Limited
(vi) $0.4 million from Enviva, Inc.
Key Financials
30 June 2023 31 December 2022 30 June 2022
NAV as at $604 million / £479 million((3)) $739 million / £610 million((3)) $719 million / £593 million((3))
NAV per Share as at $12.90 / £10.23((3)) $14.52 / £11.99((3)) $13.64 / £11.25((3))
Share price at $7.14 / £5.66((3)) $8.21 / £6.78((3)) $8.07 / £6.66((3))
Share price discount to NAV 44.7 per cent. 43.5 per cent. 40.8 per cent.
Market capitalisation at $334 million / £265 million((3)) $418 million / £345 million((3)) $425 million / £351 million((3))
Cash and cash equivalents at $133 million((4)) / £105 million((3)) $120 million((4)) / £99 million((3)) $72 million((4)) / £60 million(()(3))
Marketable securities (unrestricted) at $142 million((5)) / £113 million((3)) $177 million((5)) / £146 million(()(3)) $90 million((5)) / £74 million(()(3))
Marketable securities (restricted) at $111 million((6)) / £88 million((3)) $4 million((6)) / £3 million((3)) $81 million((6)) / £67 million(()(3))
30 June 2023 30 June 2022
Total comprehensive (loss)/income for the six months ended $(105.3) million $55.3 million
Basic and diluted (loss)/earnings per share for the six months ended (213.18) cents 103.19 cents
Number of Shares repurchased and average price per repurchased Share for the 4,091,145 2,223,312
period ended((7))
$7.30/£5.78 $8.27/£6.54
Number of Shares outstanding at period ended 46,800,513 52,714,287
Per cent. change in US Dollar and Sterling Share price for the period ended $ (13 per cent.) $28.5 per cent.
£ (16.5 per cent.) £ 43.2 per cent.
((1)) Amounts shown reflect investment-related activity at the Partnership,
not the Company.
((2)) Amounts may vary due to rounding.
((3)) Based on exchange rate of 1.2614 $/£ at 30 June 2023 (1.2103 $/£ at 31
December 2022, 1.2119 $/£ at 30 June 2022 and 1.606 $/£ at IPO on 29 October
2013).
((4)) At 30 June 2023, 31 December 2022 and 30 June 2022, respectively,
amounts are comprised of $12.3 million, $15.8 million and $6.4 million held at
the Company, $54.7 million, $68.4 million and $14.9 million held at the
Partnership and $65.8 million, $35.3 million and $51 million held at REL US
Corp.
((5)) At 30 June 2023, unrestricted marketable securities held by the
Partnership consist of publicly-traded shares of Permian Resources (formerly
Centennial), Enviva, Solid Power, Tritium and Hyzon for which the aggregate
fair value was $142 million (31 December 2022: Permian Resources (formerly
Centennial), Enviva, Solid Power, Tritium and Hyzon and 30 June 2022: Enviva,
Solid Power, Tritium and Hyzon).
((6)) At 30 June 2023, restricted marketable securities held by the
Partnership consist of publicly-traded shares of Hammerhead Energy, Inc. for
which the aggregate fair value was $111 million (31 December 2022: Tritium and
DCRD and 30 June 2022: Solid Power, Permian Resources (formerly Centennial),
Tritium and DCRD).
((7)) Inception to date total number of shares repurchased were 33,096,218 at
an average price per share of £4.12 ($5.28).
Chair's Statement
Dear Shareholder,
Battling inflation and navigating market uncertainties
After the political upheaval created by the war in Ukraine in 2022 and the
significant price moves in energy markets that resulted, the first half of
2023 has seen a retrenchment of energy prices towards or below pre-invasion
levels. WTI crude oil prices ended on 30 June 2023 at $70.66, down around 12
per cent. from where they ended 2022 and 43 per cent. down from the peak of
$123.64 in March 2022. Henry Hub gas prices followed a similar trajectory and
are down to $2.48 at 30 June 2023, or around 30 per cent. from the end of 2022
and 75 per cent. from their peak in August 2022.
That has not necessarily meant the environment has become easier, simply that
the challenges are different. The new year has seen a return of significant
and sustained inflation in developed economies for the first time in a
generation. Central Banks have responded by raising rates aggressively back
towards, or beyond, levels not seen since before the Financial Crisis of
2008-9 in their efforts to reign in those inflationary pressures.
The situation has been further complicated by mixed data showing slowing
economic growth set against a still tight labour market, leading to persistent
wage growth and labour supply pressures. Central bank actions to tighten
monetary policy have yet to fully feed through leaving uncertainty about their
ultimate economic effect and the impact they will have on growth. Economies
are slowing, with growth in Europe and the UK flat-lining while US growth has
pushed ahead at about 2 per cent. Asset prices have also been impacted and
most global assets have seen prices come under pressure in the face of rising
interest rates. Alongside that the crisis in the global banking system, which
saw the failures of Silicon Valley Bank, Signature Bank and Silvergate Bank in
the US, and the dissolution of Credit Suisse in Europe, has exacerbated market
nervousness.
What does this all mean for energy prices? Despite the continued uncertain
outlook for the global economy, the IEA expects oil demand to grow by 2.2 mb/d
in 2023, which was 99.9 mb/d in 2022. However, the demand picture contrasts
sharply with the outlook for global oil supplies which are expected to see
fractional growth for the full year. This weak performance is due to the
energy landscape still being impacted by continued tight production following
decades of Upstream under-investment and reduced supplies from OPEC+ led by
Saudi Arabia. In addition, Russia's invasion of Ukraine has resulted in oil
volumes being diverted to India and China.
As the world grapples with geopolitical instability, global efforts to curb
inflation and the herculean task of weaning itself off fossil fuels, REL's
portfolio stands to benefit from these factors as they represent tailwinds to
our conventional energy and decarbonisation strategies. Tight and uncertain
supply supports stable energy commodity prices over the mid-to-long term,
while the need to address climate change and energy security support our
decarbonisation and energy transition investments.
Balancing security, affordability, and sustainability will have structural
market implications
The theme that succinctly captures the challenge for society and our industry
is the imperative to balance the competing demands of the energy trilemma:
sustainability, security and affordability.
While decarbonising the energy system as the world transitions to net zero
must remain the core aim, the recent volatility in energy markets serve as an
important reminder that the transition also needs to take account of the
security and affordability of energy for the end consumer.
With that in mind, hydrocarbons will continue to play an important role in the
energy system for the next decade or two at least. The past 12 months have
demonstrated the need for an orderly energy transition. If the world
transitions away from hydrocarbons too quickly, as the impact of Russian
volumes exiting the market has served to illustrate, the result will be energy
shortages, price spikes and economic damage. It is critical, therefore, that
demand for, and available supply of, hydrocarbons are consistent. We have seen
some tepid increases in Upstream investment this year, but the rate of natural
declines in existing production sources mean there needs to be greater
investment.
At the same time, the necessity for decarbonisation is becoming more urgent,
as evidenced by the unprecedented high temperatures during the month of July
2023. At the same time, CO2 emissions have increased every year since the
Paris COP in 2015, except in 2020 when they decreased due to the impact of the
Covid-19 pandemic. We have seen some progress on Government support for the
energy transition, including passing the Inflation Reduction Act last year in
the US. The war in Ukraine has undoubtedly changed the energy system for the
long term with heightened focus on energy security increasing demand for
domestically produced energy. This will hasten investment into renewables and
other non-fossil fuels and technologies such as bioenergy, carbon capture and
energy storage providing REL with further opportunities.
But while the decarbonisation of the global power system continues at pace,
there are potential challenges ahead. The growth in highly cost competitive
variable power sources such as wind and solar means there needs to be an
acceleration in the financing and building of new grid capacity, as well as
reform in planning and regulation. In the UK for example, network owners are
under pressure to reduce multi-year delays for new projects wanting to connect
to the grid. These delays threaten to derail the UK's target to decarbonise
electricity supplies by 2035 and similar pressures exist in the US and EU.
I believe that the general public market malaise and sentiment toward
decarbonisation stocks in 2023 thus far is transitory and is not reflective of
the inherent long-term value creation occurring within this segment of REL's
portfolio. Fundamentally, the need to balance security, affordability, and
sustainability will continue to drive strong operating performance across
REL's portfolio and will underpin our ability to continue to drive returns for
shareholders.
Board changes and AGM
After nearly ten years as a REL Non-Executive Director and as Chair of the
Company for almost seven of those, Richard Hayden retired from the Board after
the AGM in May 2023. Under his stewardship, Richard has overseen the
strengthening of REL's governance through the implementation of significant
adjustments to the Investment Management Agreement, over the last few years.
These have included: the Investment Manager's representatives voluntarily
leaving the Board; amending the Investment Management Agreement to stop
performance fees until there is 100 per cent. make-whole from prior realised
and unrealised losses; instituting an 8 per cent. hurdle for each deal as well
as the requirement of full capital return on individual deals before a
performance fee is payable. I want to thank Richard for his commitment to REL
over the last decade and I wish him all the best for the future.
Peter Barker also retired as a Non-Executive Director after the AGM after
nearly ten years and I extend my warm thanks to him for his excellent
contribution to the Board. Mr Barker brought a huge amount of experience from
a long career in investment banking, including with Goldman Sachs and
JPMorgan.
We are pleased to welcome Karen A. McClellan to the Board as a Non-Executive
Director. Ms McClellan is an advisory board member of TT International's
Environmental Solutions Fund and serves as an appointed expert for the UK
Accelerated Climate Transitions programme, on the Global SDG Council for
Alternative Fuels, and on the Climate Tech Council (London). Prior to becoming
a non-executive director, Ms McClellan has worked over the last two decades in
carbon policy, clean infrastructure finance and zero-carbon technologies,
having raised and deployed more than £700 million in renewable energy and
carbon funds and transactions. During two decades as an investment banker at
Lehman Brothers, Robert Fleming and the EBRD, Ms McClellan structured
investment funds backed by emission reductions and energy savings and served
on their investment committees.
I was pleased that, at the tenth AGM held on 23 May 2023, each of the
Resolutions were duly passed without amendment.
Investment portfolio summary and performance
The first half of the year saw some challenging conditions, particularly for
small cap, high growth companies in emerging technology fields. As a result
the portfolio was negatively impacted and during the period NAV decreased by
~11 per cent. to $12.90 per share (or ~15 per cent. to £10.23 per share).
REL's portfolio comprises twelve investments in the decarbonisation and energy
transition space and three conventional assets. The decarbonisation portfolio
was most impacted with declines in the total value of our investments of $72.0
million, which consisted of $71.2 million of changes in fair value and $0.8
million in realisations. On the conventional side we saw a decrease of $70.0
million, which consisted of $53.5 million in realisations and $16.5 million of
changes in fair value. In addition, REL will continue to look for
opportunities to realise value from its conventional portfolio where possible.
In H1 2023, REL, through the Partnership invested an aggregate amount of $4.5
million in energy transition and decarbonisation investments, bringing the
total invested in this area to ~$214 million across twelve investments, which
in aggregate were valued at $156 million, or 0.73x Gross MOIC, at 30 June
2023.
In February, REL announced a $12.5 million commitment to Our Next Energy's
(ONE) $300 million Series B round. ONE is a Michigan-based energy storage
technology company working to develop batteries for mobility and large-scale
storage applications. ONE will use the proceeds of the round to complete ONE
Circle, its first Lithium Iron Phosphate (LFP) battery manufacturing plant.
There were other developments in the portfolio during the period. A number of
our portfolio companies continued to make good progress on their strategic
growth goals. These included Group14 Technologies and Infinitum. These
milestones are explained more fully below in the Investment Manager's Report
and ensure these companies remain well positioned to capture the sizeable
opportunities ahead of them.
Elsewhere, Enviva missed its Q1 earnings estimates and subsequently revised
its full year outlook for 2023. The main reasons for the miss were related to
higher input prices (inflation across wages, diesel and power prices in the
US) as well as lower than expected production volumes caused by operating
outages. Nonetheless, fundamentals for biomass as an alternative to coal in
Europe and Asia remain very strong as substantiated by RED III in Europe. I am
confident that concerns regarding biomass's viability in the mix of European
power generation have been addressed and the fundamentals for the business and
the order backlog remain as strong as ever. Enviva is a fast-growing company
that is executing on an ambitious plan of expanding its production while
meeting very strong demand from its existing customer base.
Also during the period, REL was informed that Anuvia had ceased operations and
is undergoing liquidation. The Company invested $20 million in Anuvia in March
2022, with its investment being written down to $14 million at the time of the
Company's Q1 2023 quarterly portfolio valuations. Anuvia is in the process of
realising its assets and whilst the Series D Investors, including the Company,
are first equity in line to receive proceeds from Anuvia, the Company's
Investment Manager has informed the Board on 10 July 2023 that no such
proceeds can now be reasonably expected given the debt burden on the business
and therefore, was marked down to nil as of 30 June 2023.
Lastly, the current interest rate environment, underpinned by dynamically
rising rates, has negatively impacted loan origination businesses such as
GoodLeap by increasing borrowing costs, reducing demand for loans, and
creating uncertainty in the capital markets ecosystem.
Buyback programme and capital returns
In the first half of 2023, REL continued with its buyback programme to
capitalise on NAV accretion, returning £23.6 million to shareholders through
the purchase of 4,091,145 shares at a weighted average price of £5.78 ($7.30)
per share.
As of 30 June 2023, REL has returned £136.5 million ($174.8 million) to
Shareholders by purchasing 33,096,218 shares through the buyback programme,
representing 41.4 per cent. of the total outstanding shares at commencement in
May 2020, at a weighted average price of £4.12 ($5.28) per share.
In addition, pursuant to changes to the Investment Management Agreement
announced on 3 January 2020, the Investment Manager agreed for the Company to
be required to repurchase shares or pay dividends equal to 20 per cent. of net
gains on investment disposals. No further carried interest will be payable
until the $192.6 million of realised and unrealised losses to date at 30 June
2023 are made whole with future gains. REL continues to seek opportunities to
purchase shares in the market at prices at or below the prevailing NAV per
share.
Outlook for the remainder of 2023 and beyond
As I wrote at the beginning, this year has seen significant inflationary
pressures that will impact the future path of the global energy system. I am
saddened by the terrible consequences of the Russia-Ukraine war and my
thoughts and hopes are with all those affected. Because a resolution to the
conflict is unclear at time of writing, it remains challenging to make
definitive predictions about the future of conventional assets given the still
sizeable role that Russia plays in global energy supply.
Fundamentally, though, I believe that the increased focus on energy security
as a result of Russia's actions will mean that advanced economies will seek to
reduce their dependency on conventional imported energy. As we have seen in
Europe, it is likely that campaigns and initiatives to improve energy
efficiency and demand at peak times will be utilised more often. With
globalisation and the efficiency of the global trade system under scrutiny it
is possible that we now enter a period of tepid global growth, despite China's
seemingly renewed focus on economic prosperity. We have also seen the
beginnings of GDP growth decoupling from oil demand: prior to the pandemic,
GDP growth of 1 per cent. a year implied about half a per cent growth in oil
demand but that elasticity has now fallen - and the fall might get sharper.
The most certain outcome of all this is the likely positive structural shift
towards locally produced non-fossil fuels and technologies, sustaining and
accelerating the energy transition.
Looking ahead, while Europe weathered the 2022/23 winter well, the coming
winter could well be challenging, especially if a lack of alternatives to
Russian gas makes it hard to fill European storage during the summer months. I
am hopeful that a combination of continued gains in energy efficiency,
including investment in storage technologies, the rapid growth of wind and
solar power and increasing electrification of final energy consumption means
that the signs are encouraging but significantly more investment is still
needed to fill the gap entirely. The EU's supply-side measures supporting
low-carbon energy sources and decarbonisation technologies in response to the
US' Inflation Reduction Act (IRA), is yet to materialise formally - although
REPowerEU is a welcome first step. Suggestions that Europe could be included
on some of the IRA's subsidies in exchange for rethinking its carbon border
tax are interesting, as is The G7's 'climate club' concept on trade.
In summary, while energy markets, both fossil and renewable, have continued to
be volatile, I believe the global energy mix will change and demand for energy
will grow. This demand will have to be met by a combination of different types
of energy. There is no one solution and so REL will continue to invest in a
range of different opportunities. It is also important that we do not shift
away from the current energy system faster than we are able to build the net
zero energy system of the future. This means continued investment in
hydrocarbons to address natural decline rates and the underinvestment of
recent years. This means improving productivity and efficiency of existing
output. This means introducing government policy which is more favourable to
clean energy investment, reducing barriers and bureaucracy. This means
incentives to change consumer and industrial behaviour and demand. All this
means the development of new technologies.
Your Board will continue to allocate capital where it expects the highest risk
adjusted long term returns - challenging the Investment Manager to balance
between capital investments and share repurchases as appropriate. The Board
will also maintain its regular discussions with the Investment Manager to make
further shareholder friendly changes to the Investment Management Agreement,
which will require the consent of the Investment Manager and possibly the
Cornerstone investors as well. This approach should give the Directors and
Shareholders confidence that REL will continue to update the Investment
Management Agreement in line with current market practices.
Let me end by thanking you for your continued support. REL has repositioned
its investments and portfolio over recent years to capitalise on the shift
towards the energy transition. The long-term trends and demand driving our
decarbonisation investments remain strong and we see the opportunity for
profitable capital deployment. At the same time the Investment Management team
and the teams running our portfolio companies have taken the necessary steps
to reduce leverage, improve cash generation and improve liquidity.
Finally, I would like to once again thank our previous Chair, Richard Hayden
for his service and dedication to your Company, as well as Peter Barker for
being a valued Non-Executive Independent Director since the Company's IPO in
2013. I am delighted to serve as the new Chair, and I am excited by the
prospect of REL's investments benefiting from the tailwinds that renewed
policy support are expected to provide to the entire energy sector.
Richard Horlick
Chair of Riverstone Energy Limited
15 August 2023
Investment Manager's Report
The battle between interest rates, inflation and the outlook for economic
growth has dominated the first half of 2023. Central Banks have raised
interest rates at a rapid clip and to their highest levels for over a decade.
Economies have so far held up relatively well but forward-looking expectations
for future GDP growth have cooled as the impact of higher input costs and
purchase prices combine with higher financing costs and a tight global labour
market. In addition, after the rapid ascent of energy prices through to their
peak in the middle of 2022, this year has been notable for the pullback we
have seen in both oil and gas prices.
This has made for a mixed and challenging environment. On the one hand the
conventional assets in the portfolio, namely Permian Resources, Onyx and
Hammerhead Energy have continued to perform well operationally and their
valuations have also held up well in the face of volatile and declining energy
prices. The conventional portfolio has seen its total value decrease by $70.0
million over the period, which consisted of $53.5 million of realisations and
$16.5 million of changes in fair value, with an unrealised value of $319.7
million at 30 June 2023.
On the other hand, the decarbonisation and transition portfolio has been
impacted by the macro environment, which has seen valuations of small cap and
high growth stocks come under pressure in general across the market, including
in the emerging technology and green energy spaces. In addition, despite the
strategic progress a number of our portfolio companies have made, there have
been write-downs on Anuvia, GoodLeap and Enviva. In aggregate, the
decarbonisation portfolio has declined in total value by $72.0 million over
the period, which consisted of $71.2 million of changes in fair value and $0.8
million of realisations, with unrealised value of $152.1 million at
period-end.
During the period the NAV for REL as a whole decreased by 11 per cent. to
$12.90 per share (or ~15 per cent. to £10.23 per share at 30 June 2023) with
share buybacks contributing positively during the period.
The geopolitical impact of the Russian invasion of Ukraine and increased
tensions between the US and China have shifted attitudes towards both
globalisation and energy security. Countries are increasingly looking at ways
to decrease their reliance on imported conventional energy sources and for
many the only alternative is to invest in domestic green energy opportunities.
This will of course take time but is an added supportive factor to
decarbonisation.
This process has been given further impetus by the US Inflation Reduction Act
which has encouraged the EU and other developed countries to respond with
additional support for green energy. This is strengthening global green energy
subsidies which has created an investment environment that is of potential
benefit to REL.
REL invested an aggregate amount of $4.5 million in H1 2023 into the
decarbonisation portfolio; with $3.5 million invested into Enviva and $1.0
million in Our Next Energy (ONE). This latter investment was part of a $12.5
million commitment to ONE's $300 million Series B Preferred Equity Round.
ONE is a Michigan-based energy storage technology company working to
develop batteries for mobility and large-scale storage applications. ONE will
use the proceeds of the round to complete ONE Circle, its Van Buren
Township, Michigan facility, which will be its first Lithium Iron Phosphate
(LFP) battery manufacturing plant.
Given the challenging environment, REL has remained very focused on managing
its existing portfolio and ensuring the portfolio companies have sufficient
liquidity to continue fuelling their growth. Positive progress continues to
be made with companies building manufacturing capacity, raising capital to
support growth, international expansion and the development of new
technologies. As a result, there have been a number of positive milestones for
existing portfolio companies to report on.
Hyzon Motors has announced the successful completion and testing of the first
nine single-stack 200kW Fuel Cell System (FCS) B samples at its production and
innovation centre in Bolingbrook, Illinois. This validates Hyzon's design,
equipment and operating procedures and it is now looking to increase its rate
of production. Hyzon remains on course to declare Start of Production and
commercialisation of its innovative FCS in 2024.
Group14 Technologies announced the construction of a second
one-million-square-foot factory in Moses Lake, Washington. This development
will use funding from private investors as well as Government funds. It will
be the world's largest factory of advanced silicon battery materials for
electric vehicle programs. The factory will join Group14's existing factory in
manufacturing SC55 which is an advanced silicon battery technology to deliver
higher energy density and charge rates than traditional lithium-ion batteries.
Solid Power received over $5 million of funding from the United States
Department of Energy to further scale and develop its nickel- and cobalt-free
cells for its Solid-State battery technology that could significantly lower
the price of EV batteries. The technology is intended to produce cells that
are more energy-dense as well as lighter, thinner and less volatile than
lithium-ion cells.
FreeWire Technologies announced a new headquarters in Banbury, Oxfordshire in
the UK as it expands beyond the US and into Europe. Initially the company will
focus on the UK, Ireland and the Benelux region, followed by Spain and Italy
later this year. The company already has some Boost Chargers deployed in the
EU through its partnership with BP and is positioned to capitalise on the
growth in demand for ultrafast EV charging solutions.
Infinitum announced the acquisition of Circuit Connect, a printed circuit
board (PCB) fabricator based in Nashua, New Hampshire. This will immediately
allow for substantially higher production capacity of PCB stators and will
allow a framework for continuous volume growth to help meet the high demand
for Infinitum's innovative air core motor technology.
Tritium announced record results for the first four months of 2023 with a new
production and revenue record, a $40 million capital investment from two
existing backers and an expectation it will be EBITDA positive in the first
half of calendar 2024. The company raised its forward-looking growth guidance
as it continues to invest to meet strong customer demand for its EV fast
chargers.
Negative events during the period impacted three portfolio companies Anuvia,
Enviva and GoodLeap. REL was informed that Anuvia had ceased operations and is
undergoing liquidation. The Company invested $20 million in Anuvia in March
2022, with its investment being written down to $14 million at the time of the
Company's Q1 2023 quarterly portfolio valuations. Anuvia is in the process of
realising its assets through bankruptcy and it is unlikely that REL will
recover any of its investment and therefore the investment has been fully
written down as at the period end. Enviva missed its Q1 2023 earnings
estimates and subsequently revised its full year outlook for 2023. The main
reasons for the miss were related to higher input prices as well as lower than
expected production volumes caused by operating outages. Nonetheless, the
fundamentals for the business and the order backlog remain as strong as ever.
Lastly, the current interest rate environment, underpinned by dynamically
rising rates, has negatively impacted loan origination businesses such as
GoodLeap by increasing borrowing costs, reducing demand for loans, and
creating uncertainty in the capital markets ecosystem.
On the conventional assets side performance has continued to be strong. In
February 2023 the combination between Hammerhead and DCRD closed resulting in
the conversion of REL's existing Hammerhead ownership into 15.4 million shares
of Hammerhead Energy Inc. REL remains focused on executing its strategy of
realising value from its conventional assets and continuing to reorient the
portfolio towards decarbonisation and energy transition assets. As a result
total net realisations and distributions were $54.3 million from Permian
Resources ($28.1 million), Onyx ($20.2 million), Carrier II ($4.6 million),
Hammerhead Energy Inc. ($0.6 million), Tritium DCFC Loan ($0.4 million) and
Enviva Inc. ($0.4 million) in the first half of 2023.
Cash on the balance sheet held by REL and the Partnership structure totalled
$133 million (£105 million) at 30 June 2023, with unfunded commitments of $18
million.
REL has maintained a focus on shareholder returns and has bought back a total
of 4,091,145 ordinary shares during the period, representing 8.0 per cent. of
the total outstanding at an average share price of £5.78 ($7.30) per share.
The Investment Manager remains committed to transitioning the portfolio
further towards decarbonisation and energy transition assets where it
continues to see strong structural drivers for growth and value creation.
Current Portfolio - Conventional
Investment (Public/Private) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 30 Jun 2023 Gross MOIC((2)) 31 Dec 2022
Capital ($mm) Capital ($mm)((1)) ($mm)((2)) Gross MOIC((2))
Permian Resources ((4)) (Public) 268 268 223 110 333 1.24x 1.17x
Onyx (Private) 66 60 81 98 179 3.00x 3.00x
Hammerhead Energy Inc. ((4)) (Public) 308 296 24 111 135 0.46x 0.60x
Total Current Portfolio - Conventional - Public((3)) 576 564 247 222 468 0.83x 0.87x
Total Current Portfolio - Conventional - Private((3)) 66 60 81 98 179 3.00x 3.00x
Total Current Portfolio - Conventional - Public & Private((3)) 642 624 328 320 647 1.04x 1.07x
Current Portfolio - Decarbonisation
Investment (Public/Private) Gross Committed Capital ($mm) Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 30 Jun 2023 31 Dec 2022
Capital ($mm) Capital ($mm)((1)) ($mm)((2)) Gross MOIC((2)) Gross MOIC((2))
GoodLeap (formerly Loanpal) (Private) 25 25 2 36 38 1.50x 2.20x
FreeWire (Private) 10 10 - 20 20 2.00x 2.00x
Infinitum 18 18 - 18 18 1.05x 1.30x
(Private)
DCRC/Solid Power((4)) (Public) 48 48 - 18 18 0.39x 0.39x
T-REX Group (Private) 18 18 - 18 18 1.00x 1.00x
DCRN/Tritium DCFC((4)) (Public) 25 25 1 13 14 0.56x 0.60x
Our Next Energy (Private) 13 13 - 13 13 1.00x 1.00x
Enviva (Public)((4)) 22 22 - 8 9 0.41x 1.93x
Group14 4 4 - 4 4 1.00x 1.00x
(Private)
Ionic I & II (Samsung Ventures) (Private) 3 3 - 3 3 1.00x 1.00x
Hyzon Motors((4)) (Public) 10 10 - 1 1 0.10x 0.16x
Anuvia 20 20 - - - 0.00x 1.00x
(Private)
Total Current Portfolio - Decarbonisation - Public((3)) 105 105 1 41 43 0.41x 0.69x
Total Current Portfolio - Decarbonisation - Private((3)) 109 109 2 111 113 1.03x 1.51x
Total Current Portfolio - Decarbonisation - Public & Private((3)) 214 214 3 152 155 0.73x 1.08x
Total Current Portfolio - Conventional & Decarbonisation - Public & 856 837 331 472 803 0.96x 1.08x
Private((3))
Cash and Cash Equivalents((9)) $133
Total Liquidity (Cash and Public Investments) $396
Total Market Capitalisation $334
Realisations
Investment Gross Committed Capital Invested Gross Realised Gross Unrealised Value Gross Realised Capital & Unrealised Value ($mm) 30 Jun 2023 31 Dec 2022
(Initial Investment Date) ($mm) Capital ($mm) Capital ($mm)((1)) ($mm)((2)) Gross Gross MOIC((2))
MOIC((2))
Rock Oil((5)) 114 114 233 3 236 2.06x 2.07x
(12 Mar 2014)
Three Rivers III 94 94 204 - 204 2.17x 2.17x
(7 Apr 2015)
ILX III 179 179 172 - 172 0.96x 0.96x
(8 Oct 2015)
Meritage III((6)) 40 40 88 - 88 2.20x 2.20x
(17 Apr 2015)
RCO((7)) 80 80 80 - 80 0.99x 0.99x
(2 Feb 2015)
Carrier II 110 110 67 - 67 0.61x 0.60x
(22 May 2015)
Pipestone Energy (formerly CNOR) 90 90 58 - 58 0.64x 0.64x
Sierra 18 18 38 - 38 2.06x 2.06x
(24 Sept 2014)
Aleph Midstream((6)) 23 23 23 - 23 1.00x 1.00x
(9 Jul 2019)
Ridgebury H3 18 18 22 - 22 1.22x 1.22x
(19 Feb 2019)
Castex 2014 52 52 14 - 14 0.27x 0.27x
(3 Sep 2014)
Total Realisations((3)) 819 819 1,000 3 1,002 1.22x 1.22x
Withdrawn Commitments and Impairments((8)) 350 350 9 - 9 0.02x 0.02x
Total Investments((3)) 2,024 2,006 1,339 475 1,813 0.90x 0.95x
Total Investments & Cash and Cash Equivalents((3), (9)) 607
((1)) Gross realised capital is total gross proceeds realised on invested
capital. Of the $1,339 million of capital realised to date, $1,016 million is
the return of the cost basis and the remainder is profit.
((2)) Gross Unrealised Value and Gross MOIC (Gross Multiple of Invested
Capital) are before transaction costs, taxes (approximately 21 to 27.5 per
cent. of U.S. sourced taxable income) and 20 per cent. carried interest on
applicable gross profits in accordance with the revised terms announced on 3
January 2020, but effective 30 June 2019. Since there was no netting of losses
against gains before the aforementioned revised terms, the effective carried
interest rate on the portfolio as a whole will be greater than 20 per cent. No
further carried interest will be payable until the $192.6 million of realised
and unrealised losses to date at 30 June 2023 are made whole with future
gains, so the earned carried interest of $0.8 million at 30 June 2023 has been
deferred and will expire in October 2023 if the aforementioned losses are not
made whole. Since REL has not yet met the appropriate Cost Benchmark at 30
June 2023, $29.6 million in Performance Allocation fees that would have been
due under the prior agreement were not accrued. In addition, there is a
management fee of 1.5 per cent. of net assets (including cash) per annum and
other expenses. Given these costs, fees and expenses are in aggregate expected
to be considerable, Total Net Value and Net MOIC will be materially less than
Gross Unrealised Value and Gross MOIC. Local taxes, primarily on U.S. assets,
may apply at the jurisdictional level on profits arising in operating entity
investments. Further withholding taxes may apply on distributions from such
operating entity investments. In the normal course of business, REL may form
wholly-owned subsidiaries, to be treated as C Corporations for US tax
purposes. The C Corporations serve to protect REL's public investors from
incurring U.S. effectively connected income. The C Corporations file U.S.
corporate tax returns with the U.S. Internal Revenue Service and pay U.S.
corporate taxes on its taxable income.
((3)) Amounts may vary due to rounding.
((4)) Represents closing price per share in USD for publicly traded shares
Permian Resources Corporation (formerly Centennial Resource Development, Inc.)
(NASDAQ:PR - 30-06-2023: $10.96 per share / 31-03-2023: $10.50 price per
share); Enviva, Inc. (NYSE:EVA - 30-06-2023: $10.85 per share / 31-03-2023:
$28.88 price per share); Solid Power, Inc. (NASDAQ:SLDP - 30-06-2023: $2.54
per share / 31-03-2023: $3.01 price per share); Hyzon Motors, Inc.
(NASDAQ:HYZN - 30-06-2023: $0.96 per share / 31-03-2023: $0.82 price per
share); Tritium DCFC Limited (NASDAQ:DCFC - 30-06-2023: $1.09 price per share
/ 31-03-2023 $1.28 price per share); and Hammerhead Energy, Inc. (NASDAQ: HHRS
- 30-06-2023: $7.25 per share / 31-03-2023: $7.75 per share).
((5)) The unrealised value of the Rock Oil investment consists of rights to
mineral acres.
((6)) Midstream investment.
((7)) Credit investment.
((8)) Withdrawn commitments consist of Origo ($9 million) and CanEra III ($1
million), and impairments consist of Liberty II ($142 million), Fieldwood ($80
million, net of realisations of $8 million), Eagle II ($62 million) and Castex
2005 ($48 million).
((9)) This figure is comprised of $12.3 million held at the Company, $54.7
million held at the Partnership and $65.8 million held at REL US Corp.
Investment Portfolio Summary
As of 30 June 2023, REL's portfolio comprised fifteen active investments
including two E&P investments, twelve decarbonisation investments and one
power investment.
Onyx
As of 30 June 2023, REL, through the Partnership, has invested $60 million of
its $66 million commitment to Onyx. Onyx is a European-based independent power
producer that was created through the successful acquisition of 2,350MW of
gross installed capacity (1,941MW of net installed capacity) of five coal- and
biomass-fired power plants in Germany and the Netherlands from Engie SA. Two
of the facilities in the current portfolio are among Europe's most recently
constructed thermal plants, which benefit from high efficiencies, substantial
environmental controls, low emissions profiles and the potential use of
sustainable biomass.
As of 30 June 2023, REL's interest in Onyx, through the Partnership, was
valued at 3.00x Gross MOIC((1)) or $179 million (Realised: $81 million,
Unrealised: $98 million). The Gross MOIC((1)) remained flat over the period.
Hammerhead
As of 30 June 2023, REL, through the Partnership, has invested $295 million of
its $308 million commitment to Hammerhead, a company focused on liquids-rich
unconventional resources in the Montney and Duvernay resource play in Western
Canada. Since its establishment in 2010, Hammerhead has aggregated one of the
largest and most advantaged land positions in the emerging Montney and
Duvernay formations of Western Canada's Deep Basin. The company controls and
operates 100 per cent. of this asset base, which comprises over 1,800 net
drilling locations across approximately ~112,000 Montney net acres. Since
Riverstone's initial investment, Hammerhead has increased production almost
ten-fold and has significantly grown reserves to 314 mboe. In the Q1 2023, the
Company reported a realised record production rate of over 39,992 boe/d (47
per cent. liquids), in line with guidance for 2023. The recent nine-well pad
at North Karr continues to materially exceed performance expectations and
averaged 14,733 boe/d (58 per cent. liquids) in Q1 2023.
Hammerhead plans to have higher capital expenditures in 2023 than in 2022 in
order to increase development activities. Hammerhead has hedged approximately
39 per cent. of forecasted 2023 crude oil production at a weighted average
price of $74.31 per barrel and 44 per cent. of forecasted 2023 natural gas
production at a weighted average price of $3.34 per MMBtu.
As of 30 June 2023, REL's interest in Hammerhead, through the Partnership, was
valued at 0.46x Gross MOIC((1)) or $135 million (Realised: $24 million,
Unrealised: $111 million). The Gross MOIC((1)) decreased over the period.
Permian Resources (formerly Centennial)
As of 30 June 2023, REL, through the Partnership, has invested in full its
$268 million commitment to Permian Resources / Centennial. Headquartered in
Midland, Texas, Permian Resources is the largest pure-play E&P company in
the Delaware Basin.
In Q3 2022, Centennial closed its merger with Colgate and began its first day
of trading as Permian Resources (NYSE: PR) on 12 September 2022.
In Q2 2023, Permian Resources announced a special variable dividend of $0.05 /
share in addition to its quarterly base dividend of $0.05 / share, maintaining
its commitment to returning >50 per cent. of free cash flow to
shareholders. The company closed on a series of portfolio management
transactions, which consisted of a bolt-on acquisition in New Mexico for $98
million, a sizable acreage swap in New Mexico, and a divestiture of a portion
of its saltwater disposal wells and associated produced water infrastructure
in Texas for $125 million, with another $60 million subject to an earnout.
REL, through the Partnership, owns approximately 10.1 million shares which are
publicly traded (NYSE: PR).
As of 30 June 2023, REL's interest in Permian Resources, through the
Partnership, was valued at 1.24x Gross MOIC((1)) or $333 million (Realised:
$223 million, Unrealised: $110 million). The Gross MOIC((1)), which reflects
the mark-to-market value of REL's shareholding, increased over the period.
GoodLeap (formerly Loanpal)
As of 30 June 2023, REL, through the Partnership, has invested in full its $25
million commitment to GoodLeap. The company is a technology-enabled
sustainable home improvement loan originator, providing a point-of-sale
lending platform used by key residential contractors. GoodLeap does not take
funding risk. The company presells its originated loans via forward purchase
agreements to large asset managers. The company's attractive unit economics
and asset-light business model allow for rapid growth and the ability to scale
faster than its competitors, while generating free cash flow by capitalising
on upfront net cash payments on the flow of loan originations and avoiding
costly SG&A and capital expenditures incurred by other portions of the
value chain.
As of 30 June 2023, REL's interest in GoodLeap, through the Partnership, was
valued at 1.50x Gross MOIC((1)) or $38 million (Realised: $2 million,
Unrealised: $36 million). The Gross MOIC((1)) decreased over the period.
FreeWire
As of 30 June 2023, REL, through the Partnership, has fully invested its $10
million commitment to FreeWire. FreeWire is the leading provider of
battery-integrated DC fast chargers (DCFCs) and their associated software.
Riverstone led the company's $50 million Series C round in January 2021.
Freewire's primary hardware product is the Boost Charger, which offers
charging speeds of up to 200kW with only a 25kW grid connection by using a
160kWh battery. These specifications support 15-24 fast charging sessions per
day. In addition to hardware sales, FreeWire's software platform offers
recurring revenues, enabling charger management and third-party platform
integration with plans to offer energy management and grid services.
As of 30 June 2023, REL's interest in FreeWire, through the Partnership, was
valued at 2.00x Gross MOIC((1)) or $20 million (Realised: nil, Unrealised: $20
million). The Gross MOIC((1)) has remained flat over the period.
Infinitum
As of 30 June 2023, REL, through the Partnership, has fully invested its $17.5
million commitment to Infinitum. Infinitum's patented air-core motors offer
superior performance in half the weight and size, at a fraction of the carbon
footprint of traditional motors, making them pound for pound one of the most
efficient in the world. Infinitum motors open up sustainable design
possibilities for the machines we rely on to be smaller, lighter and quieter,
improving our quality of life while also saving energy.
As of 30 June 2023, REL's interest in Infinitum, through the Partnership, was
valued at 1.05x Gross MOIC((1)) or $18.4 million (Realised: nil, Unrealised:
$18.4 million).The Gross MOIC((1)) has decreased over the period.
Ionic I & II (Samsung Ventures)
On 17 August 2021, REL announced the purchase of an interest in one of Samsung
Ventures' battery technology focused venture capital portfolios (the "Samsung
Portfolio") for $30.0 million. The majority of the Samsung Portfolio consists
of 1.66 million shares of Solid Power, Inc., which successfully completed its
business combination with DCRC on 8 December 2021. Gross proceeds to Solid
Power from the transaction amounted to $542.9 million from a fully committed
$195 million PIPE and $347.9 million of cash held in trust net of redemptions;
only 0.6 per cent. of shares held by public stockholders of DCRC were
redeemed. Of the shares voted at the special meeting of DCRC's stockholders,
over 99.9 per cent. voted to approve the business combination.
The remainder of the portfolio is held in shares of Ionic Materials (Ionic I
& II), a material science company that manufactures transformative
polymers for use in solid-state batteries, healthcare and 5G applications.
Ionic Materials' solid polymer is believed to be the first of its kind to
conduct ions at room temperature, a critical enabler of solid-state batteries.
As of 30 June 2023, REL's aggregate investment in the Samsung Portfolio,
through the Partnership, was marked at 0.50x Gross MOIC((1)) or $15 million
(Realised: nil, Unrealised: $15 million). The Gross MOIC((1)) remained flat
over the period.
DCRC/Solid Power
As of 30 June 2023, REL, through the Partnership, has fully invested its $20.6
million commitment to DCRC/Solid Power. Riverstone sponsored DCRC's $350
million IPO on 23 March 2021. REL made a $0.6 million investment in DCRC at
the time of the IPO, as the blank check company began to pursue merger
candidates. On 15 June 2021, DCRC announced its business combination agreement
with Solid Power, a Louisville, Colorado based producer of all solid-state
batteries for electric vehicles, to which REL, through the Partnership,
committed an additional $20 million to the $165 million PIPE that was raised.
In addition to the announcement late last year that Solid Power closed on a
$130 million Series B investment raise led by BMW Group, Ford Motor Company,
and Volta Energy Technologies, earlier this year, the company announced that
it received an award from the U.S. Department of Energy (DOE) to continue its
development of nickel- and cobalt-free solid-state battery cells. Solid Power
expects to receive up to $5.6 million to develop battery cells containing a
lithium metal anode and sulphur composite cathode to enable improved energy
and charging performance. The DOE announced $42 million in funding for 12
projects to strengthen the domestic supply chain for advanced batteries that
power electric vehicles (EVs), with Solid Power's award being a portion of
this funding. Projects selected aim to expand US domestic EV adoption by
developing batteries that last longer, charge faster, perform efficiently in
freezing temperatures and have better overall range retention. The company
continues to meet its milestones and has demonstrated a track record of
partnering with leading companies and investors globally.
The business combination between DCRC and Solid Power closed on 8 December
2021, with Solid Power beginning to trade on NASDAQ under the ticker "SLDP".
As of 30 June 2023, REL's interest in Solid Power, through the Partnership,
consisted of the $0.6 million sponsor investment, which was valued at 2.12x
Gross MOIC((1)) or $1 million (Realised: nil, Unrealised: $1 million), and the
$20 million PIPE investment, which was valued at 0.25x Gross MOIC((1)) or $5
million (Realised: nil, Unrealised: $5 million).
T-REX Group
As of 30 June 2023, REL, through the Partnership, has fully invested its $17.5
million commitment to T-REX Group. T-REX Group, a SaaS provider supporting the
asset-backed financing industry, brings together asset class expertise,
critical data management capabilities, and a platform for deal structuring,
cash flow modeling, scenario analysis, real-time performance tracking, and
reporting.
T-REX Group combines sophisticated cloud-based SaaS technology with big data
and asset class expertise to drive down operating and capital expense, reduce
risk exposure, and enhance performance for complex investments.
As of 30 June 2023, REL's interest in T-REX Group, through the Partnership,
was valued at 1.00x Gross MOIC((1)) or $17.5 million (Realised: nil,
Unrealised: $17.5 million).
DCRN/Tritium DCFC
In February 2021, REL, through the Partnership, invested $0.6 million in the
Founder Shares and Warrants of Decarbonisation Plus Acquisition Corp. II
(NASDAQ: DCRN) at the time of its IPO. In May 2021, DCRN announced it would
combine with Tritium, a Brisbane based pioneer in e-mobility and EV charging
infrastructure. On 4 January 2022, Tritium announced record breaking Q4'21 and
FY'21 financial performance results. The merger vote to approve the
combination of Tritium and DCRN occurred and closed on 12 January 2022.
In February 2022, REL funded an additional $15 million commitment to Tritium.
The funding event occurred three days after the company met with President
Biden to announce the construction of the Company's Lebanon, Tennessee
manufacturing plant. The plant will employ 500 over the next five years,
produce over 10,000 DC fast chargers units annually, and will ultimately reach
peak production capacity of 30,000 units annually.
On 17 January 2023, Tritium announced its largest single customer order from
BP plc (NYSE: BP) for deployment across the U.S., UK, Europe, and Australia.
Tritium set a new production record of 3,200 units, 90 per cent. of the
company's FY 2022 production in just the first four months of CY 2023. Tritium
re-affirmed its 2023E production goal of 11,000 units and to become EBITDA
positive during the first half of 2024.
In July 2023, Tritium announced it will provide all fast chargers for Phase I
of Hawaii's National Electric Vehicle Infrastructure ("NEVI") funding program,
becoming the first manufacturer to secure a fast-charging order through the
NEVI program.
As of 30 June 2023, REL's interest in Tritium, through the Partnership,
consisted of the $0.6 million sponsor investment, which was valued at 1.00x
Gross MOIC((1)) or $1 million (Realised: nil, Unrealised: $1 million), the $15
million equity investment, which was valued at 0.18x Gross MOIC((1)) or $3
million (Realised: nil, Unrealised: $3 million), and the $9.7 million loan
investment, which was valued at 1.04x Gross MOIC((1)) or $10 million
(Realised: $0.6 million, Unrealised: $10.0 million).
Our Next Energy (ONE)
In December 2022, REL invested $11.5 million of its $12.5 million commitment
(remaining $1 million funded in January 2023) to Our Next Energy's (ONE) $300
million Series B round, valuing the company at over $1 billion. ONE is
a Michigan-based energy storage technology company working to develop
batteries for mobility and large-scale storage applications. ONE will use the
proceeds of the round to complete ONE Circle, its Van Buren Township,
Michigan facility, which will be its first Lithium Iron Phosphate (LFP)
battery manufacturing plant.
As of 30 June 2023, REL's interest in ONE, through the Partnership, was valued
at 1.00x Gross MOIC((1)) or $13 million (Realised: nil, Unrealised: $13
million).
Enviva
As of 30 June 2023, REL, through the Partnership, has invested $22 million of
its $22 million commitment to Enviva. Enviva, based in Bethesda, Maryland, is
the world's largest supplier of wood pellets to major utilities and heat and
power generators, principally in Europe and Japan. Through its subsidiaries,
Enviva owns and operates ten plants with a combined wood pellet production
capacity of approximately 6.2 million MTPY.
On 31 December 2021, Enviva completed its conversion from a master limited
partnership to a corporation following approval by Enviva unitholders on 17
December 2021. Enviva's decline in stock price from Q1 2023 to Q2 2023 was
driven primarily by challenging performance in first-quarter 2023, which was
approximately $50 million below management's expectations for adjusted EBITDA.
Given the impact of Q1 performance, Enviva revised its full year 2023 EBITDA
guidance downward from a range of $305-335 million to a range of $200-250
million. On 5 May 2023, Enviva changed capital allocation priorities,
eliminating its dividend to manage liquidity, improve operating and cost
productivity of existing assets, repurchase shares, and accelerate investments
in new pellet production assets.
As of 30 June 2023, REL's interest in Enviva, through the Partnership, was
valued at 0.41x Gross MOIC((1)) or $9 million (Realised: $0.3 million,
Unrealised: $8 million). The Gross MOIC((1)) decreased over the period.
Group14
In April 2022, REL, through the Partnership, invested $4 million into Group14
Technologies, Inc.'s $400 million Series C funding round. The Series C round
was led by Porsche AG, with participation from OMERS Capital Markets,
Decarbonisation Partners, Vsquared Ventures, and others. Group14 is a battery
materials technology company founded in 2015. The company has developed a
proprietary silicon-based anode battery material to replace graphite in
conventional lithium-ion batteries.
In Q4 2022, the company raised an additional $214mm as a second close to its
Series C transaction; bringing total Series C capital raised to $614mm, fully
funding the business plan through 2023.
As of 30 June 2023, REL's interest in Group14, through the Partnership, was
valued at 1.00x Gross MOIC((1)) or $4 million (Realised: nil, Unrealised: $4
million).
Hyzon
In connection with the closing of the previously announced merger between DCRB
and Hyzon Motors Inc. (NASDAQ: HYZN), REL purchased $10 million of DCRB common
stock in a private placement transaction at $10 per share in July 2021. Hyzon,
headquartered in Rochester, New York, is the industry-leading global supplier
of zero-emissions hydrogen fuel cell powered commercial vehicles.
As of 30 June 2023, REL's interest in Hyzon, through the Partnership, was
valued at 0.10x Gross MOIC((1)) or $1 million (Realised: nil, Unrealised: $1
million). The Gross MOIC((1)) decreased over the period.
Anuvia
Anuvia Plant Nutrients, Inc. has ceased operations and is undergoing
liquidation. Anuvia engaged Evercore to advise on a fundraising or sale
process beginning in Q3 2022. The capital raise effort was ultimately
unsuccessful subsequent to the 31 March 2023 valuation. The investment was
marked down from $20 million to $14 million at the 31 March 2023 valuation to
reflect uncertainty around the potential success of the capital raise. As is
often the case, the capital raise had pathways to be successful until the very
end, but ultimately did not materialize. Anuvia is in the process of realising
its assets. Whilst Series D equity holders are first equity in line to
receive proceeds from Anuvia, the Investment Manager has informed the Board on
10 July 2023 that no such proceeds can now be reasonably expected given the
debt burden on the business.
Valuation
The Investment Manager is charged with proposing the valuation of the assets
held by REL through the Partnership. The Partnership has directed that
securities and instruments be valued at their fair value. REL's valuation
policy is compliant with IFRS and IPEV Valuation Guidelines and has been
applied consistently from period to period since inception. As some of the
Partnership's investments are generally not publicly quoted, valuations
require meaningful judgement to establish a range of values, and the ultimate
value at which an investment is realised may differ from its most recent
valuation and the difference may be significant.
The Investment Manager values each underlying investment in accordance with
the Riverstone valuation policy, the IFRS accounting standards and IPEV
Valuation Guidelines. The value of REL's portion of that investment is derived
by multiplying its ownership percentage by the value of the underlying
investment. If there is any divergence between the Riverstone valuation policy
and REL's valuation policy, the Partnership's proportion of the total holding
will follow REL's valuation policy. Valuations of REL's investments through
the Partnership are determined by the Investment Manager and disclosed
quarterly to investors, subject to Board approval.
Riverstone values its investments using common industry valuation techniques,
including comparable public market valuation, comparable merger and
acquisition transaction valuation, and discounted cash flow valuation.
For development-type investments, Riverstone also considers the recognition of
appreciation or depreciation of subsequent financing rounds, if any. For those
early stage privately held companies where there are other indicators of a
decline in the value of the investment, Riverstone will value the investment
accordingly even in the absence of a subsequent financing round.
Riverstone reviews the valuations on a quarterly basis with the assistance of
the Riverstone Performance Review Team ("PRT") as part of the valuation
process. The PRT was formed to serve as a single structure overseeing the
existing Riverstone portfolio with the goal of improving operational and
financial performance.
The Audit Committee reviews the valuations of the Company's investments held
through the Partnership and makes a recommendation to the Board for formal
consideration and acceptance.
Uninvested Cash
As of 30 June 2023, REL had a cash balance of $12.3 million and the
Partnership, including its wholly-owned subsidiaries, REL Cayman Holdings, LP,
REL US Corp and REL US Centennial Holdings, LLC, had uninvested funds of over
$120.5 million held as cash and money market fixed deposits, gross of the
accrued Management Fee of $2.3 million. After the accrued Management Fee,
REL's aggregate cash balance is $130.5 million. As in prior years, in
accordance with the Partnership Agreement, if the Company requires additional
funds for working capital, it is entitled to receive another distribution from
the Partnership. The Partnership maintains deposit accounts with several
leading international banks. In addition, the Partnership invests a portion of
its cash deposits in short-term money market fixed deposits. REL's treasury
policy seeks to protect the principal value of cash deposits utilising low
risk investments with top-tier counterparts. Uninvested cash earned
approximately 140 basis points during the period ended 30 June 2023. All cash
deposits referred to in this paragraph are denominated in U.S. dollars.
On 15 May 2023, the Board was pleased to allocate an additional £30.0
million to the Share Buyback Programme. During the period, the Company had
repurchased 4,091,145 shares, in aggregate, for £23.6 million ($29.8 million)
at an average share price of £5.78 ($7.30). Since REL started the buyback
programme in May 2020, the Company has purchased 33,096,218 shares, in
aggregate, for £136.5 million ($174.8 million) at an average share price of
£4.12 ($5.28). As of 30 June 2023, £29.5 million remains available for
repurchasing.
As of 30 June 2023, REL, through the Partnership, had potential unfunded
commitments of $18 million. In connection with the listing of REL on the
London Stock Exchange, all proceeds of the offering were converted to U.S.
dollars at an average rate of 1.606 at inception. All cash deposits referred
to above are denominated in U.S. dollars. Additionally, REL's functional
currency and Financial Statements are all presented in U.S. dollars. The
Partnership's commitments are denominated in U.S. dollars, except Hammerhead
which is denominated in Canadian dollars.
RIGL Holdings, LP
15 August 2023
REPORT OF THE BOARD OF DIRECTORS
For the period ended 30 June 2023
General Information
The Board submits its report, together with the Interim Condensed Financial
Statements, of Riverstone Energy Limited ("REL" or the "Company") for the
six-month period ended 30 June 2023.
REL is a company limited by shares, which was incorporated on 23 May 2013 in
Guernsey with an unlimited life and registered with the Commission as a
Registered Closed-ended Collective Investment Scheme pursuant to the POI Law.
It has been listed on the London Stock Exchange since 29 October 2013. The
registered office of the Company is PO Box 286, Floor 2, Trafalgar Court, Les
Banques, St Peter Port, Guernsey, GY1 4LY.
Principal Activities
The principal activity of the Company is to act as an investment entity
through the Partnership and make investments in the energy sector. The
Company's investment objective is to generate long-term capital growth by
investing in the global energy sector.
Business Review
A review of the Company's business and its likely future development is
provided in the Board Chair's Statement and in the Investment Manager's Report
above.
Results and Dividend
The results of the Company for the period ended 30 June 2023 are shown in the
Condensed Statement of Comprehensive Income below. The Net Asset Value of
the Company as at 30 June 2023 was $604 million (31 December 2022: $739
million). The Directors do not recommend the payment of a dividend in
respect of the period ended 30 June 2023 (30 June 2022: $nil).
Principal Risk and Uncertainties
The Company's assets consist of listed and private equity investments, held
through the Partnership, in the conventional and decarbonisation portfolios.
Initially, there was a particular focus on opportunities in the global E&P
and midstream energy sub-sectors, but since 2020 REL has been exclusively
focussed on pursuing a global strategy across decarbonisation sectors
presented by Riverstone's investment platform. Its principal risks are
therefore related to market conditions in the energy and energy transition
sectors in general, but also to the particular circumstances of the businesses
in which it is invested through the Partnership. The Investment Manager,
through the Partnership, seeks to mitigate these risks through active asset
management initiatives and carrying out due diligence work on potential
targets before entering into any investments.
Each Director is fully aware of the risks inherent in the Company's business
and understands the importance of identifying, evaluating and monitoring these
risks. The Board has adopted procedures and controls that enable it to carry
out a robust assessment of the risks facing the Company, manage these risks
within acceptable limits and meet all of its legal and regulatory obligations.
The Board thoroughly considers the process for identifying, evaluating and
managing any significant risks faced by the Company on an ongoing basis and
these risks are reported and discussed at Audit Committee and Board meetings.
The Board ensures that effective controls are in place to properly mitigate
these risks to the greatest extent possible and that a satisfactory compliance
regime exists to ensure all applicable local and international laws and
regulations are upheld.
The process which the Company follows in order to identify and mitigate its
principal risks and uncertainties is set out in the Corporate Governance
Section of the Annual Report and Financial Statements for the year ended 31
December 2022 (the "2022 Annual Report"), a copy of which is available on the
Company's website
https://www.riverstoneREL.com//investors/reports-and-presentations/
(https://www.riverstoneREL.com/investors/reports-and-presentations/) . The
Directors have reviewed the principal risks and uncertainties for the
remaining six months of the Company's financial year and the risks identified
are the same as those set out in the 2022 Annual Report and are summarised as
follows:
Investment Concentration Risk
The Company initially intended to only invest in the global energy sector,
with a particular focus on oil and gas exploration and production, and
midstream investments, which exposed it to industry and sector concentration
risk. Under the modified investment strategy, since 2020, the Company has
pivoted to focus on energy transition and decarbonisation and this provides an
element of diversification for the portfolio, albeit with additional
investment risks.
Ordinary Shares Trading at a Discount to NAV per Share
The Company's shares have, for a considerable period of time, been trading at
a discount to NAV per share for reasons, including, but not limited to,
general market conditions in the energy sector, liquidity concerns, perceived
issues with the terms of the Investment Management Agreement and actual or
expected Company performance as the Company transitions to maximise value from
the conventional portfolio allowing investment into its decarbonisation
strategy.
Inherent Risks Associated with the Conventional and Decarbonisation
Investments
The investment portfolio held by the Company in both the conventional and
decarbonisation strategies exposes the Company to a number of specific
investment and valuation risks, the most notable ones being: risks and
judgements associated with fair valuing private equity investments, potential
changes to domestic policy, banking, regulatory or tax environment of existing
or potential investments, early/development stage investment risk in the
decarbonisation portfolio, global conflict/imposition of sanctions/operating
in hazardous environments etc.
The Company is Heavily Reliant on the Services Provided by the Investment
Manager
The Investment Management Agreement requires the Investment Manager to provide
competent, attentive, and efficient services and personnel to the Company. If
the Investment Manager was not able to do this or if there was an unacceptable
reduction in the service received or investment competence levels of the
personnel employed by the Investment Manager, then the Company would not able
to terminate the Investment Management Agreement as it does not expressly
provide for termination on notice without specific cause, and poor investment
performance, the departure of key Riverstone executives or a change of control
of Riverstone do not constitute cause for these purposes. Furthermore, it
would be costly for the Company to terminate the Investment Management
Agreement as the Company would be required to make significant payments.
Vote on any Discontinuance Resolution that may be Proposed
Affiliates of the Investment Manager and the Company's Cornerstone Investors
would be entitled to vote on any Discontinuation Resolution that may be
proposed. As the Investment Manager and its affiliates (and, indirectly, the
Cornerstone Investors) receive fees from the Company, they will most probably
be incentivised to vote against such resolution.
Climate Change
The effects of climate change and the transition to a low carbon economy could
possibly reduce demand for some of the Company's existing investments, as well
as impact their valuations, and may limit future growth opportunities. General
sentiment may affect investor appetite and hence may lead to a depression of
the Company's share price.
Related Parties
Details of related party transactions that have taken place during the period
and any material changes, if any, are set out in Note 7 of the Interim
Condensed Financial Statements. There are no material changes in the related
party transactions that are disclosed when compared to those noted in the 2022
Annual Report.
Shareholdings of the Directors
The current Directors with beneficial interests in the shares of the Company
as at 30 June 2023 (31 December 2022) are detailed below:
Director Ordinary Per cent. Ordinary Per cent.
Shares held Holding at Shares held Holding at
30 June 30 June 31 December 31 December
2023 2023 2022 2022
Richard Horlick((1)) 10,000 0.021 10,000 0.020
Patrick Firth((2)) 8,000 0.017 8,000 0.016
Jeremy Thompson((1)) 3,751 0.008 3,751 0.007
Claire Whittet((1)(3)) 2,250 0.005 2,250 0.004
John Roche((1)) 2,201 0.005 2,201 0.004
Karen McClellan((1)) - - - -
((1) ) Non-executive Independent Director.
((2) ) Senior Independent Director.
((3)) Ordinary Shares held indirectly with spouse.
There have been no changes to the current Directors' shareholdings post period
end.
Going Concern
The Audit Committee has reviewed the appropriateness of the Company's
unaudited interim condensed financial statements being prepared in accordance
with "IAS 34 Interim Financial Reporting as adopted by the EU" and presented
on a going concern basis, which it has recommended to the Board. The
unaudited interim condensed financial statements have been prepared on a going
concern basis for the reasons set out below and as the Directors, with
recommendation from the Audit Committee, have a reasonable expectation that
the Company has adequate resources to continue in operational existence for
the foreseeable future, which is defined as the period from the date of
approval of these unaudited interim condensed financial statements up until 30
September 2024.
In reaching this conclusion, that the unaudited interim condensed financial
statements are prepared on a going concern basis, the Directors have
considered the principal risks faced by the Company, the substantial level of
cash/cash equivalent balances held as at 30 June 2023, the liquidity of
certain listed investments held, the cash flow forecasts for the Company
outlining the requirements to settle current and expected liabilities
(including the funding of the Company's share buyback programme) and the
potential unfunded commitments of the Partnership.
Post Period End Updates
Subsequent to the period end, there have been no material updates noted for
the Company.
By order of the Board
Richard Horlick
Chair of the Board
15 August 2023
Directors' Responsibilities Statement
The Directors are responsible for preparing this Interim Report in accordance
with applicable law and regulations. The Directors confirm that to the best of
their knowledge:
· The unaudited interim condensed financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU; and
· The Chair's Statement, the Investment Manager's Report and the
Report of the Board of Directors include a fair review of the information
required by:
(i) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the unaudited interim condensed
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(ii) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the financial year and that have materially affected the financial position
and performance of the entity during that period; and any changes in the
related party transactions described in the last annual report that could do
so.
On behalf of the Board
Richard Horlick
Chair
15 August 2023
Condensed Statement of Financial Position
As at 30 June 2023 (Unaudited)
30 June 31 December
2023 2022
Notes $'000 $'000
(Unaudited)
(Audited)
Assets
Non-current assets
Investment at fair value through profit or loss 6 593,009 723,102
Total non-current assets 593,009 723,102
Current assets
Trade and other receivables 61 598
Cash and cash equivalents 12,267 15,755
Total current assets 12,328 16,353
Total assets 605,337 739,455
Current liabilities
Trade and other payables 1,416 665
Total current liabilities 1,416 665
Total liabilities 1,416 665
Net assets 603,921 738,790
Equity
Share capital 1,072,056 1,101,674
Retained deficit (468,135) (362,884)
Total equity 603,921 738,790
Number of Shares in issue at period/year end 9 46,800,513 50,891,658
Net Asset Value per Share ($) 9 12.90 14.52
The unaudited interim condensed financial statements were approved and
authorised for issue by the Board of Directors on 15 August 2023 and signed on
their behalf by:
Richard Horlick Patrick Firth
Chair Director
The accompanying notes form an integral part of these unaudited interim
condensed financial statements.
Condensed Statement of Comprehensive Income
For the six months ended 30 June 2023 (Unaudited)
1 January 2023 1 January 2022
to 30 June 2023 to 30 June 2022
Notes $'000 $'000
Unaudited Unaudited
Investment (loss)/gain
Change in fair value of investment at fair value through profit or loss 6 (102,711) 58,746
Expenses
Directors' fees and expenses 7 (476) (345)
Legal and professional fees (354) (319)
Other operating expenses (1,747) (1,761)
Total expenses (2,577) (2,425)
Operating (loss)/profit for the financial period (105,288) 56,321
Finance income and expenses
Foreign exchange gain/(loss) 37 (981)
Total finance income and expenses 37 (981)
(Loss)/profit for the period((1)) (105,251) 55,340
Basic and Diluted (Loss)/Earnings per Share (cents) 9 (213.18) 103.19
((1)) A separate statement of other comprehensive income is not required as
the Company has no such income.
All activities derive from continuing operations.
The accompanying notes form an integral part of these unaudited interim
condensed financial statements.
Condensed Statement of Changes in Equity
For the six months ended 30 June 2023 (Unaudited)
Share Retained Total
capital deficit Equity
$'000 $'000 $'000
As at 1 January 2023 1,101,674 (362,884) 738,790
Loss for the financial period - (105,251) (105,251)
Buyback and cancellation of shares (29,618) - (29,618)
As at 30 June 2023 1,072,056 (468,135) 603,921
For the six months ended 30 June 2022 (Unaudited)
Share Retained Total
capital deficit Equity
$'000 $'000 $'000
As at 1 January 2022 1,133,854 (451,813) 682,041
Profit for the financial period - 55,340 55,340
Buyback and cancellation of shares (18,396) - (18,396)
As at 30 June 2022 1,115,458 (396,473) 718,985
The accompanying notes form an integral part of these unaudited interim
condensed financial statements.
Condensed Statement of Cash Flows
For the six months ended 30 June 2023 (Unaudited)
1 January 2023 1 January 2022
to 30 June 2023 to 30 June 2022
$'000 $'000
Unaudited Unaudited
Cash flows generated from operating activities
Operating (loss)/profit for the financial period (105,288) 56,321
Adjustments for:
Change in fair value of investment at fair value through profit or loss 102,711 (58,746)
Movement in trade receivables 537 557
Movement in trade payables 207 33
Net cash used in operating activities (1,833) (1,835)
Cash flows generated from investing activities
Distributions from the Partnership 27,382 18,365
Net cash generated from investing activities 27,382 18,365
Cash flow used in financing activities
Buyback of shares (29,074) (16,480)
Net cash used in financing activities (29,074) (16,480)
Net movement in cash and cash equivalents during the period (3,525) 50
Cash and cash equivalents at the beginning of the period 15,755 7,296
Effect of foreign exchange rate changes 37 (981)
Cash and cash equivalents at the end of the period 12,267 6,365
The accompanying notes form an integral part of these unaudited interim
condensed financial statements
Notes to the UNAUDITED Interim Condensed Financial Statements
For the six months ended 30 June 2023 (Unaudited)
1. General information
Riverstone Energy Limited is a company limited by shares, which was
incorporated on 23 May 2013 in Guernsey with an unlimited life and registered
with the GFSC as a Registered Closed-ended Collective Investment Scheme
pursuant to the POI Law. The Company's Ordinary Shares were admitted to the UK
Listing Authority's Official List and to trading on the London Stock Exchange
as part of its IPO which completed on 29 October 2013. The registered office
of the Company is PO Box 286, Floor 2, Trafalgar Court, Les Banques, St Peter
Port, Guernsey, GY1 4LY.
The Company makes its investments through the Partnership, a Cayman Islands
registered exempted limited partnership, in which the Company is the sole
limited partner. The principal place of business of the Partnership is the
Cayman Islands. Both the Company and the Partnership are subject to the
Investment Management Agreement with the Investment Manager, a partnership
registered in the Cayman Islands.
The Partnership has the right to invest alongside the Private Riverstone Funds
in all Qualifying Investments in which the Private Riverstone Funds
participate. These funds are managed and advised by affiliates of the
Investment Manager. Further detail of these investments is provided in the
Investment Manager's Report.
The unaudited interim condensed financial statements of the Company for the
six months ended 30 June 2023 have been prepared on a going concern basis in
accordance with the Disclosure and Transparency Rules of the United Kingdom
Financial Conduct Authority and in accordance with International Accounting
Standard 34 ("IAS 34") Interim Financial Reporting as adopted by the European
Union. These unaudited interim condensed financial statements do not
comprise statutory financial statements within the meaning of The Companies
(Guernsey) Law, 2008, and should be read in conjunction with the financial
statements of the Company as at and for the year ended 31 December 2022, which
were prepared in accordance with International Financial Reporting Standards
as adopted by the EU. The statutory financial statements for the year ended 31
December 2022 were approved by the Board of Directors on 28 February 2023. The
opinion of the auditors on those financial statements was not qualified and
did not include a reference to any matters to which the auditor drew attention
by way of emphasis without qualifying the report. The accounting policies
adopted in these interim condensed financial statements are consistent with
those of the previous financial year and the corresponding interim reporting
period. New and amended standards have been considered in Note 2. These
interim condensed financial statements for the period ended 30 June 2023 have
been reviewed by the Company's Auditors, Ernst & Young LLP, but not
audited and their review report appears earlier in this document. The
financial information for the year ended 31 December 2022 has been derived
from the audited annual financial statements of the Company for that year,
which were reported on by Ernst & Young LLP in the Company's 2022 Annual
Report.
The accounting policies adopted in the preparation of the unaudited interim
condensed financial statements for the period ended 30 June 2023 are
consistent with those followed in the preparation of the Company's annual
financial statements for the year ended 31 December 2022, which were prepared
in accordance with IFRS as adopted by the European Union.
Certain prior period amounts have been adjusted for consistency and to reflect
the current period presentation.
These unaudited interim condensed financial statements are presented in U.S.
dollars, which is also the Company's functional currency. The amounts are
rounded to the nearest $'000, unless otherwise stated.
Going Concern
The unaudited interim condensed financial statements have been prepared on a
going concern basis for the reasons set out in the Report of the Board of
Directors and the Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the foreseeable
future, which is defined as the period from the date of approval of the
unaudited interim condensed financial statements up until 30 September 2024.
2. New standards, interpretations and amendments adopted by the Company
The Company has not early adopted any standard, interpretation or amendment
that has been issued but is not yet effective. Several amendments apply for
the first time in 2023, but do not have a material impact on the Company's
interim condensed financial position or on the presentation of the Company's
statements.
3. Critical accounting judgements, estimates and assumptions
The estimates and judgements made by management are consistent with those made
in the Financial Statements for the year ended 31 December 2022.
The preparation of Financial Statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Judgements
In the process of applying the Company's accounting policies, management has
made the following critical judgements, which have the most significant effect
on the amounts recognised in the interim condensed financial statements:
Assessment as an Investment Entity
The Company meets the definition of an investment entity on the basis of the
following criteria:
1. the Company obtains funds from multiple investors for the purpose of
providing those investors with investment management services;
2. the Company commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation, investment income,
or both; and
3. the Company measures and evaluates the performance of substantially all
of its investments on a fair value basis.
To determine that the Company meets the definition of an investment entity,
further consideration is given to the characteristics of an investment entity,
which are that:
· it should have more than one investment, to diversify the risk
portfolio and maximise returns;
· it should have multiple investors, who pool their funds to
maximise investment opportunities;
· it should have investors that are not related parties of the
entity; and
· it should have ownership interests in the form of equity or
similar interests.
The Directors are of the opinion that the Company meets the essential criteria
and typical characteristics of an Investment Entity.
Assessment of control over the Partnership
The Company makes its investments through the Partnership in which it is the
sole limited partner.
The Board has assessed whether the Company has all the elements of control as
prescribed by IFRS 10 in relation to the Company's investment in the
Partnership and has concluded that although the Company is the sole limited
partner, it does not control the Partnership but instead has significant
influence and therefore accounts for the Partnership as an investment in
associate at fair value in accordance with IAS 28.
Assessment of Partnership as a structured entity
The Company considers the Partnership to be a structured entity under IFRS 12.
Transfer of funds by the Partnership to the Company is determined by the
General Partner (see Note 7). The risks associated with the Company's
investment in the Partnership are disclosed in Note 10 of the annual financial
statements. The summarised financial information for the Company's investment
in the Partnership is disclosed in Note 6.
Contingent Liabilities - Performance Fee Allocation
In the ordinary course of business, we monitor the performance fee allocation
and provide for anticipated costs where an outflow of resources is considered
probable and a reasonable estimate can be made of the likely outcome.
Where an outflow is not probable, but is possible, a contingent liability may
still exist and its relevant details will be disclosed.
In January 2020, the management engagement committee of REL, consisting of
REL's independent directors, agreed with RIGL Holdings, LP (formerly
Riverstone International Limited), REL's Investment Manager (the "Investment
Manager"), to amend the terms on which REL is required to pay a performance
allocation (the "Performance Allocation") in respect of REL's investments.
These terms are disclosed in Note 7; Related Party Transactions.
At the reporting date we are not aware of any evidence to indicate that a
present obligation exists, nor is it probable that an outflow of resources
will be required such that any amount should be provided for, even though
there were realisations of certain investments during the period. This is due
to the Portfolio Level Cost Benchmark and 8 per cent. Hurdle Rate not being
met.
Estimates and Assumptions
Fair valuation of investment in the Partnership
The area involving a high degree of judgement or complexity and where
assumptions and estimates are significant to the interim condensed financial
statements has been identified as the risk of misstatement of the valuation of
the investment in the Partnership (see Note 5). Revisions to accounting
estimates are recognised in the period in which the estimate is revised and in
any future periods affected. The Board's determination that no discount or
premium should be applied to the net asset value of the Partnership involves a
degree of judgement due to the nature of the Partnership's investments and
other assets and liabilities and the valuation techniques and procedures
adopted by the Partnership.
The resulting accounting estimates will, by definition, seldom equal the
related actual results.
Climate change
In preparing the interim condensed financial statements, the Directors have
considered the impact of climate change, particularly in the context of the
climate change risks identified in the ESG Report from the 2022 REL Annual
Report.
The Directors have considered the medium and longer term cash flow impacts of
climate change on a number of key estimates within the interim condensed
financial statements, including the estimates of future cash flows and future
profitability used in the assessment of the fair value of the underlying
investments held by the Partnership.
These considerations did not have a material impact on the financial reporting
estimates and assumptions in the period. This reflects the conclusion that
climate change is not expected to have a significant impact on the recognition
and separate measurement considerations of the assets or the Company's
short-term cash flows including those considered in the going concern
assessment.
4. Taxation
The taxation basis of the Company remains consistent with that disclosed in
the Financial Statements for the year ended 31 December 2022.
The Company has made an election to, and currently expects to conduct its
activities so as to be treated as a partnership for U.S. federal income tax
purposes. Therefore, the Company expects that it generally will not be liable
for U.S. federal income taxes. In the normal course of business, REL may form
wholly owned subsidiaries, to be treated as C Corporations for U.S. tax
purposes. The C Corporations serve to protect REL's public investors from
incurring U.S. ECI. The C Corporations file U.S. corporate tax returns with
the U.S. IRS and pay U.S. corporate taxes on its income. Each of the Company's
Shareholders who are liable for U.S. taxes will take into account their
respective share of the Company's items of income, gain, loss and deduction in
computing its U.S. federal income tax liability as if such Shareholder had
earned such income directly, even if no cash distributions are made to the
Shareholder.
The Company is exempt from taxation in Guernsey under the provisions of the
Income Tax (Exempt Bodies) (Guernsey) Ordinance, 2008 and is charged an annual
exemption fee of £1,200.
The Cayman Islands at present impose no taxes on profit, income, capital gains
or appreciations in value of the Partnership. There are also currently no
taxes imposed in the Cayman Islands by withholding or otherwise on the Company
as a limited partner of the Partnership on profit, income, capital gains or
appreciations in respect of its partnership interest nor any taxes on the
Company as a limited partner of the Partnership in the nature of estate duty,
inheritance or capital transfer tax.
Local taxes may apply at the jurisdictional level on profits arising in
operating entity investments. Further taxes may apply on distributions from
such operating entity investments. The company is structured, and has
structured its investments, to eliminate the incurrence of ECI by REL's
investors. Based upon the current commitments and investments held through REL
US Corp., the future U.S. tax liability on profits is expected to be in the
range of 21 to 27.5 per cent. (31 December 2022: 21 to 27.5 per cent.).
5. Fair value
IFRS 13 'Fair Value Measurement' requires disclosure of fair value measurement
by level. The level in the fair value hierarchy within which the financial
assets or financial liabilities are categorised is determined on the basis of
the lowest level input that is significant to the fair value measurement,
adjusted if necessary.
Financial assets and financial liabilities are classified in their entirety
into only one of the three levels:
• Level 1 - quoted prices (unadjusted) in active markets for identical
assets or liabilities.
• Level 2 - inputs other than quoted prices included within Level 1
that are observable for the assets or liabilities, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
• Level 3 - inputs for the assets or liabilities that are not based on
observable market data (unobservable inputs).
The Company's only financial instrument carried at fair value is its
investment in the Partnership which has been classified within Level 3 as it
is derived using unobservable inputs. Amounts classified under Level 3 for the
period ended 30 June 2023, consisting of only the Company's investment in the
Partnership, were $593 million (31 December 2022: $723 million).
The fair value of all other financial instruments approximates to their
carrying value.
Transfers during the period
There have been no transfers between levels during the period ended 30 June
2023 and the year ended 31 December 2022. Any transfers between the levels
will be accounted for on the last day of each financial period. Due to the
nature of the investment in the Partnership, it is always expected to be
classified under Level 3.
Valuation methodology and process
The same valuation methodology and process was deployed at 30 June 2023 and 31
December 2022.
The Directors base the fair value of the investment in the Partnership on the
value of its limited partnership capital account received from the General
Partner, which is determined on the basis of the fair value of its assets and
liabilities, adjusted if necessary, to reflect liquidity, future commitments,
and other specific factors of the Partnership and Investment Manager. This is
based on the components within the Partnership, principally the value of the
Partnership's investments in addition to cash and short-term money market
fixed deposits. Any fluctuation in the value of the Partnership's investments
in addition to cash and short-term money market fixed deposits held will
directly impact on the value of the Company's investment in the Partnership.
The Directors have considered whether a discount or premium should be applied
to the net asset value of the Partnership. In view of the investment in the
Partnership and the nature of the Partnership's assets, no adjustment to the
net asset value of the Partnership has been deemed to be necessary.
The Partnership's investments are valued using the techniques described in the
Company's valuation policy. The Investment Manager's assessment of fair value
of investments held by the Partnership, through Investment Undertakings, is
determined in accordance with IPEV Valuation Guidelines. When valuing the
Partnership's investments, the Investment Manager reviews information provided
by the underlying investee companies and other business partners and applies
IPEV methodologies, to estimate a fair value as at the date of the Statement
of Financial Position, subject to Board approval. It is the opinion of the
Directors, that the IPEV valuation methodology used in deriving a fair value
is generally not different from the fair value requirements of IFRS 13. In the
event that there is a difference, the requirements of IFRS 13 override the
IPEV requirements.
The Investment Manager values the investments on a quarterly basis using
common industry valuation techniques, including comparable public market
valuation, comparable merger and acquisition transaction valuation and
discounted cash flow valuation. For early stage private investments,
Riverstone's investment due diligence process includes assumptions about
short-term financial results in determining the appropriate purchase price for
the investment. For the SPAC Sponsor investments, the Investment Manager
applies discounts to the closing price of the publicly traded shares for lack
of identified target, risk of unsuccessful closing of the business combination
and applicable lock-up periods post-closing. The techniques used in
determining the fair value of the Company's investments through the
Partnership are selected on an investment by investment basis so as to
maximise the use of market based observable inputs.
REL's valuation policy is compliant with both IFRS and IPEV Valuation
Guidelines and is applied consistently from period to period. As some of the
Partnership's investments are generally not publicly quoted, valuations
require meaningful judgement to establish a range of values and the ultimate
value at which an investment is realised may differ from its most recent
valuation and the difference may be significant.
For the period ended 30 June 2023, the valuations of the Company's
investments, through the Partnership, are detailed in the Investment Manager's
Report.
The Board reviews and considers the fair value of the Partnership's
investments arrived at by the Investment Manager before incorporating such
values into the fair value of the Partnership. The variety of valuation bases
adopted, quality of management information provided by the underlying investee
companies and the lack of liquid markets for the investments mean that there
are inherent difficulties in determining the fair value of these investments
and such difficulties cannot be eliminated. Therefore, the amounts realised on
the sale of investments may differ from the fair values reflected in these
unaudited interim condensed financial statements and the differences may be
significant.
The Investment Manager monitors the range of reasonably possible changes in
significant unobservable inputs on a regular basis with consultation from the
Investment Manager. Using its extensive industry experience, the Investment
Manager provides the Board with its determination of the reasonably possible
changes in significant unobservable inputs in the market conditions as of the
period end.
6. Investment at fair value through profit or loss
The movement in fair value is derived from the fair value movements in the
underlying investments held by the Partnership, net of income, expenses and
distributions of the Partnership and its related Investment Undertakings,
including any Performance Allocation and applicable taxes.
30 June 31 December
2023
2022
$'000 $'000
Cost
Brought forward 1,046,814 1,094,090
Distributions from the Partnership (27,382) (47,276)
Carried forward 1,019,432 1,046,814
Fair value adjustment through profit or loss
Brought forward (323,712) (419,651)
Fair value movement during period/year - see Summary Income Statement below (102,711)
95,939
Carried forward (426,423) (323,712)
Fair value at period/year end 593,009 723,102
Summary financial information for the Partnership's investments and its
related Investment Undertakings
30 June 31 December 2022
2023
Summary Balance Sheet $'000 $'000
Investments at fair value (net) 540,313 657,040
Cash and cash equivalents ((1)) 54,670 68,483
Management fee payable - see Note 7 (2,265) (2,682)
Other net (liabilities)/assets 291 261
Fair value of REL's investment in the Partnership 593,009 723,102
((1)) These figures, together with the $65.8 million held at REL US Corp (31
December 2022: $35.3 million), comprise the $120.5 million cash held in the
Partnership (31 December 2022: $103.8 million).
30 June 31 December 2022
2023
Reconciliation of Partnership's investments at fair value $'000 $'000
Investments at fair value - Level 1 252,893 177,136
Investments at fair value - Level 3 - see Note 5 221,615 444,592
Investments at fair value 474,508 621,728
Cash and cash equivalents 65,805 35,312
Partnership's investments at fair value 540,313 657,040
1 January 2023 1 January 2022
to 30 June 2023 to 30 June 2022
Summary Income Statement $'000 $'000
Unrealised and realised gain on Partnership's investments (net) (100,104) 66,702
Interest and other income 3,851 29
Management fee expense - see Note 7 (4,768) (5,774)
Other operating expenses (1,690) (2,211)
Portion of the operating profit for the period attributable to REL's (102,711) 58,746
investment in the Partnership
1 January 2023 1 January 2022
to 30 June 2023 to 30 June 2022
Reconciliation of unrealised and realised gain/(loss) on Partnership's $'000 $'000
investments
Unrealised gain on investments (gross) (56,352) 106,109
Realised loss on Partnership's investments (gross) (43,745) (36,827)
General Partner's Performance Allocation - see Note 7 - -
Provision for taxation (7) (2,580)
Unrealised and realised gain on Partnership's investments (net) (100,104) 66,702
The Board reviews the valuations performed by the Investment Manager and
monitors the range of reasonably possible changes in significant unobservable
inputs on a regular basis with consultation from the Investment Manager. Using
its extensive industry experience, the Investment Manager provides the Board
with its determination of the reasonably possible changes in significant
unobservable inputs in the market conditions as of the period end.
Quantitative information about Level 3 fair value measurements in the
Partnership as at 30 June 2023
Industry: Energy
Range
Fair value of Level 3 Investments (in thousands) Valuation technique(s) Unobservable input(s) Low ((1)) High((1)) Weighted Average ((1)) Sensitivity of the Fair value of Level 3
input to fair value of Investments affected by unobservable input ((3)) (in thousands)
Level 3 investments((2))
$189,749 Public comparables 2023E EV / EBITDA Multiple 16.0x 36.0x 35.1x 25 per cent. weighted average change in the input would result in 1 per cent. 35,656
change in the total fair value of Level 3 investments
2024E EV / EBITDA Multiple((4)) 1.0x 3.0x 1.3x 25 per cent. weighted average change in the input would result in 3 per cent. 98,134
change in the total fair value of Level 3 investments
2023E EV / Revenue Multiple((4)) 3.0x 20.5x 11.8x 20 per cent. weighted average change in the input would result in 3 per cent. 74,115
change in the total fair value of Level 3 investments
2024E EV / Revenue Multiple((4)) 1.8x 10.4x 3.0x 20 per cent. weighted average change in the input would result in 1 per cent. 17,500
change in the total fair value of Level 3 investments
Transaction comparables Asset Value ($m/kW) $56 $182 $72 50 per cent. weighted average change in the input would result in 3 per cent. 98,134
change in the total fair value of Level 3 investments
EV / Revenue Multiple 14.5x 26.0x 16.8x 20 per cent. weighted average change in the input would result in 3 per cent. 17,500
change in the total fair value of Level 3 investments
Discounted cash flow Discount Rate 30% 10% 27% +/-50 per cent. Weighted average change in the input would result in -/+3 per 98,134
cent. change in the total fair value of Level 3 investments
$31,866 Other((5))
$221,615 Total
((1)) Calculated based on fair values of the Partnership's Level 3
investments.
((2)) Based on its professional experience and recent market conditions, the
Investment Manager has provided the Board with these weighted average changes
in the inputs with a forecasted time period of 6 to 12 months.
((3)) The Partnership's Level 3 investments are valued using one or more of
the techniques which utilise one or more of the unobservable inputs, so the
amounts in the "Fair value of Level 3 investments" column will not aggregate
to the total fair value of the Partnership's Level 3 investments.
((4)) As at 30 June 2023, the sensitivity of this unobservable input to the
total fair value of Level 3 investments was determined to be significant by
applying the same methodology that determined it to be significant as at 31
December 2022.
((5)) 'Other' include certain investments that are not subject to a
sensitivity analysis because they are insensitive to the changes in inputs set
out above as at 30 June 2023.
Quantitative information about Level 3 fair value measurements in the Partnership as at 31 December 2022
Industry: Energy
Range
Fair value of Level 3 Investments (in thousands) Valuation technique(s) Unobservable input(s) Low ((1)) High ((1)) Weighted Average ((1)) Sensitivity of the Fair value of Level 3
input to fair value of Investments affected by unobservable input ((3)) (in thousands)
Level 3 investments((2))
$255,797 Public comparables 2023E EV / EBITDA Multiple 16.0x 36.0x 34.1x 25 per cent. weighted average change in the input would result in 1 per cent. 53,156
change in the total fair value of Level 3 investments
2024E EV / EBITDA Multiple((4)) 1.0x 3.0x 1.0x 25 per cent. weighted average change in the input would result in 6 per cent. 118,348
change in the total fair value of Level 3 investments
2022 EV/Revenue Multiple 2.0x 12.4x 7.2x 20 per cent. weighted average change in the input would result in 1 per cent. 40,043
change in the total fair value of Level 3 investments
2023E EV/Revenue Multiple((4)) 2.0x 19.1x 10.9x 20 per cent. weighted average change in the input would result in 1 per cent. 113,406
change in the total fair value of Level 3 investments
Transaction comparables Asset Value ($m/kW) $56 $182 $58 50 per cent. weighted average change in the input would result in 1 per cent. 118,348
change in the total fair value of Level 3 investments
Discounted cash flow Discount Rate 30% 10% 30% +/-50 per cent. weighted average change in the input would result in -/+1 per 138,348
cent. change in the total fair value of Level 3 investments
$188,795 Other((5))
$444,592 Total
((1)) Calculated based on fair values of the Partnership's Level 3
investments.
((2)) Based on its professional experience and recent market conditions, the
Investment Manager has provided the Board with these weighted average change
in the inputs with a forecasted time period of 6 to 12 months.
((3)) The Partnership's Level 3 investments are valued using one or more of
the techniques which utilise one or more of the unobservable inputs, so the
amounts in the "Fair value of Level 3 investments" column will not aggregate
to the total fair value of the Partnership's Level 3 investments.
((4)) As at 31 December 2022, the sensitivity of this unobservable input to
the total fair value of Level 3 investments was determined to be significant
by applying the same methodology that determined it not to be significant as
at 31 December 2021.
((5)) 'Other' include certain investments that are not subject to a
sensitivity analysis because they are insensitive to the changes in inputs set
out above as at 31 December 2022 and 31 December 2021, respectively.
7. Related party transactions
Parties are considered to be related if one party has the ability to control
the other party or exercise significant influence over the party in making
financial or operational decisions.
Directors
The Company has six non-executive Directors (31 December 2022: seven).
Directors' fees and expenses for the period ended 30 June 2023 amounted to
$476,141, (30 June 2022: $341,749), none of which was outstanding at period
end (31 December 2022: $Nil).
Partnership
In accordance with section 4.1(a) of the Partnership Agreement, the Company
received distributions in aggregate of $27,382,638 (30 June 2022: $18,365,317)
from the Partnership through the 6 month period to 30 June 2023. In accordance
with section 4.1(a) of the Partnership Agreement, in the event of the Company
requiring additional funds for working capital, it is entitled to receive
another distribution from the Partnership.
Investment Manager
For the provision of services under the Investment Management Agreement, the
Investment Manager is paid in cash out of the assets of the Partnership an
annual Management Fee equal to 1.5 per cent. per annum of the Company's Net
Asset Value (including cash). The fee is payable quarterly in arrears and each
payment is calculated using the quarterly Net Asset Value as at the relevant
quarter end as further outlined in Note 9 in the Financial Statements to 31
December 2022. During the period to 30 June 2023, the Partnership incurred
Management Fees of $4,767,640 (30 June 2022: $5,773,552) of which $2,264,688
remained outstanding as at the period end (31 December 2022: $2,681,729). In
addition, the Company and Partnership, in aggregate, reimbursed the Investment
Manager $2,067,503 in respect of amounts paid on their behalf for the period
(30 June 2022: $1,024,264), of which $2,005,549 related to legal and
professional fees of the Company and Partnership ($400,128 specific to the
Company), $80,663 related to travel and other operating expenses of the
Investment Manager (all specific to the Company), and ($18,709) related to
reimbursable expenses of the portfolio companies (all specific to the
Partnership).
The circumstances in which the Company and the Investment Manager may
terminate the Investment Management Agreement are as follows (Please refer to
Note 9 of the 2022 Annual Report for full disclosure. There have been no
changes since the year end):
Event Notice period Consequences of termination
By the Company if the Investment Manager is in material breach which has not 12 months The General Partner is entitled to receive a payment equal to four times the
been rectified quarterly Management Fee payable to the Investment Manager on the basis of the
Company's most recent Net Asset Value and an amount equal to the Performance
Allocation due on the Company's investments on the basis, at the Company's
option, of the latest quarterly valuation or the actual realisation value for
each investment.
By the Investment Manager if the Company is in material breach which has not 12 months The General Partner is entitled to receive a payment equal to twenty times the
been rectified quarterly Management Fee payable to the Investment Manager on the basis of the
Company's most recent Net Asset Value and an amount equal to the Performance
Allocation due on the Company's investments on the basis, at the General
Partner's option, of the latest quarterly valuation or the actual realisation
value for each investment.
By the Company if the Investment Manager becomes insolvent or resolves to wind Immediate No payment to be made to the Investment Manager or the General Partner.
up or if the Investment Manager or General Partner commits an act of fraud or
wilful default in relation to the Company which results in material harm to
the Company
The Investment Management Agreement cannot be terminated by either the Company
or the Investment Manager without cause.
Following the seventh anniversary of the Company's London listing on 29
October 2020, a discontinuation resolution was proposed and not passed,
therefore the Investment Management Agreement will continue in perpetuity
subject to the termination for cause provisions described above. However,
either the Board or Shareholders holding in aggregate at least 10 per cent. of
the Company's voting securities can call an EGM at any time to vote on the
liquidation of the Company (75 per cent. of the votes cast in favour required)
or run-off of its portfolio (50 per cent. of the votes cast in favour
required). Under both these scenarios, the Investment Manager would be
entitled to twenty times the most recent quarterly Management Fee.
General Partner
The General Partner makes all management decisions, other than investment
management decisions, in relation to the Partnership and controls all other
actions by the Partnership and is entitled to receive a Performance
Allocation, calculated and payable at the underlying investment holding
subsidiary level, equal to 20 per cent. of the gross realised profits (if any)
in respect of a disposal, in whole or in part, of any underlying asset of the
Company.
The General Partner is entitled to receive its Performance Allocation in cash,
all of which, after tax, Riverstone, through its affiliate RELCP, reinvests in
Ordinary Shares of the Company on the terms summarised in Part I and Part VIII
of the IPO Prospectus.
In accordance with the revised terms announced on 3 January 2020, but
effective 30 June 2019, no further carried interest will be payable until the
$192.6 million of realised and unrealised losses to date at 30 June 2023 are
made whole with future gains. The earned carried interest of $0.8 million at
30 June 2023 has been deferred and will expire in October 2023 if the
aforementioned losses are not made whole. Since REL has not yet met the
appropriate Cost Benchmark at 30 June 2023, $29.6 million in Performance
Allocation was not accrued in accordance with the terms of the current
agreement, which would have been accrued under the prior agreement.
Cornerstone Investors
Each of the Cornerstone Investors has acquired an indirect economic interest
in each of the General Partner and the Investment Manager depending on the
size of their commitment and the total issue size, up to an aggregate maximum
indirect economic interest of 20 per cent. in each, for nominal consideration.
These interests entitle the Cornerstone Investors to participate in the
economic returns generated by the General Partner, including from the
Performance Allocation, and the Investment Manager, which receives the
Management Fee.
8. Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of
Directors, as a whole. The key measure of performance used by the Board to
assess the Company's performance and to allocate resources is the Total Return
on the Company's Net Asset Value, as calculated under IFRS, and therefore no
reconciliation is required between the measure of profit or loss used by the
Board and that contained in the Financial Statements and Interim Report.
For management purposes, the Company is organised into one main operating
segment, which invests in one limited partnership.
All of the Company's income is derived from within Guernsey and the Cayman
Islands.
All of the Company's non-current assets are located in the Cayman Islands.
Due to the Company's nature, it has no customers.
9. Earnings per Share and Net Asset Value per Share
Earnings per Share
1 January 2023 to 30 June 2023 1 January 2022 to 30 June 2022
(Loss)/Profit for the period ($'000) (105,251) 55,340
Weighted average numbers of Shares in issue 49,371,476 53,629,141
EPS (cents) (213.18) 103.19
The Earnings per Share is based on the profit or loss of the Company for the
period and on the weighted average number of Shares the Company had in issue
for the period.
There are no dilutive Shares in issue as at 30 June 2023 (30 June 2022: none).
Net Asset Value per Share
30 June 2023 31 December 2022 30 June 2022
NAV ($'000) 603,921 738,790 718,985
Number of Shares in issue 46,800,513 50,891,658 52,714,287
Net Asset Value per Share ($)((1)) 12.90 14.52 13.64
Net Asset Value per Share (£) 10.23 11.99 11.25
Discount to NAV (per cent.)((2)) 44.65 43.46 40.84
( )
((1)) The GBP:USD FX rate is 1.2614 as at 30 June 2023.
((2)) The share price used to calculate the Discount to NAV (per cent.) is
$7.14 (£5.66).
The Net Asset Value per Share is arrived at by dividing the net assets as at
the date of the Condensed Statement of Financial Position by the number of
Ordinary Shares in issue at that date. The Discount to NAV is arrived at by
calculating the percentage discount of the Company's Net Asset Value per Share
to the Company's closing Share price as at the date of the Condensed Statement
of Financial Position.
10. Post-Period End Updates
Subsequent to period end, there have been no material updates for the Company.
Glossary of Capitalised Defined Terms
"Administrator" means Ocorian Administration (Guernsey) Limited;
"Aleph Midstream" means Aleph Midstream S.A;
"Annual General Meeting" or "AGM" means the general meeting of the Company;
"Annual Report and Financial Statements" means the annual publication of the
Company provided to the Shareholders to describe their operations and
financial conditions, together with their Financial Statements;
"Anuvia" means Anuvia Plant Nutrients Inc.;
"Audit Committee" means a formal committee of the Board with defined terms of
reference;
"Board" or "Directors" means the directors of the Company;
"CanEra III" means CanEra Inc.;
"Carrier II" means Carrier Energy Partners II LLC;
"Castex 2005" means Castex Energy 2005 LLC;
"Castex 2014" means Castex Energy 2014 LLC;
"Centennial" means Centennial Resource Development, Inc.;
"CNOR" means the Canadian Non-Operated Resources LP;
"Company" or "REL" means Riverstone Energy Limited;
"Company Secretary" means Ocorian Administration (Guernsey) Limited;
"Cornerstone Investors" means those investors who have acquired Ordinary
Shares and acquired a minority economic interest in the General Partner and in
the Investment Manager, being AKRC Investments LLC, Casita, L.P., KFI and
McNair;
"Corporate Brokers" means JP Morgan Cazenove and Numis Securities Limited;
"C Corporations" means a C Corporation, under U.S. federal income tax law,
being a corporation that is taxed separately from its owners;
"DCRB" means Decarbonization Plus Acquisition Corporation;
"DCRC" means Decarbonization Plus Acquisition Corporation III;
"DCRN" means Decarbonization Plus Acquisition Corporation II;
"DCRD" means Decarbonization Plus Acquisition Corporation IV;
"Disclosure Guidance and Transparency Rules" or "DTRs" mean the disclosure
guidance published by the FCA and the transparency rules made by the FCA under
section 73A of FSMA;
"Discontinuation Resolution" means a special resolution that was proposed and
not passed by the Company's Shareholders to discontinue the Company within six
weeks of the seventh anniversary of the Company's first Admission if the
trading price has not met the Target Price, and the Invested Capital Target
Return has not been met;
"Discount to NAV" means the situation where the Ordinary shares of the Company
are trading at a price lower than the Company's Net Asset Value;
"E&P" means exploration and production;
"Eagle II" means Eagle Energy Exploration, LLC;
"Earnings per Share" or "EPS" means the Earnings per Ordinary Share and is
expressed in U.S. dollars;
"EBITDA" means earnings before interest, taxes, depreciation and amortisation;
"ECI" means effectively connected income, which refers to all income from
sources within the United States connected with the conduct of a trade or
business;
"EGM" means an Extraordinary General Meeting of the Company;
"Enviva" means Enviva Holdings, L.P.;
"EU" means the European Union;
"EV" means enterprise value;
"FCA" means the UK Financial Conduct Authority (or its successor bodies);
"Fieldwood" means Fieldwood Energy LLC;
"Financial Statements" means the audited financial statements of the Company,
including the Statement of Financial Position, the Statement of Comprehensive
Income, the Statement of Cash Flows, the Statement of Changes in Equity and
associated notes;
"FreeWire" means FreeWire Technologies, Inc.;
"Fund V" means Riverstone Global Energy & Power Fund V, L.P.;
"General Partner" means REL IP General Partner LP (acting through its general
partner, REL IP General Partner Limited), the general partner of the
Partnership and a member of the Riverstone group;
"GFSC" or "Commission" means the Guernsey Financial Services Commission;
"GoodLeap" means GoodLeap, LLC;
"Gross MOIC" means gross multiple of invested capital;
"Group14" means Group14 Technologies Inc.;
"Hammerhead" means Hammerhead Energy, Inc.;
"Henry Hub" means a pipeline interchange of natural gas in North America used
as a benchmark in gas pricing;
"Hyzon" means Hyzon Motors, Inc.;
"IAS" means international accounting standards as issued by the Board of the
International Accounting Standards Committee;
"IFRS" means the International Financial Reporting Standards, being the
principles-based accounting standards, interpretations and the framework by
that name issued by the International Accounting Standards Board, as adopted
by the EU;
"ILX III" means ILX Holdings III LLC;
"Infinitum" means Infinitum Electric Inc.;
"Interim Report" means the Company's half yearly report and unaudited interim
condensed financial statements for the period ended 30 June;
"Investment Manager" means RIL (effective through 17 August 2020) and RIGL
(effective after 17 August 2020) which are both majority-owned and controlled
by Riverstone;
"Investment Management Agreement" means the investment management agreement
dated 24 September 2013 between RIL, the Company and the Partnership (acting
through its General Partner) under which RIL is appointed as the Investment
Manager of both the Company and the Partnership (effective through 17 August
2020), the 2(nd) Amended & Restated investment management agreement
effective after 17 August 2020 between RIGL, the Company and the Partnership
(acting through its General Partner) under which RIGL is appointed as the
Investment Manager of both the Company and the Partnership and the 3(rd)
Amended & Restatement investment management agreement effective 9 December
2020 between RIGL, the Company and the Partnership (acting through its General
Partner);
"Investment Undertaking" means the Partnership, any intermediate holding or
investing entities that the Company or the Partnership may establish from time
to time for the purposes of efficient portfolio management and to assist with
tax planning generally and any subsidiary undertaking of the Company or the
Partnership from time to time;
"IPEV Valuation Guidelines" means the International Private Equity and Venture
Capital Valuation Guidelines;
"IPO" means the initial public offering of shares by a private company to the
public;
"IRS" means the Internal Revenue Service, the revenue service of the U.S.
federal government;
"ISIN" means an International Securities Identification Number;
"KFI" means Moore Capital Management, formerly known as Kendall Family
Investments, LLC, a cornerstone investor in the Company;
"Liberty II" means Liberty Resources II LLC;
"Loanpal" means Loanpal, LLC;
"London Stock Exchange" or "LSE" means London Stock Exchange Plc;
"Management Engagement Committee" means a formal committee of the Board with
defined terms of reference;
"Management Fee" means the management fee to which RIL is entitled;
"McNair" means RCM Financial Services, L.P. for the purposes of acquiring
Ordinary Shares and Palmetto for the purposes of acquiring a minority economic
interest in the General Partner and the Investment Manager;
"Meritage III" means Meritage Midstream Services III, L.P.;
"mmboe" means million barrels of oil equivalent;
"NASDAQ" means National Association of Securities Dealers Automated Quotations
Stock Market;
"NAV per Share" means the Net Asset Value per Ordinary Share;
"Net Asset Value" or "NAV" means the value of the assets of the Company less
its liabilities as calculated in accordance with the Company's valuation
policy and expressed in U.S. dollar
"Net MOIC" means gross multiple of invested capital net of taxes and carried
interest on gross profit;
"NYSE" means The New York Stock Exchange;
"Official List" is the list maintained by the Financial Conduct Authority
(acting in its capacity as the UK Listing Authority) in accordance with
Section 74(1) of the Financial Services and Markets Act 2000;
"ONE" or "Our Next Energy" means Our Next Energy, Inc;
"Onyx Power" means Onyx Strategic Investment Management I BV;
"OPEC" means Organisation of the Petroleum Exporting Countries;
"Ordinary Shares" means redeemable ordinary shares of no par value in the
capital of the Company issued and designated as "Ordinary Shares" and having
the rights, restrictions and entitlements set out in the Articles;
"Origo" means Origo Exploration Holding AS;
"Partnership" or "RELIP" means Riverstone Energy Investment Partnership, LP,
the Investment Undertaking in which the Company is the sole limited partner;
"Partnership Agreement" means the partnership agreement in respect of the
Partnership between inter alios the Company as the sole limited partner and
the General Partner as the sole general partner dated 23 September 2013;
"Performance Allocation" means the Performance Allocation to which the General
Partner is entitled;
"PIPE" means private investment in public entity;
"POI Law" means the Protection of Investors (Bailiwick of Guernsey) Law, 2020,
as amended;
"Private Riverstone Funds" means Fund V and all other private multi-investor,
multi-investment funds that are launched after Admission and are managed or
advised by the Investment Manager (or one or more of its affiliates) and
excludes Riverstone employee co-investment vehicles and any Riverstone managed
or advised private co-investment vehicles that invest alongside either Fund V
or any multi-investor multi-investment funds that the Investment Manager (or
one or more of its affiliates) launches after Admission;
"PRT" means Riverstone Performance Review Team;
"Qualifying Investments" means all investments in which Private Riverstone
Funds participate which are consistent with the Company's investment objective
where the aggregate equity investment in each such investment (including
equity committed for future investment) available to the relevant Private
Riverstone Fund and the Company (and other co-investees, if any, procured by
the Investment Manager or its affiliates) is $100 million or greater, but
excluding any investments made by Private Riverstone Funds where both (a) a
majority of the Company's independent directors and (b) the Investment Manager
have agreed that the Company should not participate;
"RCO" means Riverstone Credit Opportunities, L.P.;
"RELCP" means Riverstone Energy Limited Capital Partners, LP (acting by its
general partner Riverstone Holdings II (Cayman) Ltd.) a Cayman exempted
limited partnership controlled by affiliates of Riverstone;
"Ridgebury H3" means Ridgebury H3, LLC;
"RIGL" means RIGL Holdings, LP;
"RIL" means Riverstone International Limited;
"Riverstone" means Riverstone Holdings LLC and its affiliated entities (other
than the Investment Manager and the General Partner), as the context may
require;
"Rock Oil" means Rock Oil Holdings, LLC;
"SaaS" means Software as a Service;
"Sierra" means Sierra Oil and Gas Holdings, L.P.;
"Shareholder" means the holder of one or more Ordinary Shares;
"Solid Power" means Solid Power, Inc.;
"SPAC" means special purpose acquisition company;
"Target Price" means, as defined in the Articles, £15.00, subject to (a)
downward adjustment in respect of the amount of all dividends and other
distributions, stock splits and equity issuances below the prevailing NAV per
Ordinary Share made following the first Admission and (b) upward adjustment to
take account of any share consolidations made following the first Admission;
"Three Rivers III" means Three Rivers Natural Resources Holdings III LLC;
"Total Return on the Company's Net Asset Value" means the capital appreciation
of the Company's Net Asset Value plus the income received from the Company in
the form of dividends;
"T-REX Group" means T-REX Group, Inc.;
"Tritium" means Tritium DCFC Limited;
''UK" or "United Kingdom" means the United Kingdom of Great Britain and
Northern Ireland;
"UK Listing Authority" or "UKLA" means the Financial Conduct Authority;
"U.S." or "United States" means the United States of America, its territories
and possessions, any state of the United States and the District of Columbia;
"WTI" means West Texas Intermediate which is a grade of crude oil used as a
benchmark in oil pricing;
"£" or "Pounds Sterling" or "Sterling" means British pound sterling and
"pence" means British pence; and
"$" means United States dollars and "cents" means United States cents.
DIRECTORS AND GENERAL INFORMATION
Directors Administrator and Company Secretary English solicitors to the Company
Richard Hayden (Chair of the Board until 1 March 2023) Ocorian Administration (Guernsey) Limited Hogan Lovells International LLP
Atlantic House
Richard Horlick (Chair of the Board from 1 March 2023) PO Box 286
Holborn Viaduct
London
Peter Barker (until 23 May 2023) Floor 2
EC1A 2FG
Patrick Firth Trafalgar Court
United Kingdom
Karen McClellan (from 24 May 2023) Les Banques
John Roche St Peter Port
Guernsey advocates to the Company
Jeremy Thompson Guernsey
Carey Olsen (Guernsey) LLP
Claire Whittet GY1 4LY
Carey House
Channel Islands
PO Box 98
Audit Committee
Les Banques
Patrick Firth (Chair) Registered office
St Peter Port
Peter Barker (until 23 May 2023) PO Box 286
Guernsey
Richard Hayden (until 23 May 2023) Floor 2
GY1 4BZ
Richard Horlick Trafalgar Court
Channel Islands
Karen McClellan (from 24 May 2023) Les Banques
John Roche St Peter Port
U.S. legal advisors to the Company
Jeremy Thompson Guernsey
Vinson & Elkins LLP
Claire Whittet GY1 4LY
1001 Fannin Street
Channel Islands
Suite 2500
Management Engagement Committee
Houston, Texas
Claire Whittet (Chair) Registrar
TX 77002
Peter Barker (until 23 May 2023) Link Asset Services
United States of America
Patrick Firth 65 Gresham Street
Richard Hayden (until 23 May 2023) London
Independent auditor
Richard Horlick EC2V 7NQ
Ernst & Young LLP
Karen McClellan (from 24 May 2023) United Kingdom
PO Box 9, Royal Chambers
John Roche
St Julian's Avenue
Jeremy Thompson Principal banker and custodian
St Peter Port
Barclays Bank PLC
Guernsey
Nomination Committee PO Box 41
Le Marchant House GY1 4AF
Jeremy Thompson (Chair)
Le Truchot Channel Islands
Peter Barker (until 23 May 2023)
St Peter Port
Guernsey
Patrick Firth
GY1 3BE
Corporate Brokers
Richard Hayden (until 23 May 2023) Channel Islands
JP Morgan Cazenove
Richard Horlick
25 Bank Street
Karen McClellan (from 24 May 2023)
Canary Wharf
John Roche
London
Claire Whittet
E15 5JP
United Kingdom
Investment Manager
RIGL Holdings, LP
Numis Securities Limited
190 Elgin Avenue
The London Stock Exchange Building
George Town
10 Paternoster Square
Grand Cayman
London
KY1-9005
EC4M 7LT
Cayman Islands
United Kingdom
Investment Manager's Performance Review Team
Pierre Lapeyre
David Leuschen
Baran Tekkora
Robert Tichio
Website: www.RiverstoneREL.com
ISIN: GG00BBHXCL35
Ticker: RSE
SWISS SUPPLEMENT
ADDITIONAL INFORMATION FOR INVESTORS IN SWITZERLAND
This Swiss Supplement is supplemental to, forms part of and should be read in
conjunction with the Interim Report and Unaudited Interim Condensed Financial
Statements ended 30 June 2023 for RIVERSTONE ENERGY LIMITED (the "Company").
Effective from 20th July 2015, the Company had appointed Société Générale
as Swiss Representative and Paying Agent. The current Prospectus, the
Memorandum and Articles of Association and the annual report of the Company
can be obtained free of charge from the representative in Switzerland,
Société Générale, Paris, Zurich Branch, Talacker 50, P.O. Box 5070,
CH-8021 Zurich. The paying agent of the Company in Switzerland is Société
Générale, Paris, Zurich Branch, Talacker 50, P.O. Box 5070, CH-8021 Zurich.
The Company may offer Shares only to qualified investors in Switzerland. In
respect of the Shares distributed in and from Switzerland, the place of
performance and jurisdiction is the registered office of the Swiss
Representative.
Cautionary Statement
The Chair's Statement, the Investment Manager's Report and the Report of the
Board of Directors have been prepared solely to provide additional information
for shareholders to assess the Company's strategies and the potential for
those strategies to succeed. These should not be relied on by any other party
or for any other purpose.
The Chair's Statement, Investment Manager's Report and the Report of the Board
of Directors may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "expects", "intends", "may", "will" or
"should" or, in each case, their negative or other variations or comparable
terminology.
These forward-looking statements include all matters that are not historical
facts. They appear in a number of places throughout this document and include
statements regarding the intentions, beliefs or current expectations of the
Directors and the Investment Adviser, concerning, amongst other things, the
investment objectives and investment policy, financing strategies, investment
performance, results of operations, financial condition, liquidity, prospects,
and distribution policy of the Company and the markets in which it invests.
By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future. Forward-looking statements are not guarantees of future
performance.
The Company's actual investment performance, results of operations, financial
condition, liquidity, distribution policy and the development of its financing
strategies may differ materially from the impression created by the
forward-looking statements contained in this document.
Subject to their legal and regulatory obligations, the Directors and the
Investment Manager expressly disclaim any obligations to update or revise any
forward-looking statement contained herein to reflect any change in
expectations with regard thereto or any change in events, conditions or
circumstances on which any statement is based.
Riverstone Energy Limited
PO Box 286, Floor 2,
Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 4LY, Channel
Islands.
T 44 (0) 1481 742742
F 44 (0) 1481 742698
Further information available online:
www.RiverstoneREL.com (http://www.RiverstoneREL.com)
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