REG - VH Global Energy Inf - Proposed Asset Realisation Strategy

VH Global Energy InfrastructureAnnouncement

23/05/2025 07:00

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RNS Number : 8771J  VH Global Energy Infrastructure PLC  23 May 2025

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

 

23 May 2025

 

VH Global Energy Infrastructure plc

(the "Company" or "ENRG")

 

Proposed Asset Realisation Strategy and Change in Investment Management Fee

 

In the Company's annual results announcement dated 3 April 2025, the board of
directors of the Company (the "Board") noted that it was examining all options
for repaying the trust that the Company's shareholders (the "Shareholders")
have placed in the Company over the past four years since the Company's
initial public offering ("IPO"). The Board, directly and through its corporate
broker, Numis Securities Limited ("Deutsche Numis") has engaged with a
significant proportion of the Shareholders over the past six months. While no
one option was favoured by all Shareholders, the feedback from the majority of
Shareholders was a desire for the Company to return capital via a sale of the
Company's portfolio of assets (the "Portfolio") with a view to maximising
value. Shareholders were rightly cognisant of the balance between expedited
returns of capital and damaging the long-term value of the Portfolio through
untimely sales.

 

As such, the Board today announces that it intends to commence an asset
realisation strategy (the "Proposed Asset Realisation Strategy") which will
require a change to the Company's investment policy. The Proposed Asset
Realisation Strategy will involve mandating the Company's current alternative
investment fund manager ("AIFM"), Victory Hill Capital Partners LLP ("Victory
Hill"), to sell the Portfolio in a timely manner with a view to maximising
value. The Board is firmly of the opinion that it is in Shareholders' best
interests to retain Victory Hill to deliver the Proposed Asset Realisation
Strategy. It is with that in mind that the Board has sought to align and
incentivise Victory Hill to manage the Portfolio on this basis.

 

The Board and Victory Hill note that some Portfolio assets are in a better
position to be sold than others given their operational maturity. Some
Portfolio assets need further management before they can be sold at a value
that the Board and Victory Hill believe would be acceptable to Shareholders,
although it is also within the Proposed Asset Realisation Strategy for the
Company to consider offers for all of the Portfolio assets to be sold as a
whole.  In any case, the Board anticipates, having taken advice from Victory
Hill, that the Proposed Asset Realisation Strategy will be completed in no
longer than 3 years, by which point all capital will have been returned to
Shareholders, and the Company would de-list and be liquidated (the period
running for 3 years from the date that resolutions to be put to Shareholders
to approve and implement the Proposed Asset Realisation Strategy (the
"Resolutions") are passed, being the "Realisation Period"). The Board will
consider methods to return cash to Shareholders as realisations are made over
time.  Cash will be returned to Shareholders as and when the Company holds
enough cash from the sale of Portfolio assets to justify the cost of effecting
a return to Shareholders.

 

Advantages of the Proposed Asset Realisation Strategy and Change in Investment
Management Fee

 

The Board understands that the persistent deep discount that ENRG's shares
(the "Shares") trade at relative to its NAV is, in part, an indication that
investors currently do not value exposure to uncorrelated, highly cash
generative assets, such as those forming the Portfolio. The Board notes that
while a minority of Shareholders wish to see the Company continue with its
current strategy, the clear majority of Shareholders support an asset
realisation strategy such as the one proposed.

 

The Board believes the Proposed Asset Realisation Strategy and change in
investment management fee (described in more detail in the section below) are
in the best interests of Shareholders for the further key reasons:

 

·     Satisfying Shareholder demands for return of capital: the majority
of Shareholders are as frustrated as the Board with the Company's Share price
discount to NAV. The discount issues are sector-wide and Shareholders are
understandably seeking capital returns at the highest achievable value, and in
as short a time frame as possible. The Board believes the Proposed Asset
Realisation Strategy is the best and most realistic route to this outcome.

 

·     Victory Hill is the right investment manager to deliver maximum
returns to Shareholders: the Board believes that Victory Hill is the best
investment manager to deliver a successful realisation of the geographically
and technologically diverse Portfolio while continuing to manage the Portfolio
on a day-to-day basis throughout the Realisation Period. The Board also
believes that successful implementation of the Proposed Asset Realisation
Strategy will depend on having the support of the operating partners in
relation to the Portfolio assets, which is much more likely with Victory
Hill's guidance given their ongoing strategic relationships. Retaining Victory
Hill limits any disruption in the asset management progress within the
Portfolio and allows the Company to begin the Proposed Asset Realisation
Strategy shortly following the required Shareholders' approvals.

 

·      Victory Hill will be appropriately incentivised to dispose of the
Portfolio in its entirety and deliver the highest achievable returns to
Shareholders: Victory Hill's business, like ENRG's, will fundamentally change
as a result of the Proposed Asset Realisation Strategy. The introduction of
the Performance Fee (defined and explained in more detail in the section
below) clearly aligns Victory Hill's interests with the Board's and
Shareholders' to sell the Portfolio in as short a time frame as possible, at
the highest possible value within that timeframe. The Performance Fee will
only become payable to Victory Hill if the entire Portfolio has been realised
(save for any reserved temporary investments) and Shareholders have received
their full (net of fees, costs, expenses, taxes, other liabilities and any
reserves needed in order to achieve an orderly winding-up of the Company) cash
returns above a hurdle rate based on the Company's NAV, explained in more
detail in the section below. The Board believes this reduces the risk of part
of the Portfolio remaining unsold at the end of the Realisation Period and
incentivises Victory Hill to sell the Portfolio in as short a time period as
possible.

 

·      Net returns could represent a material uplift to the current
share price: Given Victory Hill is incentivised to aim for asset sales at the
highest value possible (see hurdle levels, based on the NAV, in the section
below) within the Realisation Period, and the Shares currently trade on a 44%
discount to NAV (as at the close of business on 21 May 2025), there is scope
for Shareholders to benefit from material share price returns in excess of the
current share price if Victory Hill is to achieve a Performance Fee. The Board
is hopeful that the Proposed Asset Realisation Strategy could result in a
reasonable NAV total return for Shareholders that invested at IPO, albeit not
the type of return that it would have initially hoped at IPO and that could
potentially be achieved with a continuation of the Company's current strategy.

 

Proposed Change in Investment Management Fee

 

In acknowledging that Victory Hill's portfolio management role will
fundamentally change, the Board has agreed in principle with Victory Hill to
revise the fees payable under the alternative investment fund management
agreement between the Company and Victory Hill (the "AIFM Agreement") with
effect from the passing of the Resolutions. The general meeting (the "General
Meeting") at which the Resolutions will be sought is expected to be held in
August 2025 (see "Expected Timetable" section below). Principally, and as
supported by Shareholders' feedback, the Board believes that the proposed
performance fee structure will align Victory Hill's interests with the
interests of Shareholders to complete the Proposed Asset Realisation Strategy
whilst seeking the maximum achievable values, at the point of realisation, in
a timely fashion.

 

The key proposed changes to the fees payable to Victory Hill under the AIFM
Agreement are set out below and

further detail on proposed changes to the AIFM Agreement will be provided in a
circular to Shareholders (the "Circular") to be published in due course that
will convene the General Meeting.

 

Current investment management fee

Victory Hill currently receives an annual investment management fee calculated
as a percentage of the Company's net asset value (calculated in accordance
with the terms of the AIFM Agreement) ("NAV") as follows:

·      1% on the first £250m of NAV;

·      0.9% on NAV in excess of £250m and up to and including £500m;
and

·      0.8% on NAV in excess of £500m,

(the "Current Fee"). 1   The Current Fee is payable exclusive of value added
tax.

 

Proposed investment management fee

The Board is proposing to change the Current Fee with effect from the date
that the Resolutions are passed to:

·      a base fee (the "Base Fee") of £4.25m per annum, for the
Realisation Period.  For the avoidance of doubt, the Base Fee will cease to
be payable if the Company terminates Victory Hill's appointment as AIFM for
convenience (i.e. otherwise than for cause) on giving Victory Hill 12 months'
written notice (the "Notice Period") in accordance with the terms of the AIFM
Agreement. For example, if the Company terminates Victory Hill's appointment
in the first year, then Victory Hill will only be entitled under the existing
provisions of the AIFM Agreement to receive up to 12 months' worth of Base Fee
and not for the full Realisation Period; and

·      a performance fee (the "Performance Fee") on the terms set out
below,

(the Base Fee and the Performance Fee being together the "Proposed Fee"). 2 

The Performance Fee will be the Performance Percentage (defined below) of all
realisation proceeds (the "Realisation Proceeds") of Portfolio assets plus any
dividends paid during the Realisation Period that are in excess of a hurdle
(the "Hurdle") based on the proportion of the Company's most recently
published NAV prior to the date that the Circular is published (the "Reference
NAV") applicable to the relevant Portfolio assets.  The Hurdle shall apply
during the Realisation Period, based on the year during the Realisation Period
in which an asset is deemed sold, as follows:

·      Year 1: 85% of Reference NAV

·      Year 2: 90% of Reference NAV

·      Year 3: 100% of Reference NAV.

Performance against the Hurdle will be assessed at the point at which a
legally binding contract has been entered into by the relevant member of the
Company's group to dispose of the relevant Portfolio asset.

 

The Performance Fee will only become payable to Victory Hill (i) if the entire
Portfolio has been realised (save for any reserved temporary investments);
(ii) if the aggregate amount of Realisation Proceeds returnable to
Shareholders ("Total Returns") are at least 85% of the Reference NAV; and
(iii) once Shareholders have received their full (net of fees, costs,
expenses, taxes, other liabilities and any reserves needed in order to achieve
an orderly winding-up of the Company) cash returns.

 

The "Performance Percentage" will be:

 

·     0%, if the Portfolio is not realised within the Realisation Period or
Total Returns are less than 85% of the Reference NAV;

·      15%, if Total Returns are equal to or exceed 85% of the Reference
NAV;

·      17.5%, if Total Returns are equal to or exceed 90% of the
Reference NAV; or

·      20%, if Total Returns are equal to or exceed 95% of the Reference
NAV.

The Performance Fee will be calculated and accrued on the earlier to occur of
the (i) end of the Realisation Period; and (ii) point at which a legally
binding contract has been entered into by the relevant member of the Company's
group to dispose of the final unrealised asset forming part of the Portfolio.
The Proposed Fee is payable exclusive of value added tax.

 

In the event that the entire Portfolio has not been realised at the end of the
Realisation Period the Board shall consider at that point what might be best
for the future of the Company, which might involve proposals for Shareholders
to vote on the continuation of the Company, or to vote on the voluntary
liquidation, unitisation, reorganisation or other reconstruction of the
Company.

 

The proposed changes to the fee arrangements within the AIFM Agreement will be
deemed a related party transaction under the UK Listing Rules ("UKLR"), and
are subject to Shareholders' approval by ordinary resolution. The Board will
also require a fair and reasonable opinion from Deutsche Numis, as sponsor of
the Company.

 

Reasons why the Board believes key elements of the Proposed Fee are in the
best interests of Shareholders

 

·     3-year time horizon balances objectives: the Board and Victory Hill
believe that certain assets in the Portfolio may be sold at a suitable value
much sooner than 3 years. However, given the Company's assets are at different
stages of operational maturity, it is likely that some assets may take up to 3
years to sell at a price that would satisfy the Board's view of value. The
3-year time horizon should allow Victory Hill to manage the assets into a
sales process considerately without immediately becoming a 'forced seller'.
The Board and Victory Hill are confident that the Portfolio can be realised
over a period of 3 years without exposing Shareholders to new asset-specific
risks. The Board, as advised by Victory Hill, believes that a shorter time
period than 3 years, is likely to lower the anticipated risk-adjusted return
to Shareholders.

 

·      Fixed Base Fee: The Board recognises that the execution of the
Proposed Asset Realisation Strategy on top of the day-to-day management of a
geographically and technologically diverse Portfolio will significantly
broaden the scope and responsibilities of Victory Hill as the Company's
investment manager during the Realisation Period. Victory Hill will dedicate
significant additional time and resources into successfully selling the entire
Portfolio within the Realisation Period, running simultaneous sales processes
across multiple jurisdictions in the most value-enhancing way possible for
Shareholders. Furthermore, some assets will need to be actively managed on an
expedited timeframe to prepare them for sale within the Realisation Period.
The Board firmly believes it is in the best interests of all Shareholders that
the Base Fee remains sufficient throughout the Realisation Period for Victory
Hill to retain staff and achieve this goal for Shareholders. The Board has
reviewed Victory Hill's budgets and financial records and, taking into
consideration the current fee levels and capital already returned to
Shareholders, believes £4.25m per year is an appropriate Base Fee while the
Company is in its Realisation Period.

 

·     Lower Hurdle in earlier years: the Board believes that the moving
Hurdle for the Performance Fee (using a lower percentage of the Reference NAV
as the Hurdle in earlier years) enhances Victory Hill's incentive to sell
Portfolio assets on an expedited basis.

 

·     Hurdle below the Reference NAV: the Board has received feedback from
its Shareholders that it should carefully consider selling assets, or the
Portfolio as a whole, at levels below carrying value. This feedback has been
more prevalent as the Company's share price discount to NAV has widened.
Therefore, the Board believes it is in Shareholders' interest to begin the
Hurdle at 85% of the Reference NAV. Victory Hill is incentivised to consider
or solicit bids for assets, or the Portfolio as a whole, above the Hurdle
level (which varies depending on the year in which the assets are sold).

 

·      Hurdle is not a target: Although the Hurdle is set below or at
the Reference NAV, neither the Board, nor Victory Hill, sees the Hurdle as a
target. The Board believes that Victory Hill only achieves a material reward
if Portfolio asset sales comfortably exceed the Hurdle. As such, the Board
considers that Victory Hill is clearly incentivised to exceed the Hurdle
materially on an asset-by-asset sales basis. Further, given that the
Performance Percentage scales up the closer that Total Returns track to the
Reference NAV, Victory Hill is heavily incentivised to achieve Total Returns
above 95% of the Reference NAV.

 

·     Uncapped Performance Fee: the Performance Fee will be uncapped in
order to incentivise Victory Hill to be ambitious in achieving the best
possible returns for Shareholders within the Realisation Period.

 

Material change to the Company's Investment Policy

Changing the Company's investment objective and policy to reflect the Proposed
Asset Realisation Strategy, which will include the Company ceasing to make any
new investments, will result in a material change to the Company's investment
policy, which will require approval of the UK Financial Conduct Authority (the
"FCA") in accordance with the UKLR. This approval will be sought before the
Circular is published. Shareholder approval to the change to the Company's
investment objective and policy will also be required in accordance with the
UKLR, and will be sought at the General Meeting.

Change to the Company's Articles of Association

In order to implement the Proposed Asset Realisation Strategy, it is proposed
that the Company's articles of association would be amended to remove the
provisions that currently trigger a requirement for a general meeting of the
Company to be convened at which Shareholders would vote on whether or not the
Company should continue as an investment trust, which would no longer be
required.

 

Dividend

 

The Board intends to continue paying a quarterly dividend to Shareholders. As
the Proposed Asset Realisation Strategy progresses, the size of the quarterly
dividend will depend on the level of net income generated by the assets that
remain in the Portfolio (noting that some assets are more cash generative than
others). The Board will keep the Company's dividend policy under review and
will continue to communicate with Shareholders on the anticipated dividend
levels, but where possible, will aim to maintain the Company's current
dividend per Share level for as long as there is income generated from the
Portfolio to support it.

Expected timetable

The Board expects to publish a Circular in July to convene the General
Meeting, but such timing will be subject to the FCA having approved the
Circular. The Company expects that the General Meeting at which Shareholders
may vote on the Resolutions will be held in August this year. The Company will
begin to operate under the Proposed Asset Realisation Strategy on the date
that the Resolutions are passed.

For further information:

 

Chair of VH Global Energy Infrastructure plc

Bernard Bulkin                     via Deutsche Numis

 

Deutsche Numis (Corporate Broker and Financial Adviser)

Hugh Jonathan                    +44 (0)20 7260 1000

Matt Goss

 

Edelman Smithfield (PR Adviser)

Ged Brumby                         +44 (0)7540 412
301

Hamza Ali                             +44 (0)7976
308 914

 

Victory Hill Capital Partners LLP (AIFM)

Navin
Chauhan                       info@victory-hill.com
(mailto:info@victory-hill.com)

 

About Victory Hill Capital Partners LLP

 

Victory Hill is a London-based specialist investment management firm founded
by an experienced team of energy financiers. The investment team has
participated in more than $200bn in transaction values across 91 conventional
and renewable energy related transactions in over 30 jurisdictions worldwide.
The Victory Hill team deploys its experience across different financial
disciplines in order to assess investments holistically from multiple points
of view. The firm pursues operational stability and well-designed corporate
governance to generate sustainable positive returns for investors.

 

Important Notice

 

This announcement has been prepared for information purposes only. This
announcement does not constitute a prospectus relating to the Company and does
not constitute, or form part of, any offer or invitation to sell or issue, or
any solicitation of any offer  to subscribe for, any shares in the Company in
any jurisdiction nor shall it, or any part of it, or the fact of its
distribution, form the basis of, or be relied on in connection with or act as
any inducement to enter into, any contract therefor. The merits or suitability
of any securities must be independently determined by the recipient on the
basis of its own investigation and evaluation of the Company. Any such
determination should involve, among other things, an assessment of the legal,
tax, accounting, regulatory, financial, credit and other related aspects of
the securities.

 

This announcement may not be used in making any investment decision in
isolation. This announcement on its own does not contain sufficient
information to support an investment decision and investors should ensure that
they obtain all available relevant information before making any investment.
This announcement does not constitute or form part of and may not be construed
as an offer to sell, or an invitation to purchase or otherwise acquire,
investments of any description, nor as a recommendation regarding the possible
offering or the provision of investment advice by any party. No information in
this announcement should be construed as providing financial, investment or
other professional advice and each prospective investor should consult its own
legal, business, tax and other advisers in evaluating the investment
opportunity. No reliance may be placed for any purposes whatsoever on this
announcement or its completeness.

 

This announcement 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. All statements other than statements of historical facts included
in this announcement, including, without limitation, those regarding the
Company's financial position, strategy, plans, proposed disposals, ability to
pay dividends and objectives, are forward-looking statements. Forward-looking
statements are subject to risks and uncertainties and, accordingly, the
Company's actual future financial results and operational performance may
differ materially from the results and performance expressed in, or implied
by, the statements. These forward-looking statements speak only as at the date
of this announcement and cannot be relied upon as a guide to future
performance. The Company, Victory Hill and Deutsche Numis expressly disclaim
any obligation or undertaking to update or revise any forward-looking
statements contained herein to reflect actual results or any change in the
assumptions, conditions or circumstances on which any such statements are
based unless required to do so by the Financial Services and Markets Act 2000,
as amended, the UK version of the Market Abuse Regulation (EU) No. 596/2014 as
it forms part of the law of England and Wales by virtue of the European Union
(Withdrawal) Act 2018, as amended from time to time, as amended by UK
legislation from time to time or other applicable laws, regulations or rules.

 

The information and opinions contained in this announcement are provided as at
the date of the announcement and are subject to change without notice. None
of the Company, Victory Hill or Deutsche Numis, or any of their respective
parents or subsidiary undertakings, or the subsidiary undertakings of any
such parent undertakings, or any of such person's respective directors,
officers, employees, agents, affiliates or advisers or any other person
("their respective affiliates") accepts (save where required by law) any
responsibility or liability whatsoever for/or makes any representation or
warranty, express or implied, as to this announcement, including the truth,
accuracy or completeness of the information in this announcement (or whether
any information has been omitted from the announcement) or any other
information relating to the Company, whether written, oral or in a visual or
electronic form, and howsoever transmitted or made available or for any loss
howsoever arising from any use of this announcement or its contents or
otherwise arising in connection therewith.  No reliance may be placed for any
purpose whatsoever on the information or opinions contained in this
announcement or on its completeness, accuracy or fairness. The document has
not been approved by any competent regulatory or supervisory authority.

 

Any investment in Company is speculative, involves a high degree of risk, and
could result in the loss of all or substantially all of their investment.
Results can be positively or negatively affected by market conditions beyond
the control of the Company or any other person. Any data on past performance
contained herein is no indication as to future performance and there can be no
assurance that any targeted or projected returns will be achieved or that the
Company will be able to implement its investment strategy or achieve its
investment objectives. Any target returns published by the Company are targets
only. There is no guarantee that any such returns can be achieved or can be
continued if achieved, nor that the Company will make any distributions
whatsoever. There may be other additional risks, uncertainties and factors
that could cause the returns generated by the Company to be materially lower
than the target returns of the Company.  Any views contained in this
announcement are based on financial, economic, market and other conditions
prevailing as at the date of this announcement.

 

 

 

The Company's LEI is 213800RFHAOF372UU580.

 

 

 1  (#_ftnref1) In FY 2023 the Current Fee was £4,371,947 and FY 2024 was
£4,373,442. This is in addition to an annual fixed fee of £88,000.

 2  (#_ftnref2) An annual fixed fee of £88,000 will continue to be payable to
Victory Hill in addition to the Proposed Fee.

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