TIDMAERS TIDMAERI
RNS Number : 2945N
Aquila European Renewables Income
29 September 2021
AQUILA EUROPEAN RENEWABLES INCOME FUND PLC
LEI No: 213800UKH1TZIC9ZRP41
HALF YEARLY FINANCIAL REPORT
For the six months ended 30 June 2021
HIGHLIGHTS
Investment Objective
Aquila European Renewables Income Fund Plc (the "Company" or
"AERIF") seeks to generate stable returns, principally in the form
of income distributions, by investing in a diversified portfolio of
renewable energy infrastructure investments.
Highlights
-- During the reporting period, the Company completed one new
investment and deployed further capital in its construction
assets
- On 30 April 2021, the Company announced it had acquired a
50.0% interest in Ourique, a Portuguese solar photovoltaic ("PV")
farm which commenced operations in December 2019, with a total
capacity of 62.1 MW
- On 10 June 2021, the Company increased its commitment to The
Rock by a further EUR 35.6 million in order to bridge debt
financing at the asset level
-- Following these announcements, the Company has now
successfully deployed or committed EUR 326.7 million
-- In line with the IPO prospectus, the Company has paid 2.5
cents(1) per Ordinary Share during the reported period (5.0 cents
on an annalised basis). Dividends were approximately 1.1 times
covered(2) for the period
-- The Company has achieved further diversification with the
addition of Ourique, increasing its allocation to solar PV to 25.1%
(14.9% as at 31 December 2020)
-- The portfolio has now been expanded to ten separate
investments, with a total proportional generating capacity of 332.3
MW (301.3 MW as at 31 December 2020)(3)
-- During the reporting period, the Company's portfolio produced
267.2 GWh(4) , which was 11.2% below budget, largely due to weaker
than expected wind conditions in the Nordics
-- The current portfolio is projected to power approximately
217,000 households and offset approximately 251,000 tonnes of CO(2)
emissions annually(5)
-- Initiation of GRESB assessments in relation to the remainder
of AERIF's portfolio is taking place following completion of an
assessment of Sagres which was rated in 2nd place among its
European market peers
-- Total net asset value ("NAV") per Ordinary Share returns
amount to 1.9% (including dividends) for the first half of 2021 and
8.3% since the IPO(11)
-- The total shareholder return was 6.6% during the period under
review and is 17.8% since the IPO(12)
-- The Company's NAV as at 30 June 2021 was EUR 316.2 million or
99.4 cents per Ordinary Share, representing a marginal decrease of
0.6% (not including dividends) per Ordinary Share(6) compared to 31
December 2020
-- On 20 April 2021, the Company reached a financial close in
relation to a two-year revolving credit facility ("RCF"), with a
facility limit of EUR 40.0 million
-- Portfolio has deleveraged with total debt(13) representing
approximately 25.4% of gross asset value(7) ("GAV"), well below the
gearing restriction limit of 50.0%
-- After the interim reporting period, on 6 August 2021, the
Company announced it had extended its existing Investment Adviser
fee arrangement until 30 June 2023 whereby the Investment Adviser
fee is paid in AERIF Ordinary Shares
Financial information(8) 30 June 2021 30 June 2020
------------------------------------ ------------ ------------
Ordinary Share price (cents) 111.0 100.5
------------------------------------ ------------ ------------
NAV per Ordinary Share (cents) 99.4 98.6
------------------------------------ ------------ ------------
Ordinary Share price premium to NAV 11.7% 1.9%
------------------------------------ ------------ ------------
Net assets (EUR million) 316.2 190.8
------------------------------------ ------------ ------------
Financial information(8) 30 June 2021 30 June 2020
------------------------------------------------- ------------ ------------
Dividends per Ordinary Share (cents) (9) 2.5 1.5
------------------------------------------------- ------------ ------------
Ongoing charges (10) 1.2% 1.3%
------------------------------------------------- ------------ ------------
NAV total return per Ordinary Share (11) 1.9% (2.5%)
------------------------------------------------- ------------ ------------
Total shareholder return per Ordinary Share (12) 6.6% (5.4%)
------------------------------------------------- ------------ ------------
1 All references to cents are in Euros, unless stated otherwise.
2 Dividend cover ratio calculation is based on the operational
result on SPV level adjusted for fund level expenses and dividends
paid by the Company during the period
3 Represents the Company's share of portfolio generating
capacity (including any assets under construction, where
applicable).
4 Proportional share
5 CO(2) savings are based on the Company's proportionate share.
Calculations follow the methodology of the Greenhouse Gas Protocol.
CO(2) savings of European assets are based on the European average.
Household data represents potential number of households which
could be powered by AERIFs share of electricity generated by its
portfolio on an annual basis.
6 Adjusted for dividends paid during the period, calculations
can be found in the half yearly report.
7 GAV is the sum of the Company's NAV and proportional share of debt
8 This disclosure is considered to represent the Company's
alternative performance measures ("APM"). Definitions of these APMs
and other performance measures used by the Company, together with
how these measures have been calculated, can be found in the half
yearly report
9 Dividends paid/payable and declared relating to the period
10 Calculation based on average NAV over the period and regular
recurring annual operating costs of the Company, can be found in
the half yearly report
11 Opening NAV at IPO after launch expenses: EUR 0.98 per
Ordinary Share. Calculation includes dividends
12 Total returns based on Ordinary Share price in Euros plus
dividends paid for the period. Opening Ordinary Share price at IPO:
EUR 1.00.
13 Represents the Company's proportionate share of total debt at
the asset special purpose vehicle ("SPV") level across its existing
investments as of 30 June 2021
STRATEGIC REPORT
CHAIRMAN'S STATEMENT
Introduction
On behalf of the Board, I am pleased to present the interim
report of Aquila European Renewables Income Fund Plc for the six
months period ended 30 June 2021. This is the Company's second
interim report since its initial public offering in June 2019.
Our investment strategy remains unchanged: we target assets
which have a high level of contracted revenues via power purchase
agreements ("PPAs") or government regulated tariffs and a long
operating life. We also seek diversification by investing in a
number of different countries and power markets throughout Europe
in order to minimise risks and reliance on any single power market.
We believe these characteristics help us to offer investors
attractive risk adjusted returns, while also providing exposure to
the green energy transition which is currently underway in
Europe.
During the period, energy production from the Company's
portfolio was below budget as a result of weaker than expected wind
levels in the Nordics and lower than budgeted irradiation levels in
Portugal. This was partially offset by a strong recovery in power
prices, helped by a recovery in demand as European economies
emerged from lockdown restrictions. We were pleased to add
Portuguese solar asset Ourique to our portfolio and committed
further bridge financing to our under-construction Norwegian wind
asset, The Rock.
The Company's performance during the COVID-19 pandemic has been
resilient, reflecting the strong contracted income underlying the
investment assets, and the careful construction of a portfolio
diversified across both geography and renewable generation
technology.
Dividends and Returns
For the year ended 31 December 2021, the Company is expected to
pay dividends in line with its dividend target of 5.0 cents per
Ordinary Share. The Company is aiming to increase the dividend
progressively over the medium term as stated in the Company's
prospectus. During the reporting period, the Company paid 2.5 cents
per Ordinary Share and its dividend cover was approximately 1.1
times (14) . Including this, the Company has paid EUR 15.6 million
in dividends, or 6.8 cents per Ordinary Share.
As at 30 June 2021, the Company's NAV was EUR 316.2 million or
99.4 per Ordinary Share. In the first six months of 2021, the
Company generated a total NAV return of 1.9% (15) (or negative 0.6%
excluding dividends) and a shareholder return of 6.6% (15) (or 4.2%
excluding dividends). Since its IPO, the Company has generated NAV
and shareholder returns totalling 8.3% and 17.8% respectively. As
at 30 June 2021, the Company's shares traded at an 11.7% premium
compared to NAV. The NAV represents the fair market valuation of
the Company's portfolio, based on a discounted cash flow analysis
over the life of each of the Company's assets.
Portfolio and Performance (16)
Since 31 December 2020, the Company has added Ourique to its
portfolio and expanded its total portfolio to ten separate
investments (composed of 32 various assets (17) ) with a combined
generating capacity of 332.3 MW (18) (301.3 MW as at 31 December
2020). The Company has a diversified portfolio which spans six
countries across Europe, including Denmark, Finland, Norway, Spain,
Greece and Portugal. The majority of the Company's assets reside in
the Nordic region, however, our reliance on Nordic wind has
continued to decline as we have become more active in Iberia, where
the Company has four investments, primarily in solar PV,
representing 25.1% of the portfolio's value. Our assets are
typically located in areas with high wind speeds and strong
capacity factors (such as the Nordics) while our solar assets are
typically located in Southern Europe, where irradiation levels are
high. Meanwhile, our hydropower asset Sagres is located in one of
the areas of Portugal with the highest precipitation levels.
The Company has interests in two construction projects - The
Rock and Albeniz - which are located in Norway and Spain
respectively. Both projects made significant construction progress
throughout the reporting period and remain on track for completion
later this year. The Rock and Albeniz represent some of the largest
investments within the portfolio and we look forward to a smooth
transition to operations in the fourth quarter of 2021.
We announced our increased commitment to The Rock during the
period via a further EUR 35.6 million in the form of bridge
financing. The bridge financing was provided pro rata by each of
The Rock's existing shareholders (representing Aquila Capital
managed funds) and was introduced in order to fund further
construction works while the project company waits for conditions
to be satisfied under its existing debt financing (non-recourse
project finance at the asset level). The bridge financing is being
provided in the form of a shareholder loan which is priced at an
attractive rate for the Company.
The power generation of the portfolio was 11.2% below budget
during the first half of the year, as a result of weaker than
expected wind levels in the Nordics (in particular, in Norway and
Denmark) during the first quarter and lower than budgeted
irradiation levels in Portugal. Desfina and Olhava performed
largely in line with budget over the period. Following an
interconnection issue experienced in one of the solar plants at the
asset Benfica III from the end of March until the beginning of May,
an insurance claim was made in order to recover the revenues lost
during this time. Despite this, asset availability was strong
throughout the reporting period. A strong recovery in power prices
throughout Europe, including the markets in which we operate,
partially offset a production-led reduction in asset revenues. This
was particularly evident in Iberia, where prices increased by
approximately 72.5% over the half year, largely driven by an
increase of European Union Allowances ("EUAs") (and commodity
prices) and a recovery in power demand driven by strong economic
growth. Nordpool prices increased approximately 284.6% over the
reporting period. Over time, we expect our production levels to
mean-revert towards P50 estimates.
14 Dividend cover ratio calculation is based on the operational
result on SPV level adjusted for fund level expenses and dividends
paid by the Company during the period.
15 Adjusted for dividends paid during the six month period.
16 All figures quoted in this section are presented on a proportional basis
17 Sagres: 21 assets; Benfica III: 3 assets
18 Represents the Company's share of portfolio generating
capacity (including any assets under construction, where
applicable).
During the first half of 2021, the Company recorded a profit
before taxes of EUR 6.1 million compared to a loss of EUR 5.5
million for the first half of 2020, mainly driven by unrealised
gains on investments of EUR 3.3 million (1H20: unrealised loss of
EUR 6.8 million) and income generated via interest of EUR 4.8
million (1H20: EUR 2.7 million).
Financing
We are pleased to report that the Company recently reached a
contractual close in relation to its two-year revolving credit
facility ("RCF") with a facility limit of EUR 40.0 million in 2021.
The RCF is an important milestone for the Company as it provides us
with substantial flexibility to finance our future investments in a
capital efficient manner. The facility also benefits from an
accordion option which enables the Company to upsize the facility
limit to EUR 100.0 million, as well as provide the option to extend
the RCF tenor beyond its existing two-year term, subject to lender
consent.
As at 30 June 2021, the Company had approximately EUR 107.6
million of non-recourse debt on a proportional basis at the asset
level representing 25.4% of GAV (31 December 2020: 26.3%), well
within the Company's maximum gearing exposure of 50.0%. Our
leverage ratio decreased over the period, as a result of ongoing
scheduled debt amortisation. Our project debt is long duration,
with a weighted average maturity of approximately 12.4 years and a
weighted average all-in interest rate of 2.9%. Our RCF was undrawn
as at 30 June 2021.
After the reporting date, in September 2021, the Company
announced that The Rock successfully closed a US Private Placement
("USPP") and Junior Nordic Green Bond ("Green Bond") (collectively
the "Bond Refinancing"), representing a combined issuance amount of
EUR 315.0 million (on a 100% interest basis). The proposed Bond
Refinancing was pursued in order to allow the Project to
immediately benefit from access to debt financing at attractive
terms. The Bond Refinancing is expected to be accretive to the
economic returns of the Project. Proceeds from the Bond Refinancing
have been used to repay the Bridge, fund remaining construction and
other project costs and return surplus capital to the Project's
shareholders.
In the same month we were also pleased to announce also that the
Company has successfully raised EUR 90.0 million. Together with the
proceeds from the Bond Refinancing have been used to repay any
outstanding debt under its RCF (currently drawn to EUR 10 million
-drawdown took place after the reported period-), as well as
funding the attractive pipeline of investment opportunities.
Environmental, Social and Governance ("ESG")
As our portfolio expands, so does its ability to offset annual
CO(2) emissions. As at 30 June 2021, the Company's 332.3 MW
portfolio had the potential to power approximately 216.8 thousand
households and offset approximately 250.9 thousand tonnes of CO(2)
emissions annually (19) . As a reference, Luxemburg had
approximately 261.0 thousand private households in 2020; thus, the
portfolio had the capacity, at the end of the reporting period, to
power it 0.8 times. We are proud of our contribution towards the
green economy and the United Nations Sustainable Development Goals,
including:
-- Ensuring access to affordable, reliable, sustainable and modern energy for all;
-- Building resilient infrastructure, promoting inclusive and
sustainable industrialisation, and fostering innovation;
-- Taking urgent action to combat climate change and its impacts.
We are committed to being a responsible investor, ensuring that
ESG criteria are incorporated into our day-to-day investment
decisions as well as generating a positive impact for society.
These commitments are reflected throughout our investment
philosophy and approach. Our Investment Adviser, Aquila Capital
Investmentgesellschaft mbH ("Aquila Capital"), is dedicated to the
green energy transition. As a signatory to the United Nations'
Principles for Responsible Investments, Aquila Capital has
integrated consideration of ESG risk into every single stage of its
investment process, including any investments in which the Company
participates. I would encourage our shareholders to review Aquila
Capital's annual ESG report, which is published on Aquila Capital's
website at https://www.aquila-capital.de/en/
sustainability/sustainability-related-disclosures.
Our assets are typically located in remote regions of Europe,
where the resource factor is high. In some cases, our assets are
closely linked to a local community. Our assets continue to support
local communities through a variety of measures, including
contracting with local service providers, the payment of local
taxes and land lease payments.
Our Board composition is unchanged since the IPO and consists of
four non-executive directors. The Board continues to uphold a
stringent level of corporate governance. AERIF benefits from both
an independent board of directors, as well as an alternative
investment fund manager ("AIFM"), International Fund Management
Limited (part of PraxisIFM Group). The Board supervises the AIFM,
who is responsible for making recommendations in relation to any
investment proposals put forward by the Investment Adviser. The
Investment Adviser is fully regulated and supervised by the Federal
Financial Supervisory Authority ("BaFin") in Germany.
On 9 June 2021, we were pleased to hold our second annual
general meeting ("AGM"). Under normal circumstances, we would have
encouraged our shareholders to attend the Company's AGM, however,
in light of the situation regarding the COVID-19 pandemic and to
comply with the UK government's guidance, the AGM was held
privately, with shareholder votes conducted by proxy. We are
pleased to report that shareholders and their representatives
approved all of the resolutions with a significant majority.
19 CO(2) savings are based on the Company's proportionate share.
Calculations follow the methodology of the Greenhouse Gas Protocol.
CO(2) savings of European assets are based on the European average.
Household data represents potential number of households which
could be powered by AERIFs share of electricity generated by its
portfolio on an annual basis.
Conclusion and Outlook
The European Union ("EU") has reaffirmed its commitment to
become the first carbon neutral continent. To do so, renewable
energy must play a key role. Despite the immense and unique scale
of EU funding required in order to reach the goal of decreasing
carbon emissions by 55% by 2030, significant private investment is
required. In the short to medium term, the capital costs of
building fossil-fuel power plants are expected to rise
significantly, further enhancing the competitiveness of
renewables.
The Board is pleased with the performance of the portfolio
during the year so far, despite weaker than expected wind
conditions in Northern Europe. As the portfolio continues to expand
into new power markets and further solar PV investments are added
to the portfolio (lower volatility compared to wind), we expect
portfolio production volatility to be lower over time. The
Company's strategy of targeting assets with high levels of
contracted revenues in the form of fixed-price PPAs or government
subsidies will continue to help hedge the Company's revenues
against fluctuations in market prices.
The Company's Investment Adviser has over 19 years of experience
in alternative investments and manages one of Europe's largest
clean energy portfolios with over 11.7 GW in installed capacity.
Working with our Investment Adviser, we are proactively exploring a
number of exciting investment opportunities in wind, solar PV and
hydro in Europe and continental Ireland. Our investment philosophy
is unchanged since the IPO and we will continue to exercise a
disciplined, long-term oriented investment approach in our pursuit
of growth.
Thank you for your ongoing support. We look forward to a
successful second half of the year.
Ian Nolan, Chairman
28 September 2021
INVESTMENT ADVISER`S REPORT
Investment Adviser Background
The Company's alternative investment fund manager ("AIFM"),
International Fund Management Limited, has appointed Aquila Capital
as its Investment Adviser in respect of the Company. Aquila
Capital's key responsibilities are to originate, analyse and assess
suitable renewable energy infrastructure investments, and advise
the AIFM accordingly. Additionally, the Investment Adviser provides
asset management services in relation to the operational assets in
the portfolio or, to the extent asset management is delegated to
third parties, oversees and monitors such asset management.
Aquila Capital is an investment and industrial development
company focused on generating and managing essential assets on
behalf of its clients. By investing in clean energy and sustainable
infrastructure, Aquila Capital contributes to the global energy
transition and strengthens the world's infrastructure backbone. The
company initiates, develops, and manages these essential assets
along their entire value chains and lifetimes. Currently Aquila
Capital manages (20) around EUR 13 billion on behalf of
institutional investors worldwide. Its primary objective is to
generate performance for its clients by managing the complexity of
essential assets.
Established in 2001 by Dieter Rentsch and Roman Rosslenbroich,
Aquila Capital is founder and partner owned. The shareholders are
backed by a minority stake of Daiwa, one of Asia's largest
investors.
Over the last two decades, Aquila Capital and its subsidiaries
have explored, projected and engaged in meaningful trends for
mankind and our planet. It has created a pan-European real asset
portfolio by combining industrial excellence with fiduciary money
management principles. It is driven by highly experienced
investment and asset management teams that fulfil the return
expectations of its investors. Today, the company manages wind
energy, solar PV and hydropower energy assets with a capacity of
more than 11.7 GW. Additionally, it has over two million square
metres of sustainable real estate and green logistics projects
either completed or under development. Aquila Capital also invests
in energy efficiency, carbon forestry and data centres. And more is
to come.
Aquila Capital has been carbon neutral since 2006 and aims to
become carbon negative. Sustainability has always been part of its
value system and is an integral part of its investment strategies,
processes and management.
Aquila Capital has around 600 employees and 14 offices in twelve
countries worldwide. Its employees, which come from 48 nations, are
its most valuable asset. It promotes their individual strengths,
encourages them to take on responsibility and to work hands-on.
Aquila Capital's culture is strongly driven by its entrepreneurial
spirit, its agility, and its diverse DNA. Its company symbol, the
eagle (Latin: Aquila) stands for sharp eyes and a unique
perspective from above.
By the end of 2030, Aquila Capital aims to be one of the world's
leading investment management companies for - what it calls -
essential assets.
The principal regulated entity within Aquila Capital, based in
Germany, is subject to significant European regulatory standards.
Compliance with these standards helps to ensure the highest levels
of service and comprehensive security for Aquila Capital's
investors and business partners.
20 EUR 10.5 billion in assets under management and EUR 2.5
billion in assets under administration. Data as at 31 March
2021.
PORTFOLIO
AS AT 30 JUNE 2021
WIND ENERGY HYDROPOWER SOLAR PV
----------------------- --------------------------------------------------------
1. Tesla 2. Sagres 3. Holmen II
Country Norway Portugal Denmark
----------------------- ------------------------ ----------- -----------------
Capacity(21) 150.0 MW 102.7 MW 18.0 MW
----------------------- ------------------------ ----------- -----------------
Status Operational Operational Operational
----------------------- ------------------------ ----------- -----------------
COD(22) 2013-2018 1951-2006 2018
----------------------- ------------------------ ----------- -----------------
Asset life from COD 25y n.a.(25) 25y
----------------------- ------------------------ ----------- -----------------
Equipment Manufacturer N100, N90, N117 (Nordex) Various V126-3.6 (Vestas)
----------------------- ------------------------ ----------- -----------------
Energy offtaker(23) PPA with utility / FiT / Spot FiP / Spot
spot
----------------------- ------------------------ ----------- -----------------
Ownership in asset 25.9% 18.0%(26) 100.0%
----------------------- ------------------------ ----------- -----------------
Leverage(24) 27.1% 43.3% 40.6%
----------------------- ------------------------ ----------- -----------------
Acquisition date Jul 2019 Jul 2019 Jul 2019
----------------------- ------------------------ ----------- -----------------
4. Olhava 5. Svindbaek I 6. The Rock
+ II
Country Finland Denmark Norway
----------------------- ------------------ --------------------- ------------------
Capacity(21) 34.6 MW 32.0 MW 400.0 MW
----------------------- ------------------ --------------------- ------------------
Status Operational Operational Under construction
----------------------- ------------------ --------------------- ------------------
COD(22) 2013-2015 2018 2021
----------------------- ------------------ --------------------- ------------------
Asset life from COD 27.5y 25y 30y
----------------------- ------------------ --------------------- ------------------
Equipment Manufacturer V112-3.0, V126-3.3 SWT-3.2-101 (Siemens) N149 5.x (Nordex)
(Vestas)
----------------------- ------------------ --------------------- ------------------
Energy offtaker(23) FiP / Spot FiP / Spot PPA / Spot
----------------------- ------------------ --------------------- ------------------
Ownership in asset 100.0% 99.9% 13.7%
----------------------- ------------------ --------------------- ------------------
Leverage(24) 49.6% 19.1% 0.0%
----------------------- ------------------ --------------------- ------------------
Acquisition date Sep 2019 Dec 2019, Mar 2020 Jun 2020
----------------------- ------------------ --------------------- ------------------
7. Benfica III 8. Albeniz 9. Desfina
Country Portugal Spain Greece
----------------------- -------------- ------------------ -------------------
Capacity(21) 19.1 MW 50.0 MW 40.0 MW
----------------------- -------------- ------------------ -------------------
Status Operational Under construction Operational
----------------------- -------------- ------------------ -------------------
COD(22) 2017-2020 2021 2020
----------------------- -------------- ------------------ -------------------
Asset life from COD 30y 30y 25y
----------------------- -------------- ------------------ -------------------
Equipment Manufacturer AstroNova Canadian Solar E82-2.35 & E92-2.35
(Enercon)
----------------------- -------------- ------------------ -------------------
Energy offtaker(23) PPA / Spot PPA / Spot FiP / Spot
----------------------- -------------- ------------------ -------------------
Ownership in asset 100.0% 100.0% 89.0%27
----------------------- -------------- ------------------ -------------------
Leverage(24) 0.0% 0.0% 46.2%28
----------------------- -------------- ------------------ -------------------
Acquisition date Oct 2020 Dec 2020 Dec 2020
----------------------- -------------- ------------------ -------------------
10. Ourique
Country Portugal
----------------------- ------------
Capacity(21) 62.1 MW
----------------------- ------------
Status Operational
----------------------- ------------
COD(22) 2019
----------------------- ------------
Asset life from COD 30y
------------------------- ------------
Equipment Manufacturer Suntech
----------------------- ------------
Energy offtaker(23) CfD / Spot
----------------------- ------------
Ownership in asset 50.0%
------------------------- ------------
Leverage(24) 0.0%
------------------------- ------------
Acquisition date Jun 2021
------------------------- ------------
21 Installed capacity at 100% ownership.
22 Commissioning date ("COD").
23 PPA = power purchase agreement, FiT = feed-in tariff, FiP = feed-in premium.
24 Leverage drawn (AERIF Share) as a percent of investment fair
value as at 30 June 2021. Leverage is defined here as debt not
granted by third parties and not by shareholders.
25 21 individual assets; approximately 12 years remaining asset
life when calculated using net full load years.
26 Majority of remaining shares are held by entities managed
and/or advised by Aquila Capital.
27 Represents voting interest. Economic interest is approximately 94%.
28 Calculation based on voting interest.
INVESTMENT ACTIVITY
The Rock
In May 2020, the AERIF Board approved a commitment of up to EUR
40.0 million in equity in The Rock (a 13.7% stake in the project).
In April 2021, the AERIF Board approved a further commitment of EUR
35.6 million to provide bridge debt financing for The Rock, given
existing conditions in place which prevented the drawdown of
existing debt facilities. Approximately EUR 9.4 million had been
drawn under this bridge financing as at 30 June 2021.
The legal situation at The Rock remains the same as reported in
the AERIF 2020 report. Local reindeer herdsmen (the Sami) have
appealed the project plan for the construction and completion of
the wind farm (the "MTA plan") at the administrative level (i.e.
not in courts). The decision of the Ministry of Petroleum and
Energy ("MPE") is still pending. There is no current indication
that any of the aforementioned reviews will lead to a negative
outcome for The Rock and it is expected that, in the near future,
the MPE will revert with a final decision on the MTA Plan as well
as confirmation of the effectiveness of the license itself.
Ourique
The Company acquired 50.0% of Ourique during the review period,
which is located in Alentejo, Portugal. It is a 62.1 MW solar farm
which has been in operation since December 2019, and which benefits
from 100% of its production being covered by a CfD until March
2026. The project is expected to save 17,035 tonnes of CO(2)
emissions per annum, and an estimated 511,046 tonnes over the
lifetime of the project (on a 100% interest basis). The remaining
50.0% is owned by an investment fund managed by Aquila Capital. The
operational asset possesses outstanding cash yields during the
first five years which will help to pay Company costs and
contributes to dividend cover from day one. Additionally, it
contributes to achieving both the technological and geographical
diversification sought by the Company.
PORTFOLIO CONSTRUCTION
AS AT 30 JUNE 2021
Capital Deployment Profile Since IPO (29)
The Company has successfully raised capital on three separate
occasions - during its IPO and twice during 2020 - raising a total
of EUR 321.8 million. During the first half of 2021, the Company
successfully deployed EUR 53.9 million through ongoing investment
activities comprising the acquisition of a 50% stake in Ourique for
EUR 26.5 million; and the further development of The Rock and
Albeniz, with EUR 17.7 million and EUR 9.7 million deployed
respectively in each. The Company's construction commitments for
its two developing projects amount to EUR 50.3 million. Following
the completion of the Ourique acquisition and taking into account
remaining commitments in respect of The Rock and Albeniz assets,
the Company has deployed or committed substantially all of the
capital available to it for investment including from its existing
EUR 40.0 million RCF.
The Company maintains an adequate liquidity position to fund its
future capital commitments. As at 30 June 2021, the Company and its
subsidiary Tesseract Holdings Limited ("THL" or "HoldCo") had an
available cash balance of approximately EUR 24.9 million (excluding
surplus cash at the asset level) in addition to the RCF which was
undrawn as at 30 June 2021. On 10 September 2021 the Company
announced that it has successfully raised EUR 90.0 million that
will be deployed to fund the acquisition of the assets identified
in the pipeline.
29 Reflects the commitment as at 30 June 2021
FINANCIAL PERFORMANCE
Asset Status
The further diversification of the portfolio in terms of
technology and geography continued during the first half of 2021.
At the end of the period, the portfolio consisted of 32 assets from
the wind power, hydropower and solar PV sectors, located in a total
of six countries in Northern and Continental Europe.
Over the long-term, our goal is to achieve an asset allocation
of 15%-25% hydropower, 30%-50% solar PV and 30%-50% wind. During
the reporting period, the Company expanded its footprint in
Portugal with the acquisition of 50.0% of the asset Ourique, a
solar PV farm with a 62.1 MW capacity. Since 31 December 2020, the
portfolio's solar PV exposure has increased from 14.9% to
25.1%.
As at 30 June 2021, the portfolio's largest country exposures
are to Denmark, Norway and Portugal (combined 68.2%). The two
Nordic countries have a long-term credit rating of "AAA". Portugal
has a "BBB" rating with a stable outlook from Standard and
Poor's.
The portfolio has minimal concentration risk, with The Rock
representing the largest single asset exposure, equating to 16.3%
by asset fair value, or 15.2% of the Company's NAV. The Company's
exposure to The Rock is expected to reduce following repayment of
bridge financing.
The portfolio is largely weighted towards operating assets
(74.3% of asset fair value) in line with its stated objective to
secure a stable and growing dividend for investors. Construction
exposure (25.7%) relates to the Company's interest in both The Rock
and Albeniz. Compared to the previous period (December 2020: 21.7%)
construction exposure has increased as the projects have continued
to advance. Both projects are expected to be completed by the
fourth quarter of 2021.
The portfolio allocation remains within the Company's stated
investment restrictions (which include single asset and single
country limits of 25.0% and 50.0% of the Company's GAV
respectively). These restrictions are designed to promote asset
diversification and minimise risks.
The strategy of the fund is to generate stable cash flows
through its investments. In order to do so, it maintains a high
degree of contracted revenues in the form of government regulated
tariffs or fixed price PPAs. At the end of June 2021, approximately
71.7% of our revenue was contracted over the first five years (30)
.
The portfolio had a weighted average contract life (31) of
approximately 9.5 years as at 30 June 2021 (compared to 9.5 years
as at 31 December 2020), which provides strong predictability of
cash flows. Additionally, our counterparty exposure also boasts an
attractive risk profile, including a combination of investment
grade corporates (PPAs) and highly rated sovereign entities
(Government regulated tariffs).
Our contracted position reflected in the graphs above represents
a snapshot of our existing PPAs and government regulated tariffs as
at 30 June 2021 and does not assume any replacement PPA or other
forms of hedging after they expire. In accordance with its
investment strategy, AERIF intends to renew and implement
replacement PPAs (or other forms of hedging, as required) before
any existing contracts expire, in order to maintain a high degree
of contracted revenues over time.
30 Calculated based on a present value of revenues as at 30 June
2021, based on the Company's portfolio discount rate.
31 Weighting based on purchase price or equity invested
Production by Technology (AERIF share)
Electricity Production % Variance
(GW h) (1H21 actual
Technology Region 1H21(32) 1H20 vs budget)
----------- ----------------- -------------- -------- -------------
Denmark,
Wind Finland, 190.4 185.9 -12.8%
Norway & Greece
----------- ----------------- -------------- -------- -------------
Hydropower Portugal 39.1 44.1 -4.5%
----------- ----------------- -------------- -------- -------------
Solar PV Portugal & Spain 37.7 - -9.3%
Total 267.2 230.1 -11.2%
------------------------------ -------------- -------- -------------
Load Factors
Technology 1H21 1H20
----------- ------ ------
Wind 23.0% 35.1%
----------- ------ ------
Hydropower 48.7% 55.0%
----------- ------ ------
Solar PV 16.0% n/a
----------- ------ ------
Total 28.5% 41.2%
----------- ------ ------
32 2021 solar production includes Ourique whose production is
shown as of the economic transfer date 1 January 2021.
The electricity production of the portfolio amounted to 267.2
GWh in the reporting period, 11.2% below budget (P50). This weaker
than expected production performance was mainly driven by depressed
wind levels, especially during the first quarter in the Nordics, in
particular in Norway and Denmark, where there were 25.9% and 21.2%
production shortfalls respectively compared to budget. In Iberia,
low irradiation levels were experienced during the second quarter.
A technical interconnection issue that took place during mid-March
at the asset Benfica III - solved subsequently at the beginning of
May - had only a marginal impact on production. An insurance claim
has been made in order to compensate for the resulting revenue
loss. Overall production levels were 16.1% higher compared to 1H20,
as a result of further acquisition activity, including at Benfica
III, Desfina and Ourique.
The electricity produced by the assets is sold or compensated
for in three ways: Government regulated tariffs, contractually
fixed compensation (PPAs) and the spot market. The spot market
experienced a strong recovery during the first half of 2021 after a
hard 2020. This helped compensate for lower production (11.2% below
budget) experienced due to climate conditions in the Nordics and
Iberia. During the reporting period, the Company received revenues
from the interest of its construction projects (Albeniz and The
Rock).
The Company has been able to maintain dividend cover of 1.1
times dividends paid (1.9 times for 1H20), demonstrating the
robustness of the strategies adopted by the Company of maintaining
a high degree of contracted revenues and diversification by asset
class and geographical position.
Operational Highlights
-- Sagres: The production of the Sagres hydropower plant was
4.5% below budget during the first half of 2021. During the first
quarter, higher precipitations levels, particularly during January
and February, saw production surpass budget by 16.8%. During the
second quarter, however, lower precipitation levels led to
production being 37.9% below budget. In contrast, power prices
continued their upward trend and were 9.9% higher than budgeted for
in the second quarter.
-- Tesla: Production across the Nordics was impacted during the
first half of 2021 by poorer than expected wind conditions.
However, there was a recovery in progress across the region as
well, which helped to offset lower production. In 1H21, Tesla's
production was 25.9% below budget. A recovery in spot electricity
prices (approximately 30% of Tesla's revenues are not contracted)
partially mitigated this low production. Revenues on the asset were
a negative 12.7% against budget. Owing to extremely low production
in May, energy had to be purchased to fulfil Tesla's obligation
under its PPAs.
-- Holmen II: Project Holmen II also suffered from low wind
levels in the Nordics, with its production being 18.9% below
budget. However, participation in the "Regulerkraft" scheme helped
revenues to record a slightly better performance than production
even though they were still 17.9% below budget. Moreover, the asset
mitigated its price exposure through short term price hedges for
the majority of the production
-- Svindbaek: Similar to the situation at Holmen II, poor wind
conditions led to production being 23.5% below budget for the first
half of 2021. Despite a recovery in spot prices and participation
in the "Regulerkraft" scheme, revenues were 23.9% below
expectations. The Company decided to close its turbines during dusk
and dawn hours for the summer months from July to September, in
order to preserve the welfare of the local bat population. Under
the terms of an SPA, the Company is expected to be compensated for
any losses arising from closures.
-- Olhava: Unlike the wind conditions observed in Norway and
Denmark, Finland benefitted from strong winds, especially during
the first quarter of the year. Olhava, which is located in Finland,
outperformed its production budget by 3.5%. The asset produced a
total of 51.1 GWh during the reported period.
-- The Rock: During June 2021, the substation at Heifjellet was
successfully energised after all of the project's 33kV cables had
been installed. The first radial with five turbines should be
energised mid-July and, thereafter, Nordex will commence
commissioning works on the aforementioned turbines. During the
reporting period, the installation work proceeded as planned. The
transportation of components to Mosjøen harbour also progressed,
with 16 vessels being delivered and unloaded. The components
delivered accounted for approximately 70% of the total anticipated
delivery. Nordex was able to deliver ten components per day from
the port to the site, sufficient to keep the turbine installation
running at the required pace. Additionally, the Norwegian
government eased COVID--19 restrictions which allowed the
construction process to proceed as planned. Completion of the
project is still expected for the fourth quarter of 2021.
-- Benfica III: The asset experienced low irradiation levels
during the reporting period, particularly during April, which led
to production being 9.0% below budget. On Montes Novos (one of
three solar parks within the Benfica III portfolio) an
interconnection circuit breaker was damaged which led to an outage
in May. The issue was subsequently resolved, and the Company is
currently pursuing an insurance claim for EUR 53.0 thousand in
order to compensate the production loss.
-- Albeniz: Construction work progressed as expected during the
reporting period. As at the end of June 2021, 26% of the overall
construction had been completed. Construction works focused on
mechanical projects (ramming for the solar tracker foundations -
almost complete - and the start of the structure assembly) and
electrical works (the opening of trenches for medium voltage
cables). Civil works also progressed well (installations of
inverters and skid foundations as well as substation earthworks
were completed). Inverters and skids convert the direct current
("DC") electricity from solar panels into the alternating current
("AC") electricity suitable for feeding into the electrical grid.
With regard to quality inspections, no incidents were recorded
during the first half of 2021. Furthermore, environmental and
archaeological inspections were performed without major issues. The
HoldCo and Aquila Capital's interim financing vehicle entered into
an indemnity guarantee agreement in relation to a grid connection
bond. The completion of the work and the energisation is still
expected to be reached during the fourth quarter of 2021.
-- Desfina: The pending operating license for Desfina was
granted in March 2021 and, given that the project became
operational in 2020, the project company is being compensated
retrospectively in relation to the FiP for 2021. The amount in
respect of the reporting period equates to approximately EUR 2.1
million (on a 100% interest basis). Production during the first
half of 2021 was marginally (1.6%) below budget.
-- Ourique: At the end of the reporting period, the Company
entered into a sale and purchase agreement to acquire 50.0% of the
asset Ourique, a Portuguese solar PV farm, with the transaction
being finalised at the end of June 2021. The asset has 100% of its
production hedged until March 2026 and has a capacity of 62.1 MWp.
The economic transfer date was 1 January 2021. In this respect, the
production data from Ourique are also included in the portfolio.
These were 9.5% below plan in the first half of 2021 due to the low
irradiation.
Valuation
Fair Value (EUR million)
As at
As at 31 December
EUR million 30 June 2021 2020
------------ ------------- ------------
Tesla 27.2 25.4
------------ ------------- ------------
Sagres 15.3 15.2
------------ ------------- ------------
Holmen II 24.5 21.5
------------ ------------- ------------
Olhava 26.0 25.3
------------ ------------- ------------
Svindbaek 39.1 37.0
------------ ------------- ------------
The Rock 47.9 32.2
------------ ------------- ------------
Benfica III 15.8 16.7
------------ ------------- ------------
Albeniz 27.5 17.4
------------ ------------- ------------
Desfina 39.7 37.9
------------ ------------- ------------
Ourique 30.4 n/a
------------ ------------- ------------
Total 293.6 228.5
------------ ------------- ------------
NAV Bridge
-- The Company's NAV as at 30 June 2021 was EUR 316.2 million or
99.4 cents per Ordinary Share. Compared to 31 December 2020 (EUR
316.9 million or 99.9 cents per Ordinary Share) this represents a
NAV total return of 1.9% per Ordinary Share (including dividends
paid).
-- During the reported period, the Company achieved a revenue
net profit of EUR 2.8 million, consisting of EUR 4.8 million
generated by shareholder loan interest income, partially offset by
an adviser fee (EUR 1.2 million) other expenses (EUR 0.6 million)
and finance costs (EUR 0.2 million).
-- Other, in the chart above, corresponds to the costs arising
from share issue costs (EUR 0.02m), Investment Advisory fees (EUR
1.2m) and FX gains (EUR 0.004m), totalling EUR 1.2 million during
the reporting period.
-- Dividends of EUR 7.9 million (2.5 cents per Ordinary Share)
were paid during the first half of 2021. These dividends were
declared in the fourth quarter of 2020 and the first quarter of
2021. Additionally, the company has declared a further 1.25 cents
dividend corresponding to the second quarter of 2021, which has
been paid during September 2021. EUR 2.6 million dividends paid
during the first half of 2020.
-- The positive revaluation effect of the investments in the
amount of EUR 7.2 million was driven by a combination of
factors:
- In general, power prices recovered after a depressed 2020.
However, wind and irradiation levels were below expectations
throughout Europe during the reporting period. At the same time,
price expectations for the northern part of the Nordic region (The
Rock is located in the northern part of Norway) have been revised
downwards due to relatively lower demand compared to other Nordic
countries and the increasing penetration of wind in the generation
mix. These two factors created an offsetting effect against the
general price recovery.
- The portfolio discount rate experienced a 30bps reduction,
moving from 6.6% as at 31 December 2020 to 6.3% during the
reporting period, reflecting further general yield compression
observable in the market, further construction progress in relation
to The Rock and Albeniz and a reduction in country risk to
pre-pandemic levels, especially in Southern Europe.
-- The following capital deployments (totalling EUR 57.8
million) were added to the portfolio in the reporting period:
- An increased capital contribution to The Rock of EUR 8.3
million equity and EUR 9.4 million in bridge financing;
- An increased capital contribution to Albeniz of EUR 9.7 million equity
- A new investment in Ourique in the amount of EUR 30.4 million(33)
33 Includes EUR 1.5 million retained acquisition price and EUR 2.4 million purchased interest
Valuation methodology
The Company owns 100% of its subsidiary THL. The Company meets
the definition of an investment entity as described by IFRS 10. As
such, the Company's investment in the HoldCo is valued at fair
value. The Company has acquired underlying investments in special
purpose vehicles ("SPVs") through its investment in the HoldCo.
The Company's Investment Adviser has carried out fair market
valuations of the SPV investments as at 30 June 2021 and the
directors have satisfied themselves as to the methodology used, the
discount rates and key assumptions applied, and the valuation. All
SPV investments are at fair value through profit or loss and are
valued using the IFRS 13 framework for fair value measurement. The
following economic assumptions were used in the valuation of the
SPVs.
Portfolio Valuation - Key Assumptions
As at
As at 31 December
Metric 30 June 2021 2020
--------------------- ------------------------------ ------------- ------------
Discount rate Weighted average 6.3% 6.6%
--------------------- ------------------------------ ------------- ------------
Long-term inflation Weighted average 2.0% 2.0%
--------------------- ------------------------------ ------------- ------------
Remaining asset life
(weighted average)
(34) Wind (weighted average) 24 24
--------------------- ------------------------------ ------------- ------------
Hydropower (weighted average) 12 12
---------------------------------------------------- ------------- ------------
Solar (weighted average) 27 27
---------------------------------------------------- ------------- ------------
There were no significant changes in the key valuation
assumptions compared to the previous reporting period.
Gearing
As at As at
30 June 31 December
EUR million 2021 2020
---------------- -------- ------------
NAV 316.2 316.9
---------------- -------- ------------
Debt 107.6 113.0
---------------- -------- ------------
GAV 423.8 429.9
---------------- -------- ------------
Debt (% of GAV) 25.4 26.3
---------------- -------- ------------
During the first half of 2021, the Company reduced its debt
ratio in relation to GAV as a result of debt amortisation. As at 30
June 2021, the Company had non-recourse debt of approximately EUR
107.6 million at the SPV level (EUR 113.0 million as at 31 December
2020), which corresponds to approximately 25.4% of GAV (26.3% as at
31 December 2020), below the investment restriction that allows a
maximum of 50.0% of GAV. As at 30 June 2021, the Company had total
cash on hand of EUR 24.9 million. Furthermore, on 20 April 2021,
the Company secured a RCF with a limit of EUR 40.0 million
(potentially EUR 100.0 million) which as of 30 June 2021 had not
been drawn.
34 Remaining asset life based on net full load years. Does not
consider any potential asset life extensions.
MARKET COMMENTARY AND OUTLOOK
Market Prices
During the first half of 2021, we witnessed a general recovery
in power prices across Europe, from very 'depressed' levels. 2020
was a very volatile year with an important downturn in power
prices, as lockdown measures extended throughout Europe. In the
first half of 2021, however, power markets improved considerably,
underpinned by three principal factors:
-- The prices of EUAs increased by nearly 60.0% driven mostly by
higher demand (i.e. speculative trading/attention of new
investors), a lower availability of EUAs on the market, and a
generally more pronounced political momentum in favour of
decarbonisation across the EU;
-- Other commodity markets also experienced a significant rebound (i.e. gas, coal, oil);
-- There was a recovery in power demand, driven by stronger economic growth.
In renewables-abundant markets, such as Iberia or the Nordics,
the impact of more hydropower and other renewables in the
generation mix partially offset a pronounced increase in power
prices.
2021 Average Daily Power Price - AERIF's Electricity
Markets(35)
Power prices are expected to remain in a bullish trend for these
markets over the next year or so, driven by positive conditions for
EUAs, as well as rising gas prices driven by a favourable
demand-supply balance. For Greece, the picture is similar, and
further supported by a significant share of thermal capacity (i.e.
lignite and gas) which contributes to generally higher power price
levels than in Spain or the Nordics.
EU Green Deal (36)
Back in 2019, European Commission President Ursula von der Leyen
announced the ambitious goal of making Europe the world's first
climate-neutral continent. While this goal was initially pushed
into the background by the pandemic-related crisis, it is currently
the focus of international economic stimulus programmes. There is
widespread agreement that investments in the energy transition are
not only urgently needed to prevent a climate catastrophe but that
they will also have extremely positive effects on the real economy.
Against this background, an increasingly growing number of
countries are following the EU's strategy.
35 Source: European Network of Transmission System Operators for
Electricity (ENTSO-E), Nordpool
36 European Green Deal, signed by the EU Commission on 14 July 2021
In addition to combating climate change, a "green recovery" will
have significantly positive effects on labour markets. Furthermore,
there are potential growth impulses from new technologies whose
sales markets are growing massively and globally. The combination
or complementarity of these events could mark a turning point that
significantly accelerates technological development, acceptance and
the speed of change.
For a sustainable reconstruction of the economy as well as
higher resilience within Europe, the multi-annual EU financial
framework has been extended until 2027. Moreover, additional
capital will be made available through a "recovery fund". Of the
EUR 1.8 trillion available, 30.0% must be invested in green
projects, while investments in climate-damaging projects are
excluded for the remaining 70.0%.
EUR 750 billion within the recovery fund provides a strong
incentive for countries to make the recovery sustainable. The need
for short-term economic stimulus measures is high. However, access
to the funds is dependent on national investment plans, which are
reviewed by the EU and must include at least 37.0% for climate
change mitigation.
The EU's climate policy is at a crossroads. The EU is pursuing a
55.0% reduction in greenhouse gases by 2030 and, in many member
states, there is already a clearly increasing momentum behind the
expansion of renewable energies. However, especially in the CEE
region, dependence on fossil energy sources remains at a very high
level. Coal, in particular, is still used intensively. According to
a new EU regulation on air pollution, which is to be adopted in
national legislation from 2021, an enormous proportion, in many
cases even 100.0%, of coal-fired power plants do not meet European
standards. This could lead to early decommissioning of hard coal
and lignite power plants or there could be retrofit investments,
but these are financially risky as the future operating hours of
the coal-fired power plants are uncertain.
In order to achieve the reduction targets the EU has set, a
decreasing amount of emissions allowances is to be expected. While
prices have already developed dynamically since 2018, the linear
reduction of emission permits leading towards a 55.0% reduction in
emissions by 2030 40 will strongly influence the running costs of
coal-fired power plants in particular, hence, the price of
electricity that can be achieved on the market will tend to
increase. The producers of renewable energy profit directly from
price increases.
Conclusion
The European Union has established very ambitious targets to
combat carbon emissions. These have been ratified by European
leaders in the signing of the "Green Deal", in which they have
committed 30.0% of the EUR 1.8 trillion allocated as an economic
stimulus for the block. Renewable energies have been at the
forefront of Europe's energy transformation over the past two
decades and it's clear they will play a key part in achieving the
goal of reducing 55.0% of greenhouse gases by 2030.
During the last six months, electricity prices have experienced
a steep recovery, driven by increasing energy commodity prices, a
demand recovery and a restoration of the economy in the region
after the extensive lockdown measures of 2020.
We believe the Company is uniquely positioned to benefit from
the energy transition, given its European focus and established
portfolio of assets, which contribute towards the green economy.
Going forward, the Board will continue to work with the Investment
Adviser to selectively target investment opportunities which meet
the Company's investment objectives.
Aquila Capital Investmentgesellschaft mbH
28 September 2021
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Environmental
The Company strives to provide investors with a truly
diversified portfolio of renewable energy assets, by investing in
renewable energy infrastructure investments such as hydropower,
wind and solar PV plants across continental Europe and Ireland. The
Company is committed to focusing on the green economy and, as such,
has chosen Aquila Capital as its Investment Adviser. Aquila Capital
has three overarching goals in the pursuit of creating sustainable
value:
Aquila Capital - Sustainability Goals
Goal Overview
------------------------- ------------------------------------------------------------
Ensuring Europe reaches
its energy transition * Creating a portfolio that produces renewable energy
goals and contributes towards reaching Europe's energy
transition goals
* Ensuring access to affordable, modern and clean
energy for all
* Creating a path for others to invest in the industry
------------------------- ------------------------------------------------------------
Improving the environment
to create a sustainable * Curbing biodiversity loss through the restoration of
future wild bees to create a sustainable food supply
* Increasing sustainable agricultural practices and
contributing to food security and nutrition
* Managing forests responsibly to ensure optimum tree
growth and the protection of endangered plants and
animal species
* Supporting WWF in its mission to stop the destruction
of nature and the environment
------------------------- ------------------------------------------------------------
Empowering people
to live a sustainable, * Providing communities with sustainable housing and
healthy lifestyle the option to voluntarily offset real estate's carbon
footprint
* Increasing the availability of affordable housing for
low-income communities
* Promoting healthy eating and increased physical
activity for a better lifestyle for our employees
* Reducing inequality in the workplace and providing
fair employment opportunities for everyone
------------------------- ------------------------------------------------------------
As a signatory of the United Nations' Principles for Responsible
Investments, Aquila Capital has integrated consideration of
environmental, social and governance factors across every single
stage of its investment process for real assets. This process is
undertaken as part of Aquila Capital's evaluation of any new
investment opportunity and is supported by ESG due diligence
conducted by third party consultants.
ESG in AERIF
ESG is integrated throughout the investment process of the
Investor Adviser and in the Company. The fund fulfils all the
requirements of Article 8 of the Sustainable Finance Disclosure
Regulation ("SFDR"), meaning, the Company intends to invest at
least partially in sustainable investments.
The Company has performed a GREBS assessment (GRESB mission is
to assess and benchmark the Environmental, Social and Governance
(ESG) and other related performance of real assets, providing
standardized and validated data to the capital markets) on the
Sagres investment, obtaining a rating of 80, placing it on the
second position amongst its peer group. Currently the entire fund
is undergoing the same assessment with the expected results to be
received during the month of October 2021.
In September 2021, the Company announced the release of a green
bond issued by Øyfjellet Wind Investment AS for Project The Rock.
The Green Bond achieved a "Dark Green" rating and an "Excellent"
rating for governance, both of which are the highest possible
ratings under CICERO's framework. The favourable ratings reflect
the Project's focus on best practice including Environmental Impact
Assessments and transparent engagement with local stakeholders. A
link to CICERO's report is available on the Company's website:
Additional ESG initiatives on the fund include the skiing at
Tesla, the Midtfellet peaks have become available to the public,
thus, more people have access to the excellent cross-country ski
trails and introduction of sheep to Benfica III, sheep from local
farmers have been introduced as a part to control the vegetation in
order to avoid using pesticides that affect negatively the
soil.
Aquila Capital has announced the second "Aquila Capital
Transformation Award - Accelerating Decarbonization in Europe" with
the theme "Solving the climate crisis through Innovation", this
award rewards talented researchers dedicated to sustainable
development in order to learn from the revealing breakthrough
technologies in the context of climate change, societal
transformation and decarbonation with a research prize endowed with
EUR 20 thousand.
Governance and Investment Process
AERIF and its Investment Adviser operate with a structured
screening, due diligence and investment process. This process is
designed to ensure that investments are reviewed and compared on a
consistent basis. Typically, due diligence for new investment
opportunities is led by Aquila Capital's in-house functions
(including investment management, structuring & tax, risk
management, legal, valuation and compliance) combined with external
advisers.
AERIF benefits from having both an independent board of
directors, as well as an AIFM. The board of directors supervises
the AIFM, which is responsible for making recommendations in
relation to any proposals put forward by the investment advisor.
The Investment Adviser is fully regulated and supervised by the
German regulatory authority "BaFin".
Environmental, social and governance factors are taken into
account during the entire process (over the whole lifetime of an
asset) including during:
Asset sourcing and analysis: Consideration of ESG principles in
the sector and country relevant to the investment opportunity
Due diligence: Multi-faceted due diligence to consider an
asset's compatibility with ESG principles, sustainability, climate
neutrality and human rights
Ongoing management: Consideration of ESG principles as they
relate to the continual maintenance and administration of an
investment strategy or asset. Supplementary ESG regulations are
introduced by Aquila Capital if local requirements are not
considered to be sufficient
Interim Management Report
The Directors are required to provide an Interim Management
Report in accordance with the Financial Conduct Authority ("FCA")
Disclosure Guidance and Transparency Rules ("DTR"). The Chairman's
Statement and the Investment Adviser's Report in this interim
report provide details of the important events which have occurred
during the period and their impact on the financial statements. The
following statements on related party transactions, going concern,
the Directors' Responsibility Statement, the Chairman's Statement
and Investment Adviser's Review, together constitute the Interim
Management Report for the Company for the six months ended 30 June
2021. The outlook for the Company for the remaining six months of
the year ending 31 December 2021 is discussed in the Chairman's
Statement and the Investment Adviser's Report.
Principal risks and uncertainties
The principal risks and uncertainties facing the Company are
detailed in the Company's most recent Annual Report for the year
ended 31 December 2020, which can be found on the Company's website
at www.aquila-european-renewables-income-fund.com. These remain
unchanged during the period under review. The key risks are
summarised below:
-- Economic and political risk - the revenue and value of the
Company's investments may be affected by future changes in the
economic and political situation;
-- Operational risks - the risk that the portfolio underperforms
and, as a result, the target returns are not met over the longer
term;
-- Compliance, tax and legal risks - the failure to comply with
the relevant regulatory changes, tax rules and obligations may
result in reputational damage or create a financial loss to the
Company;
-- Financial risks - the risk that the valuations and underlying
assumptions used to value the investment portfolio are not a fair
reflection of the market, resulting in the investment portfolio
being over or under-valued;
-- Pandemic - can significantly impact economies across the
globe as the response of governments to limit the spread of a
disease could create operational challenges for the Company's
service providers and with the operation of the Company's assets.
This ongoing pandemic may lead to a fall in demand for electricity
with a resulting impact on electricity prices which are likely to
fall;
-- Construction risk - where the Company invests in
development/construction projects various additional risks such as,
but not limited to, delays in completion, cost overruns, defects in
construction, permit related issues/ claims, may result in
additional costs and/or delays in expected asset completion,
revenue and ultimately impact on the value of the asset (increase
discount rate).
Principal risks, including emerging risks, are mitigated and
managed by the Board through continual review, policy setting and
regular reviews of the Company's risk matrix by the Audit Committee
to ensure that procedures are in place with the intention of
minimising the impact of the above mentioned risks. The Board
relies on periodic reports provided by the Alternative Investment
Fund Manager, Investment Adviser and Administrator regarding risks
that the Company faces. When required, experts will be employed to
gather information, including legal advisers, and environmental
advisers.
The Board was advised that the Audit Committee had carried out a
formal review of the risk matrix at the Audit Committee meeting.
Specifically, the operational risks and financial impact as a
result of the COVID-19 pandemic, and measures introduced to combat
its spread, were discussed, with updates on operational resilience
received from the Investment Adviser, Administrator and other key
service providers. The Board is satisfied that the key service
providers have the ability to continue their operations efficiently
in a remote or virtual working environment. The Investment Adviser
is in close contact with each asset's operation and maintenance
service provider and continues to work with the counterparties to
identify and mitigate the risk the COVID-19 pandemic may pose. The
Board has assessed other relevant areas of risk (price and
operational risks) and agreed that mitigants remain appropriate, in
light of the COVID-19 pandemic.
The Board is of the opinion that these principal risks are
equally applicable to the remaining six months of the financial
year as they were to the six months being reported on.
Related party transactions
The Company's Investment Adviser, Aquila Capital
Investmentgesellschaft mbH is considered a related party under the
Listing Rules. Details of the amounts paid to the Company's
Investment Adviser and the Directors during the period are detailed
in the Note 10 to the Financial Statements.
Going concern
The Directors have adopted the going concern basis in preparing
the financial statements. The following is a summary of the
Directors' assessment of the going concern status of the
Company.
The Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for at
least twelve months from the date of this document. In reaching
this conclusion, the Directors have considered the liquidity of the
Company's portfolio of investments as well as its cash position,
income and expense flows. The Company's net assets as at 30 June
2021 were EUR 316.2 million (31 December 2020: EUR 316.9 million).
As at 30 June 2021, the Company held EUR 21.5 million (31 December
2020: EUR 121.0 million) in cash. The total expenses for the period
ended 30 June 2021 was EUR 1.9 million (30 June 2020: EUR 1.3
million). At the date of approval of this document, based on the
aggregate of investments and cash held, the Company has substantial
operating expenses cover.
As at 30 June 2021, the Company had approximately EUR 107.6
million of non-recourse debt (on a proportional basis) at the SPV
level and the directors are satisfied that all key financial
covenants are forecast to continue to be complied with for at least
the forthcoming 12-month period from the date of this document.
In light of the COVID-19 pandemic the Directors have fully
considered each of the Company's investments. The Directors do not
foresee any immediate material risk to the Company's investment
portfolio and income from underlying SPVs. A prolonged and deep
market decline could lead to falling values to the underlying
business or interruptions to cashflow, however the Company
currently has more than sufficient liquidity available to meet any
future obligations. The Directors are also satisfied and are
comfortable that the Company would continue to remain viable under
downside scenarios, including decreasing government regulated
tariffs and a decline in long term power price forecasts.
The underlying SPV revenues are derived from the sale of
electricity through power purchase agreements in place with large
and reputable providers of electricity to the market.
These providers have been contacted by the Investment Adviser to
discuss their response to COVID-19 and business continuity plans.
During the period and up to the date of this report, there has been
no significant impact on revenue and cash flows of the SPVs. The
SPVs have contractual operating and maintenance agreements in place
with large service providers. Therefore the Directors and the
Investment Adviser do not anticipate a threat to the SPVs
revenue.
The market and operational risks and financial impact as a
result of the COVID-19 pandemic, and measures introduced to combat
its spread, were discussed by the Board, with updates on
operational resilience received from the Investment Adviser,
Administrator and other key service providers. The Board was
satisfied that the key service providers have the ability to
continue to operate.
STATEMENT OF DIRECTORS' RESPONSIBILITIES FOR THE HALF-YEARLY
REPORT
We confirm that to the best of our knowledge:
-- these Condensed Interim Financial Statements have been
prepared in accordance with International Accounting Standard 34,
"Interim Financial Reporting" as required by DTR 4.2.4R of the
Disclosure Guidance and Transparency Rules ("DTR") of the UK's FCA;
and
-- the Chairman's Statement, the Investment Adviser's Report and
the Statement of Principal Risks and Uncertainties, together with
the Condensed Financial Statements, meet the requirements of an
interim management report, and include a fair review of the
information required by:
(a) DTR 4.2.7R of the DTR of the UK's FCA, being an indication
of important events that have occurred during the six month period
ended 30 June 2021 and their impact on the Condensed Financial
Statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the DTR of the UK's FCA, being related party
transactions that have taken place during the six month period
ended 30 June 2021 and that have materially affected the financial
position or 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.
Ian Nolan Chairman
28 September 2021
Financial Statements
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2021
Six months ended 30 Six months ended 30
June 2021 June 2020
(Unaudited) (Audited)
Revenue Capital Total Revenue Capital Total
Notes (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
--------------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Unrealised gains/(losses) on
investments 3,288 3,288 - (6,759) (6,759)
Net foreign exchange
gains/(losses) 3 3 - (8) (8)
Interest Income 4 4,834 4,834 2,709 - 2,709
Investment Advisory fees 5 (1,175) (1,175) (716) - (716)
Other expenses (702) (702) (549) - (549)
--------------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Profit/(loss) on ordinary
activities
before finance costs and
taxation 2,957 3,291 6,248 1,444 (6,767) (5,323)
--------------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Finance costs (197) - (197) (161) - (161)
--------------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Profit/(loss) on ordinary
activities
before taxation 2,760 3,291 6,051 1,283 (6,767) (5,484)
--------------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Taxation - - - - - -
--------------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Profit/(loss) on ordinary
activities
after taxation 2,760 3,291 6,051 1,283 (6,767) (5,484)
--------------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Return per Ordinary Share (cents) 6 0.87c 1.04c 1.91c 0.89c (4.69c) (3.80c)
--------------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Return per Ordinary Share-diluted
(cents) 6 0.87c 1.03c 1.90c 0.89c (4.68c) (3.79c)
--------------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
The total column of the Condensed Statement of Comprehensive
Income is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the year.
Return on ordinary activities after taxation is also the "Total
comprehensive income for the period".
CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2021
As at As at
30 June 31 December
2021 2020
(Unaudited) (Audited)
Notes (EUR '000) (EUR '000)
------------------------------------------------- ----- ----------- -----------
Fixed assets
Investments at fair value through profit or loss 3 291,084 229,982
------------------------------------------------- ----- ----------- -----------
Current assets
------------------------------------------------- ----- ----------- -----------
Trade and other receivables 6,838 5,763
Cash and cash equivalents 21,482 121,014
------------------------------------------------- ----- ----------- -----------
28,320 126,777
------------------------------------------------- ----- ----------- -----------
Creditors: amounts falling due within one year
------------------------------------------------- ----- ----------- -----------
Other creditors (3,252) (39,856)
------------------------------------------------- ----- ----------- -----------
Net current assets 25,068 86,921
------------------------------------------------- ----- ----------- -----------
Net assets 316,152 316,903
------------------------------------------------- ----- ----------- -----------
Capital and reserves: equity
Share capital 7 3,182 3,170
Share premium 165,484 164,351
Special distributable reserve 144,450 144,450
Capital reserve 7,915 4,624
Revenue reserve (4,879) 308
------------------------------------------------- ----- ----------- -----------
Total Shareholders' funds 316,152 316,903
------------------------------------------------- ----- ----------- -----------
Net assets per Ordinary Share(cents) 8 99.36p 99.96c
------------------------------------------------- ----- ----------- -----------
Approved by the Board of directors and authorised for issue on
28 September 2021.
(Chairman)
Company number 11932433
CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2021
Share Special
Share premium distributable Capital Revenue
For the six months ended capital account reserve reserve reserve Total
30 June 2021 (Unaudited) Notes (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
-------------------------- ----- ----------- ----------- -------------- ----------- ----------- -----------
Opening equity as at
1 January 2021 3,170 164,351 144,450 4,624 308 316,903
Shares issued in period* 7 12 1,170 - - - 1,182
Share issue costs - (37) - - - (37)
Profit for the period - - 3,291 2,760 6,051
Dividend paid 9 (7,947) (7,947)
-------------------------- ----- ----------- ----------- -------------- ----------- ----------- -----------
Closing equity as at
30 June 2021 3,182 165,484 144,450 7,915 (4,879) 316,152
-------------------------- ----- ----------- ----------- -------------- ----------- ----------- -----------
Share Special
Share premium distributable Capital Revenue
For the six months ended capital account reserve reserve reserve Total
30 June 2020 (Audited) Notes (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
------------------------- ----- ----------- ----------- -------------- ----------- ----------- -----------
Opening equity as at
1 January 2020 1,547 313 148,516 8,595 (54) 158,917
Shares issued in period* 13 387 40,273 - - - 40,660
Share issue costs - (710) - - - (710)
(Loss)/profit for the
period - - (6,767) 1,283 (5,484)
Dividend paid 16 (2,613) (2,613)
------------------------- ----- ----------- ----------- -------------- ----------- ----------- -----------
Closing equity as at
30 June 2020 1,934 39,876 145,903 1,828 1,229 190,770
------------------------- ----- ----------- ----------- -------------- ----------- ----------- -----------
* The Company shares issued includes 1,162,975 (30 June 2020:
648,557) Ordinary Shares in relation to settlement of investment
Adviser fees of EUR 1.2 million (2019: EUR 0.6 million)
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2021
Six months Six months
ended ended
30 June 2021 30 June 2020
(Unaudited) (Audited)
Notes (EUR '000) (EUR '000)
--------------------------------------------- ----- ------------ ------------
Operating activities
Profit/(loss) on ordinary activities before
taxation 6,051 (5,484)
Adjustment for unrealised (gains)/losses on
investments (3,288) 6,759
Increase in trade and other receivables (1,075) (1,026)
Decrease in other creditors (36,605) (51)
--------------------------------------------- ----- ------------ ------------
Net cash (used in)/from operating activities (34,917) 198
--------------------------------------------- ----- ------------ ------------
Investing activities
Purchase of investments 3 (57,814) (34,849)
--------------------------------------------- ----- ------------ ------------
Net cash flow used in investing (57,814) (34,849)
--------------------------------------------- ----- ------------ ------------
Financing activities
Proceeds of share issues 7 1,182 40,660
Share issue costs (37) (710)
Dividend paid (7,947) (2,613)
--------------------------------------------- ----- ------------ ------------
Net cash (used in)/flow from financing (6,802) 37,337
--------------------------------------------- ----- ------------ ------------
(Decrease)/increase in cash (99,533) 2,686
--------------------------------------------- ----- ------------ ------------
Cash and cash equivalents at start of period 121,015 38,862
--------------------------------------------- ----- ------------ ------------
Cash and cash equivalents at end of period 21,482 41,548
--------------------------------------------- ----- ------------ ------------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 2021
1. GENERAL INFORMATION
Aquila European Renewables Income Fund Plc is a public Company
limited by shares incorporated in England and Wales on 8 April 2019
with registered number 11932433. The Company is domiciled in
England and Wales. The Company is a closed-ended investment company
with an indefinite life. The Company commenced its operations on 5
June 2019 when the Company's Ordinary Shares were admitted to
trading on the London Stock Exchange. The Directors intend, at all
times, to conduct the affairs of the Company as to enable it to
qualify as an investment trust for the purposes of section 1158 of
the Corporation Tax Act 2010, as amended.
The registered office and principal of business of the Company
is 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V
4AB.
The Company's investment objective is to generate stable
returns, principally in the form of income distributions, by
investing in a diversified portfolio of Renewable Energy
Infrastructure Investments.
2. BASIS OF PREPARATION
The condensed financial statements included in this Interim
Report have been prepared in accordance with IAS 34 "Interim
Financial Reporting". The accounting policies, critical accounting
judgements, estimates and assumptions are consistent with those
used in the latest audited financial statements to 31 December 2020
and should be read in conjunction with the Company's annual audited
financial statements for the period ended 31 December 2020. The
interim financial statements have been prepared in accordance with
IFRS to the extent that they have been adopted by the EU and with
those parts of the Companies Act 2014 (including amendments by the
Companies (Accounting) Act 2017) applicable to companies under
IFRS. The financial statements have been prepared on the historical
cost basis, as modified for the measurement of certain financial
instruments at fair value through profit or loss.
The interim financial statements have also been prepared as far
as is relevant and applicable to the Company in accordance with the
Statement of Recommended Practice ("SORP") issued by the
Association of Investment Companies ("AIC") issued in April
2021.
These condensed financial statements do not include all
information and disclosures required in the annual financial
statements and should be read in conjunction with the Company's
annual financial statements as of 31 December 2020. The audited
annual accounts for the year ended 31 December 2020 have been
delivered to the Companies House. The audit report thereon was
unmodified.
These financial statements are presented in Euro ("EUR") which
is the currency of the primary economic environment in which the
Group operates and are rounded to the nearest thousand, unless
otherwise stated.
Accounting for Subsidiary
The Company owns 100.0% of its subsidiary Tesseract Holdings
Limited, whose registered office and principal of business of the
Company is 1st Floor, Senator House, 85 Queen Victoria Street,
London, EC4V 4AB. The Company has acquired Renewable Energy
Infrastructure Investments (the "SPVs") through its investment in
the HoldCo. The Company finances the HoldCo through a mix of loan
investments and equity. The loan investment finance represents
shareholder loans (the "Shareholder loans") provided by the Company
to HoldCo. The Company meets the definition of an investment entity
as described by IFRS 10. Under IFRS 10 an investment entity is
required to hold subsidiaries at fair value through profit or loss
and therefore does not consolidate the subsidiary.
The HoldCo is also an investment entity and as described under
IFRS 10, values its SPVs investments at fair value through profit
or loss.
Going concern
The Directors have adopted the going concern basis in preparing
the financial statements. Details of the Directors' assessment of
the going concern status of the Company, which considered the
adequacy of the Company's resources and the impacts of the COVID-19
pandemic.
Segmental reporting
The Chief Operating Decision Maker, which is the Board, is of
the opinion that the Company is engaged in a single segment of
business, being investment in renewable energy infrastructure
assets to generate investment returns whilst preserving capital.
The financial information used by the Chief Operating Decision
Maker to manage the Company presents the business as a single
segment.
Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires the
application of estimates and assumptions which may affect the
results reported in the financial statements. Estimates, by their
nature, are based on judgement and available information.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying value of assets and
liabilities are those used to determine the fair value of the
investments as disclosed in note 3 to the financial statements.
The Directors have concluded that the Company meets the
definition of an investment entity as defined in IFRS 10.
This conclusion involved a degree of judgement and assessment as
to whether the Company met the criteria outlined in the accounting
standards.
The key assumptions that have a significant impact on the
carrying value of the Company's underlying investments in the SPVs
are the discount rates, useful life of the assets, the rate of
inflation, the price at which the power and associated benefits can
be sold, the amount of electricity the assets are expected to
produce and operating costs of the SPVs.
3. Investments at fair value through profit and loss
As at 31 December 2020
As at 30 June 2021 (Unaudited) (Audited)
--------------------------------------
Share Share
Holder Equity Holder Equity
Loans Investments Total Loans Investments Total
(EUR'000) (EUR'000) (EUR'000) (EUR'000) (EUR'000) (EUR'000)
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
(a) Summary of valuation
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Analysis of closing balance:
Investments held at fair value
through profit or loss 192,832 98,252 291,084 174,046 55,936 229,982
Total investments 192,832 98,252 291,084 174,046 55,936 229,982
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
(b) Movements during the period/year:
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Opening balance of investments,
at cost 174,046 51,287 225,333 67,581 42,471 110,052
Purchases at cost 18,786 39,028 57,814 106,465 8,816 115,281
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Cost of investments 192,832 90,315 283,147 174,046 51,287 225,333
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Revaluation of investments
to fair value:
Unrealised gains in fair value
of investments - 7,937 7,937 - 4,649 4,649
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Balance of capital reserve
- investments held - 7,937 7,937 - 4,649 4,649
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Fair value of investments 192,832 98,252 291,084 174,046 55,936 229,982
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
(c) Gains on investments in
period/year (per Statement
of Comprehensive Income)
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Movement on unrealised valuation
of investments held - 3,288 3,288 - (3,959) (3,959)
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Gains/(losses) on investments - 3,288 3,288 - (3,959) (3,959)
-------------------------------------- ---------- ------------ ---------- ---------- ------------ ----------
Fair value investments
The Investment Adviser has carried out fair market valuations of
the SPV investments as at 30 June 2021 and the Directors have
satisfied themselves as to the methodology used, the discount rates
and key assumptions applied, and the valuation. All SPV investments
are at fair value through profit or loss and are valued using the
IFRS 13 framework for fair value measurement.
The key assumptions that have a significant impact on the
carrying value of the Company's underlying investments in SPVs are
the discount rates, useful life of the assets, the rate of
inflation, the price at which the power and associated benefits can
be sold, the amount of electricity the assets are expected to
produce and operating costs of the SPVs.
The discount factors applied to the cashflows are reviewed
annually by the Investment Adviser to ensure they are at the
appropriate level. The weighted average valuation discount rate
applied to calculate the SPV valuation is 6.3% as at 30 June 2021
(31 December 2020: 6.6%).
Useful lives are based on the Investment Adviser's estimates of
the period over which the assets will generate revenue which are
periodically reviewed for continued appropriateness. The assumption
used for the useful life of the wind farms is 25 years and solar PV
is 30 years. The actual useful life may be a shorter or longer
period depending on the actual operating conditions experienced by
the asset.
The operating costs of the operating companies are frequently
partly or wholly subject to indexation and an assumption is made
that inflation will increase at a long-term rate. The SPVs
valuation assumes long-term inflation rate according to long-term
central bank targets.
The price at which the output from the generating assets is sold
is a factor of both wholesale electricity prices and the revenue
received from the Government support regime. Future power prices
are estimated using external third-party forecasts which take the
form of specialist consultancy reports. The future power price
assumptions are reviewed as and when these forecasts are updated.
There is an inherent uncertainty in future wholesale electricity
price projection. Power prices used in the valuation are based on
market forward pricing, and then a rolling average of capture
rates.
The following assumptions were used in valuations at:
As at As at
30 June 31 December
Metric 2021 2020
------------------------------- ------------------------------ ------- -----------
Discount rate Weighted average 6.3% 6.6%
------------------------------- ------------------------------ ------- -----------
Long-term inflation Weighted average 2.0% 2.0%
------------------------------- ------------------------------ ------- -----------
Remaining asset life (weighted
average) Wind (weighted average) 24 24
Hydropower (weighted average) 12 12
Solar (weighted average) 27 27
-------------------------------------------------------------- ------- -----------
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level.
The level of fair value hierarchy within the financial assets or
financial liabilities is determined on the basis of the lowest
level input that is significant to the fair value measurement.
Financial assets and financial liabilities are classified in their
entirety into only one of the following 3 levels:
Level 1
The unadjusted quoted price in an active market for identical
assets or liabilities that the entity can access at the measurement
date.
Level 2
Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data) for the asset or
liability, either directly or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
The fair value of the Company's equity and the shareholder loans
investments in HoldCo are determined by the underlying fair values
of the SPV investments, which are not traded and contain
unobservable inputs. As such, the Company's equity and the
shareholder loans investments in HoldCo have been classified as
level 3.
The classification of the Company's investments as detailed in
Note 13 held at fair value is detailed in the table below:
As at 30 June 2021 (Unaudited)
Level 1 Level 2 Level 3 Total
(EUR'000) (EUR'000) (EUR'000) (EUR'000)
----------------------------------------- --------- --------- --------- ---------
Investments at fair value through profit
and loss
Equity investments in Holdco - - 98,252 98,252
Shareholder loan investments in Holdco - - 192,832 192,832
----------------------------------------- --------- --------- --------- ---------
- - 291,084 291,084
----------------------------------------- --------- --------- --------- ---------
As at 31 December 2020 (Audited)
Level 1 Level 2 Level 3 Total
(EUR'000) (EUR'000) (EUR'000) (EUR'000)
----------------------------------------- --------- --------- --------- ---------
Investments at fair value through profit
and loss
Equity investments in Holdco - - 55,936 55,936
Shareholder loan investments in Holdco - - 174,046 174,046
----------------------------------------- --------- --------- --------- ---------
- - 229,982 229,982
----------------------------------------- --------- --------- --------- ---------
Due to the nature of the investments, they are always expected
to be classified as level 3. There have been no transfers between
levels during the period ended 30 June 2021 (31 December 2020:
nil).
The movement on the Level 3 unquoted investments during the
period is shown below:
As at
As at 31 December
30 June
2021 2020
(Unaudited) (Audited)
(EUR'000) (EUR'000)
----------------------------------------------------- ----------- -----------
Opening balance 229,982 118,660
Additions during the year 57,814 115,281
Unrealised (losses)/gains on investments adjustments 3,288 (3,959)
----------------------------------------------------- ----------- -----------
Closing balance 291,084 229,982
----------------------------------------------------- ----------- -----------
4. INTEREST INCOME
Six months Six months
ended ended
30 June 2021 30 June 2020
(Unaudited) (Audited)
Income from investments (EUR'000) (EUR'000)
--------------------------------------- ------------ ------------
Interest income from shareholder loans 4,834 2,709
--------------------------------------- ------------ ------------
Total Income 4,834 2,709
--------------------------------------- ------------ ------------
5. INVESTMENT ADVISORY FEES
Six months ended 30 June Six months ended 30 June
2021 2020
-------------------------
(Unaudited) (Audited)
Revenue Capital Total Revenue Capital Total
(EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000) (EUR '000)
------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Investment Advisory fees 1,175 - 1,175 716 - 716
------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Under the Investment Advisory Agreement, the following fee is
payable to the Investment Adviser:
a) 0.75 per cent. per annum of NAV (plus VAT) of the Company up to EUR 300 million;
b) 0.65 per cent. per annum of NAV (plus VAT) of the Company
between EUR 300 million and EUR 500 million; and
c) 0.55 per cent. per annum of NAV (plus VAT) of the Company above EUR 500 million
During the first two years of its appointment, the Investment
Adviser has undertaken to apply its fee (net of any applicable tax)
in subscribing for, or acquiring, Ordinary Shares. If the Ordinary
Shares are trading at a premium to the prevailing NAV, the Company
will issue new Ordinary Shares to the Investment Adviser. If,
however, the Ordinary Shares are trading at a discount to the
prevailing NAV at the relevant time, no new Ordinary Shares will be
issued by the Company and instead the Company will instruct its
broker to acquire Ordinary Shares to the value of fee due in the
relevant period.
The Investment Adviser is also entitled to be reimbursed for
certain expenses under the Investment Advisory Agreement. These
include out-of-pocket expenses properly incurred by the Investment
Adviser in providing services, including transactional,
organisational, operating and/or travel expenses.
Share based payments
The Company settled investment advisory fees by issuing Ordinary
Shares. The Company has issued following shares to settle
investment advisory fees in respect of the period under review:
Investment Fair value
advisory of
In respect of the period to 30 fees issue price Number of
June 2021 (Unaudited) (EUR) (EUR cents) shares Date of issue
------------------------------- ---------- ------------ --------- -------------
31 March 2021 587,525 102.13 575,271 17 May 2021
11 August
30 June 2021 587,156 100.61 583,596 2021
------------------------------- ---------- ------------ --------- -------------
Investment Fair value
advisory of
In respect of the period to 30 fees issue price Number of
June 2020 (Audited) (EUR) (EUR cents) shares Date of issue
------------------------------- ---------- ------------ --------- -------------
31 March 2020 359,625 100.37 358,299 18 May 2020
11 August
30 June 2020 356,714 99.38 358,939 2020
------------------------------- ---------- ------------ --------- -------------
6. EARNINGS/(LOSS) PER ORDINARY SHARE
Earnings per share is based on the loss for the period of EUR
6,051,000 (30 June 2020: loss of EUR 5,484,000) attributable to the
undiluted weighted average number of Ordinary Shares in issue of
317,656,850 (30 June 2020: 144,183,561) and the diluted weighted
average number of Ordinary Shares in issue of 318,240,446 (30 June
2020: 144,542,500) in the period to 30 June 2021. Revenue and
capital profits are EUR 2,760,000 (30 June 2020: EUR 1,283,000) and
EUR 3,291,000 (30 June 2020: capital loss of EUR 6,767,000)
respectively.
Weighted average number of shares used as the denominator
Number of shares
-------------------------------------------------------------------
As at As at
30 June 2021 30 June 2020
Weighted average number of shares used as the denominator (Unaudited) (Audited)
------------------------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share 317,656,850 144,183,561
The effect settled investment advisory fees by issuing Ordinary
Shares 583,596 358,939
Weighted average number of ordinary shares and potential ordinary
shares used as the denominator in calculating diluted earnings
per share 318,240,446 144,542,500
------------------------------------------------------------------- ------------- -------------
7. SHARE CAPITAL
As at 31 December 2020
As at 30 June 2021 (Unaudited) (Audited)
No. of shares (EUR'000) No. of shares (EUR'000)
--------------------------------- ------------------ ------------ ------------- ---------
Allotted, issued and fully paid:
Ordinary Shares of 1 cent each 318,200,084 3,182 317,037,109 3,170
--------------------------------- ------------------ ------------ ------------- ---------
Total 318,200,084 3,182 317,037,109 3,170
--------------------------------- ------------------ ------------ ------------- ---------
On incorporation, the issued share capital of the Company was 1
Ordinary Share of EUR 0.01 issued to the subscriber to the
Company's memorandum. The Company's issued share capital was
increased by EUR 50,000 represented by 50,000 Management Shares of
nominal value EUR 1.00 each, which were subscribed for by the
Investment Adviser. Following admission, the Management Shares were
redeemed by the holder.
On 9 February 2021, the Company issued 587,704 Ordinary Shares
to the Company's Investment Adviser in relation to advisory fees
payable for the period ended 31 December 2020.
On 17 May 2021, the Company issued 575,271 Ordinary Shares to
the Company's Investment Adviser in relation to advisory fees
payable for the period ended 31 March 2021.
Since the period end, the Company issued a further 583,596
Ordinary Shares to the Company's Investment Adviser, in relation to
advisory fees payable for the period ended 30 June 2021.
8. NET ASSETS PER ORDINARY SHARE
Net assets per Ordinary Share as at 30 June 2021 is based on EUR
316,152,000 (31 December 2020: EUR 316,903,000) of net assets of
the Company attributable to the 318,200,084 Ordinary Shares in
issue as at 30 June 2021 (31 December 2020: 317,037,109).
9. DIVID PAID
Six months ended 30 Six months ended 30
June 2021 (Unaudited) June 2020 (Audited)
-------------------------------------
Cents per Cents per
Ordinary Total Ordinary Total
Total dividends paid in the period Share (EUR '000) Share (EUR '000)
------------------------------------- ---------- ------------ --------- -----------
31 December 2020 interim - paid
12 March 2021 (2020: 20 March 2020) 1.25c 3,970 0.75c 1,162
31 March 2021 interim - paid 18
June 2021 (2020: 22 June 2020) 1.25c 3,977 0.75c 1,451
------------------------------------- ---------- ------------ --------- -----------
Total 2.50c 7,947 1.50c 2,613
------------------------------------- ---------- ------------ --------- -----------
The dividend relating to the year ended 31 December 2020, which
is the basis on which the requirements of Section 1159 of the
Corporation Tax Act 2010 are considered is detailed below:
Six months ended 30 Six months ended 30
June 2021 (Unaudited) June 2020 (Audited)
----------------------------------------
Cents per Cents per
Total dividends declared in the Ordinary Total Ordinary Total
period Share (EUR '000) Share (EUR '000)
---------------------------------------- ---------- ------------ --------- -----------
31 March 2021 interim - paid 18
June 2021
(2020: 22 June 2020) 1.25c 3,977 0.75c 1,451
30 June 2021 interim - paid 3 September
2021
(2020: 14 September 2020) 1.25c 3,985 0.75c 1,453
---------------------------------------- ---------- ------------ --------- -----------
Total 2.50c 7,962 1.50c 2,904
---------------------------------------- ---------- ------------ --------- -----------
10. TRANSACTIONS WITH THE MANAGER AND RELATED PARTY
TRANSACTIONS
AIFM fees for the period ended 30 June 2021 amounts to EUR
61,600 (30 June 2020: EUR 52,000). As at 30 June 2021, the fee
outstanding to the AIFM was EUR 8,400 (30 June 2020: EUR 8,400).
The AIFM, Company Secretary and Administrator are part of same
PraxisIFM Group. The Company Secretary and Administrator fees for
the period ended 30 June 2021 amounts to EUR 104,000 (30 June 2020:
EUR 95,000) and the total fees paid to PraxisIFM Group amounts to
EUR 165,000 (2019: EUR 147,000).
Fees payable to the Investment Advisor are shown in the Income
Statement. As at 30 June 2021, the fee outstanding to the Manager
was EUR 587,156 (30 June 2020: EUR 356,714)
Fees are payable to the directors, effective from appointment of
the directors 1 April 2021, at an annual rate of EUR75,000 to the
Chairman, EUR 50,000 to the Chairman of the Audit Committee and EUR
43,000 to the other directors. Directors fees paid during period
was EUR 104,000.
During the period, the Company advanced share holder loans to
Holdco EUR 18,786,000 (30 June 2020: EUR 34,849,000). The accrued
interest and the shareholder loans outstanding at the period end
was EUR 199,161,000 (30 June 2020: EUR 104,996,000).
The directors had the following shareholdings in the Company,
all of which were beneficially owned.
Ordinary
shares
Ordinary
shares As at
As at 30
June 31 December
2021 2020
(Unaudited) (Audited)
------------------- ------------ ------------
Ian Nolan 100,000 100,000
David MacLellan 75,000 75,000
Kenneth MacRitchie 50,000 50,000
Patricia Rodrigues 50,000 50,000
------------------- ------------ ------------
11. COMMITMENTS AND CONTINGENCIES
As at 30 June 2021 the Company has future investment obligations
relating to two construction projects.
Project The Rock: The Rock is a 400.0 MW construction-phase wind
energy project with an expected commissioning date in the fourth
quarter of 2021. As of the balance sheet date, the Company provided
construction finance of EUR 37.8 million with a total expected
investment of EUR 40.0 million. In addition, the Company has
granted bridge financing in the amount of EUR 9.4 million.
Project Albeniz: Albeniz is part of a cluster of four separate
solar parks in various stages of development and construction. The
portfolio is located in the south of Spain and is expected to be
commissioned in the fourth quarter of 2021. As of the balance sheet
date, the Company provided construction finance of EUR 27.0 million
with a total expected investment of EUR 49.0 million.
12. DISTRIBUTABLE RESERVES
The Company's distributable reserve consists of the Special
reserve and Revenue reserve. The Company currently pays dividends
from the Special reserve.
Capital reserve represents unrealised investments as such it is
not distributable.
13. SUBSIDIARIES, ASSOCIATES AND OTHER ENTITIES
The following table shows subsidiaries of the Company. As the
Company is regarded as an Investment Entity as referred to in note
2, these subsidiaries have not been consolidated in the preparation
of the financial statements.
Effective
Subsidiary entity ownership Country of
name % Activity incorporation Registered address
------------------------- ---------- ------------------ -------------- ----------------------------
Tesseract Holdings 100.0 Subsidiary entity, United Kingdom 1st Floor, Senator
Limited owns underlying House, 85 Queen Victoria
SPV investments Street, London, EC4V
4AB
------------------------- ---------- ------------------ -------------- ----------------------------
Holmen II Wind Park 100.0 Subsidiary entity, Denmark Gyngemose Parkvej
ApS owns investment 50, 2860 Søborg,
in Holmen II Denmark
------------------------- ---------- ------------------ -------------- ----------------------------
Aalto Wind No 2 100.0 Subsidiary entity, Finland c/o Intertrust (Finland),
Ltd. Oy owns investment Oy, Bulevardi 1,
in Oldhava 6th floor,00100 Helsinki,
Finland
------------------------- ---------- ------------------ -------------- ----------------------------
Svindbaek Vindkraft 100.0 Subsidiary entity, Denmark Gyngemose Parkvej
HoldCo ApS owns investment 50, 2860 Søborg,
in Svindbaek Denmark
------------------------- ---------- ------------------ -------------- ----------------------------
Svindbaek Vindkraft 100.0 Subsidiary entity Denmark Gyngemose Parkvej
GP ApS 50, 2860 Søborg,
Denmark
------------------------- ---------- ------------------ -------------- ----------------------------
Prettysource Lda 100.0 Subsidiary entity, Portugal Avenida Fontes Pereira
owns investment de Melo, no 14, 11/floor,
in Benfica III 1050 121 Lisbon
------------------------- ---------- ------------------ -------------- ----------------------------
Astros Irreverentes 100.0 Subsidiary entity, Portugal Avenida Fontes Pereira
Unipessoal Lda owns investment de Melo, no 14, 11/floor,
in Benfica III 1050 121 Lisbon
------------------------- ---------- ------------------ -------------- ----------------------------
Contrate o Sol Unipessoal 100.0 Subsidiary entity, Portugal Rua Filipe Folque,
Lda owns investment no 10J, 2 Dto,1050-113
in Benfica III Lisbon
------------------------- ---------- ------------------ -------------- ----------------------------
Argeo Solar S.L. 100.0 Subsidiary entity, Spain Paseo de la Castellana
owns investment 259 D, 14S-15 Madrid
in Albeniz
------------------------- ---------- ------------------ -------------- ----------------------------
Vector Aioliki Desfinas 100.0 Subsidiary entity, Greece 49A Doukissis Plakentias
S.A. owns investment Avenue Chalandri
in Desfina GR-152 34
------------------------- ---------- ------------------ -------------- ----------------------------
The Company's investments in subsidiaries are held through
Holdco.
The following table shows associates and other entities of the
Company. The Company's investments in associates are held through
Holdco.
Effective
Associate entity ownership Country of
name % Activity incorporation Registered address
--------------------- ---------- ----------------------- -------------- ------------------------
Aguia Enlica, Lda 18.0 Associate entity, Portugal RuaFilipe Folque,
owns equity investment n 10 J, 2 direito,
in Sagres Lisbon
--------------------- ---------- ----------------------- -------------- ------------------------
Midtfjellet Vindkraft 25.9 Associate entity, Norway Sandviksvågen
AS owns equity investment 45, Fitjar, Norway
in Tesla
--------------------- ---------- ----------------------- -------------- ------------------------
Palea Solar Farm 50.0 Associate entity, Portugal Avenida Fontes Pereira
Ourique S.A. owns investment de Melo, no. 14,
in Ourique 11. andar, 1050-121
Lisbon
--------------------- ---------- ----------------------- -------------- ------------------------
As disclosed in Note 3, the Company finances the HoldCo through
a mix of shareholder loans and equity. The shareholder loans accrue
at an interest rate range of 2.0% to 10.4%.
Holdco finances its SPV investments through a mix of shareholder
loans and equity. The shareholder loans accrue at an interest rate
range of 2.5% to 10.5%.
There are no restrictions on the ability of the Company's
subsidiaries and associate's entities to transfer funds in the form
of interest and dividends.
14. POST BALANCE SHEET EVENTS
On 11 August 2021, the Company issued 583,596 Ordinary Shares to
the Company`s Investment Adviser, in relation to advisory fees
payable for the period ended 30 June 2021.
On 14 September 2021, the Company has successfully raised EUR
90.0 million before costs and expenses through the issue of
87,424,431 Ordinary Shares of EUR 0.01 each in the capital of the
Company, by way of a placing pursuant to the Placing Programme. New
Ordinary Shares will be issued at EUR 1.03 per share.
Other Information
ALTERNATIVE PERFORMANCE MEASURES
In reporting financial information, the Company presents
alternative performance measures, ("APMs"), which are not defined
or specified under the requirements of IFRS. The Company believes
that these APMs, which are not considered to be a substitute for or
superior to IFRS measures, provide stakeholders with additional
helpful information on the performance of the Company. The APMs
presented in this report are shown below:
Premium
The amount, expressed as a percentage, by which the share price
is more than the Net Asset Value per Ordinary Share.
As at 30 June 2021
------------------------------- ------------- ------
NAV per Ordinary Share (cents) a 99.36
Share price (cents) b 111.00
------------------------------- ------------- ------
Premium (b÷a)-1 11.7%
------------------------------- ------------- ------
Ongoing charges
A measure, expressed as a percentage of average net assets, of
the regular, recurring annual costs of running an investment
company.
As at 30 June 2021 EUR'000
--------------------------------- -------
Average NAV a 318,275
Annualised expenses b 3,784
-------------------- ----------- -------
Ongoing charges (b÷a) 1.2%
-------------------- ----------- -------
Total return
A measure of performance that includes both income and capital
returns. This takes into account capital gains and reinvestment of
dividends paid out by the Company into the Ordinary Shares of the
Company on the ex-dividend date.
As at 30 June 2021 Share price NAV
---------------------------------- ----------------- ----------- -----
Opening at 1 January 2021 (cents) a 106.5 99.96
Dividend adjustment b 2.5 2.5
Closing at 30 June 2021 (cents) c 111.0 99.36
---------------------------------- ----------------- ----------- -----
Total return ((b+c)÷a)-1 6.6% 1.9%
---------------------------------- ----------------- ----------- -----
Dividend cover
Dividend cover ratio calculation is based on net cash flows
generated at the SPVs adjusted for fund level expenses and
dividends paid by the Company during the period.
As at 30 June 2021 EUR'000
---------------------------------- -------
Net cashflow at SPVs a 8,804
Dividend paid b 7,945
--------------------- ----------- -------
Dividend cover (a÷b) 1.1
--------------------- ----------- -------
Contact information:
Brian Smith/Jenny Thompson 020 4513 9260
PraxisIFM Fund Services (UK) Limited
The information contained within the financial statements in
this half year report has not been audited.
The figures and financial information for the year ended 31st
December 2020 are extracted from the latest published financial
statements of the Company and do not constitute statutory accounts
for that year. Those financial statements have been delivered to
the Registrar of Companies, including the report of the auditors
which was unqualified and did not contain a statement under either
section 498(2) or 498(3) of the Companies Act 2006.
A copy of the half-yearly report will be submitted to the
National Storage Mechanism and will shortly be available for
inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
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IR KVLFLFKLLBBL
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