TIDMUSF TIDMUSFP
RNS Number : 0363N
US Solar Fund PLC
20 September 2019
20 September 2019
US Solar Fund PLC
(the "Company")
Inaugural Interim Results to 30 June 2019 and Interim
Dividend
US Solar Fund PLC (LSE: USF) is pleased to announce its
inaugural interim financial results since the IPO in April 2019.
This covers the period ending on 30 June 2019.
Highlights to 30 June
* In April 2019, the Company listed on the premium
segment of the London Stock Exchange, raising gross
proceeds of $200 million, primarily from UK
institutional investors
* 1H19 interim dividend of 0.41 US cents per Ordinary
Share declared
* Strong progress since IPO with announcements on two
US solar projects or portfolios:
* 128 MW(DC) solar project in Milford, Utah, with a 25
year power purchase agreement (PPA) (acquisition
closed post-period end, as described below)
* 90 MW(DC) portfolio of utility-scale solar power
projects in North Carolina and Oregon, with binding
acquisition agreement being actively progressed
* Period end Net Asset Value (NAV) of $196 million,
$0.98 per share
* From listing to 30 June, the share price traded
consistently between $1.025 and $1.035. At 30 June,
NAV was $196 million, 0.98 per share, and shares were
trading at $1.025, a slight (4.6%) premium to NAV
* From period end to 18 September, shares have traded
between 1.005 and 1.025.
Highlights after Period-End
* First completed acquisition, Milford, announced on 2
September 2019:
* 128-MW(DC) solar project in Milford, Utah, expected
to be operational in late 2020
* 25-year fixed price PPA agreed with PacifiCorp (S&P
rating A), a wholly owned subsidiary of Berkshire
Hathaway Energy
* Developed by Longroad Energy Partners, LLC, an
experienced utility-scale renewable energy developer
* Cash equity contribution of approx. US$30m, with
US$50m in non-recourse bank debt finance; balance of
project funding from tax equity
* Expected returns in line with targets set out in the
Prospectus dated 26 February 2019
* As of 30 June 2019, the Investment Manager's pipeline
included 3,613 MWDC of assets with a total value of
$4.8 billion, or $2.8 billion cash equity value, and
an average PPA term of 16 years
* USF continues to due diligence opportunities from its
pipeline and expects to announce further investments
in due course
Commenting on the Company's results, Gill Nott, Chair of the Company said:
"We are pleased with USF's strong start after listing. The Investment Manager has quickly
demonstrated its ability to execute on the robust pipeline disclosed at IPO with the recent
announcements of exclusivity and the closing of USF's first acquisition. Recent industry data
showing the strongest Q1 in the history of US utility-scale solar reinforces to us that the
US remains a growing market opportunity with supportive industry dynamics."
Key Metrics at 30 June 2019
At 30 June 2019 % Change Since
IPO
Ordinary Shares 200,000,000 -
Issued
------------------------- -------------------------
Ticker USF ($) USFP (GBP) USF ($) USFP (GBP)
---------- ------------- ---------- -------------
Share Price 1.025 0.8125 2.50% 6.42%
---------- ------------- ---------- -------------
NAV($)(1) 196m -
------------------------- -------------------------
NAV/share ($)(1) 0.98 -
------------------------- -------------------------
Market Cap ($) 205m 2.50%
------------------------- -------------------------
Premium to NAV
($)(1) 4.6% 2.56%
------------------------- -------------------------
(1) Based on the unaudited NAV as at 30 June 2019
The Company's Interim Report and Initial Financial Statements
for the period ending 30 June 2019 are included in this
announcement
http://www.rns-pdf.londonstockexchange.com/rns/0363N_1-2019-9-19.pdf,
available on the Company's website at:
www.ussolarfund.co.uk/investor-centre/key-documents-and-disclosure
and can be found at www.morningstar.co.uk/uk/NSM.
Dividend
The Company is pleased to announce its first interim dividend of
0.41 cents per Ordinary Share for the period ending 30 June 2019.
The dividend will be paid on 8 November 2019 to Shareholders on the
register as at the close of business on 18 October 2019. The
ex-dividend date is 17 October 2019.
For further information, please contact:
US Solar Fund
Whitney Voûte +1 718 230 4329
Cenkos Securities plc
Will Rogers
Will Talkington
Justin Zawoda-Martin +44 20 7397 8900
Macquarie Capital (Europe) Limited
Stephen Taylor
Nick Stamp +44 20 3037 2000
KL Communications +44 20 3995 6699
Charles Gorman
Josie Workman
About US Solar Fund plc
US Solar Fund plc is listed on the premium segment of the London
Stock Exchange, following its successful US$200m IPO in April 2019.
The Company's investment objective is to provide investors with
attractive and sustainable dividends with an element of capital
growth by investing in a diversified portfolio of solar power
assets in North America and other OECD countries in the
Americas.
The Company will acquire or construct, own and operate solar
power assets that are expected to have an asset life of at least 30
years and generate stable and uncorrelated cashflows by selling
electricity to creditworthy offtakers under long-term power
purchase agreements (or PPAs).
About the Investment Manager
USF is managed by New Energy Solar Manager (NESM). NESM also
manages New Energy Solar, an Australian Securities Exchange
(ASX)-listed fund which has committed over US$900m to US and
Australian solar plants since late 2015.
NESM is owned by Walsh & Company, the funds management
division of Evans Dixon, an ASX-listed company (ASX: ED1) with over
A$18 billion of funds under advice and management.
1. Chair's Statement
On behalf of the Board, I am pleased to present our first
report, the Unaudited Interim Financial Statements for US Solar
Fund (USF or the Company) for the period ended 30 June 2019.
In April 2019, USF listed on the premium segment of the London
Stock Exchange, raising gross proceeds of $200m with support
predominantly from leading UK institutional investors. This was an
excellent outcome given that this was the first UK fundraising by
the Investment Manager, made even more challenging by the market
uncertainty created by the initial March Brexit deadline. USF's
fundraising success is an indication that US solar assets are a
compelling investment opportunity.
Since listing in April, the main focus of the Board and New
Energy Solar Manager (the Investment Manager or NESM) has been
working to commit the proceeds of the fundraising within the first
six to nine months from the Initial Public Offering (IPO), as
indicated in the Prospectus. Additionally, the Investment Manager
has been identifying and reviewing new investment opportunities to
add to their already very substantial pipeline. The Investment
Manager has also been meeting existing investors and engaging with
the broader investor community to provide insight into the US solar
market. The Board and the Investment Manager have all been working
hard to ensure that the Company has a strong start, focusing on
delivering maximum value for shareholders and communicating
effectively with both shareholders and the market at large.
Investment Progress
Within nine weeks of listing, USF had made two announcements of
exclusivity for solar projects or portfolios in the US. Both
projects are well aligned with USF's investment strategy and target
returns. After the end of the quarter, within just over three
months of listing, USF announced that one of these two projects had
progressed to binding acquisition agreement, and at the start of
September, it was announced that this first acquisition had reached
final close.
The Board has closely followed the development of the Investment
Manager's pipeline of opportunities since the IPO. The pipeline
remains robust and we can confirm that the investment environment
continues to support the Company's strategy. The Investment Manager
is identifying, reviewing and engaging with a substantial number of
opportunities with excellent potential.
Performance
From listing to 30 June, the share price traded consistently
between $1.025 and $1.035. At 30 June, NAV was $196 million, 0.98
per share, and shares were trading at $1.025, a slight (4.6%)
premium to NAV. From period end to 18 September, shares have traded
between 1.005 and 1.025.
Our broker at the time of the IPO was Fidante Capital. However,
the parent of Fidante Capital decided to close the brokerage
business in June. Hence in early July, USF announced that Macquarie
Capital (Europe) Ltd and Cenkos Securities plc had been appointed
as joint brokers.
DIVID
The Company will be paying a dividend of 0.41 cents per share
for the period ending 30 June. This represents an annualized
dividend yield of 2% when measured against the initial issue price
of $1 per share. The dividend will be paid on 8 November 2019.
Outlook
At IPO, USF indicated that the first dividend would be paid in
November 2019 and the initial target annual dividend yield would be
2-3%. Once fully operational, the target yield is 5.5%([1]) . As
mentioned above, the Company stated that it is aiming to commit the
net initial proceeds within six to nine months of listing. The
Investment Manager intends that substantially all of the assets are
generating cashflow (are operational), within a further 12 months
from full commitment. If this target is met, we would expect the
portfolio to be substantially or fully operational in late 2020 or
early 2021.
Though it is early days, the Board believes that the Investment
Manager is making good progress towards meeting these targets.
However, the upcoming step down of the Investment Tax Credit (ITC)
and the ongoing downward trend in interest rates are driving
increased competition for assets in the US market. We are confident
that the Investment Manager is taking a conservative approach with
pricing in order to remain consistent with the strategy and return
targets of the Company. As a result, the time taken to commit
substantially all of the proceeds may slightly exceed the IPO
target of six to nine months.
The US solar market remains a very attractive investment
opportunity as evidenced by its continued and rapid growth. During
April, the aggregate capacity of renewable energy sources - hydro,
wind, solar, biomass, and geothermal - exceeded coal for the first
time and renewable energy generated more energy than coal. During
the first quarter of this year, 1.6 gigawatts (GW(DC) ) of
utility-scale solar was installed, representing a 22% increase
compared to Q1 2018 and an 86% increase compared to five years
prior. The US utility-scale solar market (5 MW(DC) and above) now
has an installed capacity of 39 GW(DC) , approximately seven times
the size of the UK utility-scale solar market([2]) .
This growth has been driven by a combination of factors
including the economic competitiveness of solar which has
consistently strengthened due to the continued cost declines of
solar equipment; the steady progress of state legislative changes
across the US encouraging the use of renewables; and a growing
number of corporations pledging to use 100% renewable power. All of
these strong drivers make US solar an exciting investment
opportunity.
Despite the continued Brexit uncertainty, we believe that USF is
well-positioned given the prolonged low interest rate environment
and the resulting investor "search for yield". The steady and
attractive yields from UK solar assets have been recognized by UK
investors for some time. However the Board believes that US solar
assets are also attractive given the large areas of the country
that are climatically well suited to solar power and availability
of space to build larger plants giving rise to economies of scale.
For example, USF's initial acquisition, Milford Solar Project
(Milford), is in Utah and is 787 acres in size with a capacity of
128 MW(DC) while the largest utility scale solar plant in the UK,
Shotwick Solar Farm, is 250 acres and has a capacity of 72 MW(DC) .
Further, in the US, the length of the offtake contracts with the
utility companies, generally over 10 and up to 25 years, provide a
more secure long-term cash flow for investors. If the solar assets
are well designed, installed and maintained with a good contract
backing, then the investment risk profile is relatively low.
Gill Nott
Chair
18 September 2019
2. Investment Manager's Report
Summary of the Period
Following USF's listing on the London Stock Exchange, the
Investment Manager has focused on deploying the IPO proceeds into
suitable assets for the Company. At the time of listing, the
Investment Manager disclosed a pipeline with a total value of $4.8
billion or cash equity value of $2.9 billion and a target of
committing the proceeds within six to nine months.
INVESTMENT PROGRESS
Within nine weeks of listing, USF announced that it had
progressed from exclusivity to binding agreements to acquire its
first project, and by early September it had announced that the
acquisition had reached final close. The 128 MW(DC) Milford Solar
Project in Utah has a 25-year power purchase agreement (PPA) with
an investment-grade utility (S&P rating A) beginning in the
second half of 2020. The agreement sets a fixed price for 100% of
the electricity produced by the project over the PPA term. More
details on Milford are in the following section.
Shortly after announcing the Milford project, a second
transaction with leading US solar developer Cypress Creek
Renewables (CCR) was announced. The Investment Manager has
transacted with CCR previously, purchasing a 56 MW(DC)
construction-ready portfolio on behalf of the Australian fund New
Energy Solar. USF's exclusivity relates to a portfolio of
utility-scale solar power projects located in North Carolina and
Oregon with a total capacity of approximately 90 MW(DC) . All have
long-term PPAs with investment-grade offtakers with energy delivery
expected to commence in 2020. USF expects to acquire the portfolio
progressively, as each project reaches a construction-ready stage,
with the first four projects expected to commence construction
early in the second half of 2019. The Investment Manager is working
towards executing binding acquisition agreements for these projects
and will announce further details in due course.
The Investment Manager continues to work diligently to identify
and review new investment opportunities and looks forward to
communicating more information as these deals and others
progress.
Pipeline Update
At the time of listing, the Investment Manager disclosed a
pipeline of 3,020 MW(DC) with a total value of $4.8 billion, or
$2.9 billion cash equity value, and an average PPA term of 15.2
years. As of 30 June 2019, the Investment Manager's pipeline
included 3,613 MW(DC) of assets with a total value of $4.8 billion,
or $2.8 billion cash equity value, and an average PPA term of 16
years.
Since IPO there has been a shift in pipeline mix towards the
construction-ready assets that are USF's focus. The IPO pipeline
included several large operating assets and portfolios with
higher-priced PPAs which consequently demanded higher prices. These
projects either transacted at returns that were below USF's targets
or were withdrawn from sale because the buyer could not achieve
their target price. This shift in pipeline mix has seen value
remain fairly steady but pipeline MW(DC) increase.
The higher number of operating assets in the pipeline at IPO can
be attributed to the upcoming change in the ITC, which reduces from
30% to 26% after the end of 2019. The IRS has, however, set out
"Safe Harbor" provisions that provide a mechanism to "lock in" the
ITC at 30% by completing an appropriate amount of procurement or
construction in 2019 even though the project will not be placed in
service until 2020 or beyond. To fund this procurement and
construction, which would normally start later for these projects,
some developers and asset owners brought operating portfolios to
market.
We are seeing an increase in competition in the market. This is
largely driven by the upcoming step down of the ITC and the ongoing
downward trend in interest rates. With this dynamic, we are taking
a conservative approach with pricing and remaining consistent with
the strategy and return targets of the Company. As a result, the
time taken to commit substantially all of the proceeds may slightly
exceed the IPO target of six to nine months. However, the
Investment Manager is pleased that the pipeline continues to
provide numerous high-quality construction-ready investment
opportunities. The pipeline quality and size supports our
confidence in the US market and our ability to continue the
momentum of this period.
Events After the Period
Milford
After the end of the period, in July, USF executed binding
acquisition agreements for its first acquisition, Milford (the
Project). Subsequently, in early September, USF announced it had
closed the acquisition and financing of 100% of the cash equity
interests in the Project.
Milford is in Beaver County, approximately six miles north of
Milford, Utah. Construction is expected to begin immediately and
Milford is expected to be operational in late 2020. The Project
will sell 100% of the power and renewable energy credits generated
at a fixed price for 25 years to PacifiCorp (S&P rating: A), a
wholly owned subsidiary of Berkshire Hathaway Energy. PacifiCorp
has contracted to sell all the renewable attributes associated with
the Project to a retail customer. PacifiCorp is a US electric power
company that primarily operates regulated utilities with a service
territory across the US states of Oregon, Washington, California,
Utah, Idaho and Wyoming.
USF acquired Milford from Longroad Energy Partners, LLC
(Longroad). The Longroad team has a track record of developing and
financing more than 5 GW of utility-scale renewable energy projects
since 2004, including more than 1 GW in the state of Utah. The
Investment Manager has reviewed and diligenced more than 500 MW(DC)
with Longroad over the last 12 months. This will be the first
transaction that the Investment Manager has completed with
Longroad.
The Project will be constructed on a fixed-time and fixed-cost
basis by McCarthy Building Companies, one of the largest
construction companies in the US with over 2.8GW of solar and
energy storage projects designed, constructed or completed since
2013. The Project will use First Solar Inc.'s (First Solar, NASDAQ:
FSLR) high-performance Series 6 solar panels and First Solar Energy
Services is expected to provide operations and maintenance services
under a separate long-term contract.
Once operational, the Project will generate over 277,500
megawatt hours of electricity annually. This volume of electricity
is equivalent to displacing approximately 235,000 tonnes of CO2
emissions, powering 31,000 homes, or removing 51,000 cars from the
road, every year.([3])
The Company will fund the acquisition and construction of
Milford with initial equity of approximately $30m alongside
non-recourse construction debt provided by Zions Bancorporation
N.A. and KeyBank N.A. as Joint Lead Arrangers. Once complete,
approximately $50m of the construction debt will convert to
non-recourse senior debt provided by the same lender group.
Wells Fargo, an established and consistent leader in renewable
energy and cleantech financing since 2006, has committed to provide
tax equity funding for Milford upon achievement of construction
milestones. The expected returns from the Project are in line with
those anticipated in the Company's investment objective, as set out
in its Prospectus dated 26 February 2019.
The Investment Manager tests all acquisitions against the
Acquisition and Asset Management Principles disclosed in the
Prospectus and as set out below for Milford.([4])
USF Acquisition
* Milford
Principles
1. Seek Solar Power
Assets4 with * 25-year PPA with an investment-grade utility (S&P
long-term rating A) beginning in the second half of 2020
contracted offtake
agreements with
creditworthy * Fixed price for 100% of the energy and renewable
counterparties. energy credits generated by the Project for the next
25 years
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2. Acquire Solar
Power Assets at a * Construction-ready acquisition with simultaneous
time which minimizes financial close of debt financing and tax equity
exposure to
development
risks but maximises * Fully-wrapped turnkey EPC contractor with a credible
the Company's construction partner reduces time and cost risks
competitive
advantage compared
to mature asset
acquisitions.
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3. Form strong
relationships * Developer - Longroad
with credible and
capable project
developers, * Industry-leading developer with over 5GW of
construction utility-scale wind and solar build
partners
and vendors who can
offer a pipeline * Construction partner - McCarthy Building Companies
of investment
opportunities.
* One of the US' largest construction companies with
over 2.8GW of solar and energy storage projects
designed, constructed or completed since 2013
* Panel manufacturer and expected O&M provider - First
Solar
* One of the largest and most well-regarded panel
manufacturers in the world
* Leading O&M provider in the US with 6.3GW of
operating projects across 110 locations in 17 states
* The Investment Manager has a strong relationship with
First Solar through previous project acquisitions,
panel purchases, and O&M contracts
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4. Prioritise
bilateral * Although USF secured Milford through a competitive
acquisition process it will now look to leverage the relationship
negotiations with the developer/vendor to identify opportunities
over competitive for bilateral acquisitions
auction processes
-----------------------------------------------------------------
5. Participate in
mid-market segments * 128 MW(DC) asset size allows USF to deploy a
where team significant amount of capital at attractive returns
capability without competing with larger passive investors for
and track record larger projects/portfolio or operating assets
offer a competitive
advantage
* The Investment Manager's track record has reduced
perceived execution and counterparty risk for the
vendor, lenders and tax equity
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See section 2.2 Acquisition and Asset Management Principles in
the Prospectus for additional information.
US Solar Market Update
The US solar sector and broader renewables market achieved
considerable growth and milestones in the first half of 2019.
During April, the aggregate capacity of renewable energy sources -
hydro, wind, solar, biomass, and geothermal - exceeded coal for the
first time and renewable energy generated more energy than
coal.
During Q1 2019, 1.6 GW(DC) of utility-scale solar was installed,
representing:
-- a 22% increase compared to Q1 2018;
-- an 86% increase compared to five years prior, and;
-- the strongest Q1 in the history of US utility-scale solar Photovoltaic (PV).
The US utility-scale solar market now has an installed capacity
of 39 GW(DC) , approximately seven times the size of the UK
utility-scale solar market([5]) . Figure 1 below shows the recent
and projected growth in the US solar market from 2010 through 2024.
As depicted, utility-scale solar PV has and will continue to
account for the largest share of annual installations in the US
solar market, with 49 GW(DC) of utility-scale solar installations
forecast between 2019 and 2023.
Figure 1: Projected growth in the US solar market
Source: Wood Mackenzie, Q2 2019 US Solar Market Insight, June
2019.
The economic competitiveness of solar has consistently
strengthened due to the continued cost declines of solar equipment.
This is evidenced by the fact that most utility-scale solar PV
projects are being procured as the lowest cost form of energy
generation or as a hedge against the rising price of natural gas
rather than being driven by any state mandates. As shown in Figure
2, voluntary (non-mandated) procurement of utility-scale solar PV
has continued to be the primary driver of solar development;
accounting for 73% of utility-scale solar capacity additions in
2019.
Figure 2: Procurement driver of utility PV PPAs by contract
execution year
Source: Wood Mackenzie, US Utility PV Market: Quarterly Update
Q2 2019, July 2019.
Legislative changes towards favourable state renewable policies
continue to expand across the US. Of the 50 states, 35 have
implemented either a renewable portfolio standard or a voluntary
renewable target, including six states - California, Hawaii, New
Mexico, Washington, Nevada, and Maine - which have committed to
100% renewable or clean energy targets. Many states are expected to
continue to improve their existing policies as their renewable
portfolios approach near term benchmarks. Since January 2018, eight
states have increased their existing targets.
Globally, corporations signed 8.6GW of clean energy PPAs in 2019
through July (2019 YTD), up from 7.2GW for the same period last
year (see Figure 3). This has been driven largely by the US with US
corporations accounting for 69% of global PPA volume in 2019
YTD.
Figure 3: Global corporate PPA volumes, by region
Source: Bloomberg New Energy Finance, 2H 2019 Corporate Energy
Market Outlook, August 2019
The increase in corporate PPAs is due to an increasing number of
corporations pledging to use 100% renewable power by signing to the
RE100 leadership initiative. The RE100 is a global corporate
leadership initiative bringing together businesses committed to
100% renewable electricity. During 2019, the RE100 increased by 31
signatories to 191 signatories, who have a combined aggregate
annual electricity demand of 202 Terawatt hours (TWh). The increase
in corporate PPAs is also driven by economics. Utility-scale solar
PPA prices now consistently come in below new build combined cycle
(CC) natural gas prices. As shown in Figure 4, Google, Microsoft,
Starbucks, and Amazon are among the global market leaders that have
committed to power an increasing portion of their operations from
renewable sources.
Figure 4: Top corporate offtakers, 2019 YTD
Source: Bloomberg New Energy Finance, 2H 2019 Corporate Energy
Market Outlook, August 2019
The growth of solar has also been supported by US federal
policy. The ITC, which has been in place at 30% since 2006, will
step-down to 26%([6]) at the end of 2019. In July, the Solar Energy
Industries Association (SEIA) delivered a letter to the US Congress
which was signed by nearly 1,000 solar companies across the US,
calling for the extension of the ITC. In the following week, the
Renewable Energy Extension Act was introduced in both the House and
the Senate and proposes a five-year extension to the 30% ITC.
Further progress is pending voting decisions within the US
Government.
Importantly, solar is competitive even without the ITC in many
parts of the US. Regardless of whether the ITC is extended or not,
USF believes US solar remains a compelling investment opportunity.
The industry has grown at an average rate of 52% per year since the
ITC was implemented in 2006 and the combination of declining costs
and expansion and maturation of the industry indicate that the US
solar market is likely to remain an attractive industry in the
years to come.
Investment Performance
At 30 June 2019, the Company's shares were trading at $1.025.
This represents a 4.6% premium to the NAV of $196 million ($0.98
per share).
The Company generated a small net gain of $8,203 (0.004c per
share) during the period. Interest income of $697,161 and a small
net gain from investments of $45,878 was offset by operating
expenses of $582,799 and a foreign exchange mark-to-market loss of
$152,037 on funds that were retained in GBP.
Valuation
Net Asset Value
An unaudited Net Asset Value (NAV) and Net Asset Value per
Ordinary Share is calculated in US Dollars on a quarterly basis as
at 31 March, 30 June, 30 September and 31 December each year,
pursuant to the valuation methodology described below, by the
Administrator in conjunction with the Investment Manager. Once
acquired, the value of the Solar Power Assets, which form part of
the Net Asset Value calculation, will be produced by an independent
appraiser on a semi-annual basis as at 30 June and 31 December.
Valuation Methodology
Upon acquisition of the Solar Power Assets, every six months as
at 30 June and 31 December, the Company will engage an independent
third-party appraiser to value the Solar Power Assets acquired by
the Company and its Project SPVs. The Investment Manager will value
the Solar Power Assets acquired by the Company and its Project SPVs
for the quarterly periods ending 31 March and 30 September. At each
quarter end, the Investment Manager will provide the relevant
third-party or internal valuations of the Solar Power Assets
together with the valuations of the other assets of the Company and
its Project SPVs to the Administrator.
The Administrator, in conjunction with the Investment Manager,
will calculate the Net Asset Value and the Net Asset Value per
Ordinary Share as at the end of each quarter of the Company's
financial year and submit the same to the Board for its
approval.
The valuation will be calculated in accordance with Uniform
Standards of Professional Appraisal Practice (USPAP) as applied to
photovoltaic electricity generation systems in the United
States.
Fair value for operational Solar Power Assets will be derived
from a discounted cash flow (DCF) methodology. For Solar Power
Assets that are not yet operational or where the completion of the
acquisition by the Company has not occurred at the time of
valuation, acquisition cost will be used as an appropriate estimate
of fair value.
In a DCF analysis, the fair value of the Solar Power Asset is
the present value of the asset's expected future cash flows, based
on a range of operating assumptions for revenues and costs and an
appropriate discount rate range.
The Investment Manager will review a range of sources in
determining its fair market valuation of the Solar Power Assets,
including but not limited to:
-- discount rates publicly disclosed by the Company's global peers;
-- discount rates applicable to comparable infrastructure asset classes; and
-- capital asset price model outputs and implied risk premium over relevant risk-free rates.
A broad range of assumptions are used in valuation models. Given
the long-term nature of the assets, valuations are assessed using
long-term historical data to reflect the asset life.
Where possible, assumptions are based on observable market and
technical data. The Investment Manager also engages technical
experts such as long-term electricity price forecasters to provide
long-term data for use in its valuations.
The Investment Manager will use its judgement in arriving at the
appropriate discount rate. This will be based on its knowledge of
the market, taking into account intelligence gained from its
bidding activities, discussions with financial advisers in the
appropriate market and publicly available information on relevant
transactions.
Information on the Investment manager
The US Solar Fund is managed by New Energy Solar Manager which
also manages New Energy Solar (www.newenergysolar.com.au), which
has committed over $800m to 16 solar power projects (14 of which
are in the US) since late 2015.
The Investment Manager has been given responsibility, subject to
the overall supervision of the Board, for active discretionary
investment management of the Portfolio in accordance with the
Company's investment objective and policy. The Investment Manager
offers in-house deal origination, execution and asset management
capabilities with experience in equity, tax equity, debt
structuring and arranging, and active asset management. The current
Investment Manager team currently consists of more than 20
investment and asset management professionals located in Sydney and
New York.
Senior Management Team
The senior members of the Investment Manager who are responsible
for the management of US Solar Fund are set out below. Further
information on the Investment Manager team is provided at
www.ussolarfund.co.uk.
John Martin BEcon (USYD)
Chief Executive Officer
John joined the Investment Manager as Managing Director and CEO
in May 2017. John brings a wealth of experience and capability to
the role after more than two decades of experience in corporate
advisory and investment banking with a focus on the infrastructure,
energy and utility sectors. John previously led the Infrastructure
and Utilities business at corporate advisory firm Aquasia where he
advised on more than A$10 billion of infrastructure and utility
M&A and financing transactions. Prior to this John held various
investment bank management positions including the Head of National
Australia Bank Advisory and the Joint Head of Credit Markets and
Head of Structured Finance at RBS / ABN AMRO. During his time at
ABN AMRO, John managed the Infrastructure Capital business which
was viewed as a market leader in the development and financing of
infrastructure and utility projects in Australia. John started his
career as an economist with the Reserve Bank of Australia and then
worked in various treasury and risk management positions, before
moving to PwC as the partner responsible for financial risk
management.
Liam Thomas BAgribus (Curtin), MSc (Curtin), MBA (MELB)
Chief Investment Officer
Liam joined the Investment Manager as Director - Investments in
March 2016, to lead transaction origination and execution
activities. Liam has over 15 years' experience in mergers and
acquisitions, corporate and business development, projects, and
commercial management in the energy, infrastructure, mining and
agribusiness sectors. Prior to joining the Investment Manager, Liam
was a senior member of the International Development team at Origin
Energy focused on the investment and development strategy for
utility-scale solar, hydro, and geothermal projects in Latin
America and South-East Asia. Liam's previous roles have included
General Manager of Commercial Development at Aurizon, Commercial
Manager for the Northwest Infrastructure iron ore port joint
venture, and Project Manager at Orica, focusing on large scale
mining-related infrastructure and manufacturing projects.
Michael van der Vlies BAcc (UTS), CA
Chief Financial Officer
Michael is responsible for the finance activities of the
Investment Manager, including business planning, budgeting,
forecasting, financial reporting, taxation, treasury, balance sheet
management and risk management. Michael has over 16 years'
experience working in finance, infrastructure and investment
management. Michael previously led a team responsible for the
financial reporting, fund administration, regulatory and compliance
reporting globally across AMP Capital's A$15 billion Infrastructure
Equity funds. Prior to this, Michael held various finance roles
including General Manager of Finance and Group Financial Controller
at BAI Communications, a communications infrastructure business
owned by CPPIB and Senior Manager at Macquarie.
Directors
The Directors are responsible for the determination of the
Company's investment objective and policy and its investment
strategy and have overall responsibility for the Company's
activities, including the review of investment activity and
performance and the supervision and control of the Investment
Manager. The Directors have delegated responsibility for managing
the assets comprising the Portfolio to the Investment Manager.
Further information on the Board is provided at
www.ussolarfund.co.uk.
Gillian Nott
Non-Executive Chair
Mrs Nott spent the majority of her career working in the energy
sector, including positions with BP. In 1994 she became CEO of
ProShare, a not for profit organisation promoting financial
education, savings and investment, and employee share ownership.
She was a non-executive director of the Financial Services
Authority from 1998 until 2004. Subsequently she has held numerous
board roles, including being a non-executive director of Liverpool
Victoria Friendly Society, a leading insurer, and deputy chair of
the Association of Investment Companies. Mrs Nott has served as
both a non-executive director and chair of a number of venture
capital trusts and investment trusts. She is currently chair of
JPMorgan Russian Securities plc, Premier Global Infrastructure
Trust plc and Hazel Renewable Energy VCT1 plc.
Jamie Richards
Non-Executive Director
Mr Richards is a chartered accountant and has 25 years'
experience in fund management, banking and corporate recovery with
a focus on the infrastructure and solar sector. Mr Richards
previously was a partner, executive committee member and head of
infrastructure at Foresight Group having joined in 2000. Between
2007 and 2018 he had overall responsibility from inception for the
group's infrastructure and solar business in the UK, Australia,
Italy and the US. He oversaw, as a member of the investment
committee, more than 100 solar projects representing the group's
approximately GBP1.5 billion solar portfolio and led the IPO of
Foresight Solar Fund Limited. Prior to 2007, he led a number of
venture capital and private equity transactions in the technology
and cleantech sectors representing Foresight Group's funds and was
a non-executive director of several companies. Previously, Mr
Richards worked at PwC, Citibank and Macquarie, both in London and
Sydney. Mr Richards also currently acts as alternative chair of the
investment committee of Community Owned Renewable Energy LLP, an
investment programme targeting UK solar farms for community
ownership.
Rachael Nutter
Non-Executive Director
Ms Nutter has spent over 20 years in the energy sector and the
last 12 years in the renewable and clean energy sector. Ms Nutter
is currently general manager of business development for Shell
International in the nature based solutions business. Prior to
this, she led a global solar business development team in Shell
that originated and delivered investments in solar projects and
development platforms, having previously led the development of the
solar entry strategy for Shell. Ms Nutter also had a role within
Shell Ventures, and led the portfolio management of technology
demonstration projects and assessment of clean energy commercial
opportunities such as biogas for Shell. Prior to re-joining Shell
in 2012, she worked at CT Investment Partners, Carbon Trust and PA
Consulting Group, having started her career as a petroleum engineer
with Shell. Ms Nutter is a board member of the Energy Technologies
Institute, a UK public-private partnership to accelerate the
commercialisation of low carbon technologies.
Josephine Tan
Non-Executive Director
Ms Tan is an experienced corporate finance adviser to junior
mining companies and mining focused private equity funds. She is a
founding member and chief financial officer of Sandown Bay Resource
Capital, a London-based mining private equity firm focused on
investments in the junior mining sector. Prior to this, Ms Tan was
a senior investment banker at UBS AG in London and Melbourne.
During her 10 years at UBS, she worked across various teams and
industry sectors, including as part of the European Energy Group,
the Global Industrials Group and the Australian Natural Resources
Group. She commenced her career at the Boston Consulting Group in
Melbourne. Ms Tan was a non-executive director of the Australian
Governance Masters Index Fund from 2015 to 2018 and she currently
sits on the advisory board of the Australian Governance and Ethical
Index Fund, both managed by a subsidiary of Walsh and Company. Ms
Tan is not considered independent from the Investment Manager.
3. Principal Risk and Uncertainties
The Board works closely with the Investment Manager in assessing
the risks facing the Company. The Investment Manager and
Administrator have established internal controls to mitigate these
risks. The Board continually reviews the performance of the
Investment Manager and Administrator to ensure that adequate
procedures are in place. When required, experts will be employed to
gather information, including tax advisers, legal advisers, and
environmental advisers.
The potential risks that the Directors consider material to the
Company and their associated mitigants are included within the
Company's Prospectus dated 26 February 2019. These risks
include:
-- Sourcing suitable Solar Power Assets
-- Valuation of Assets
-- Changes to market conditions for the energy industry
-- Access to capital from tax equity partners
-- Default of developer or Engineering, Procurement, Construction (EPC) contractor
-- Changes in income tax, the ITC, indirect tax or duty legislation or policy
-- Construction or operation issues with Solar Power Assets
-- Political risks including Brexit
The current assessment of risks remains unchanged to those
outlined in the Company's prospectus.
4. Environmental, Social and
Governance
USF's investment objective is to provide investors with
attractive risk-adjusted and sustainable dividends, with an element
of capital growth, by investing in a diversified portfolio of Solar
Power Assets. Investing in Solar Power Assets increases renewable
energy infrastructure and renewable power generation. The provision
of renewable power directly benefits the environment through the
reduction in emitted CO2 and also through the obviation of the
pollutive effects of fossil-fuel generated power. The simplicity
and low-impact nature of solar power contributes to the improvement
of the environment for rural communities and cities.
Solar generated electricity replacing fossil-fuel generated
electricity has a measurable and positive impact on the
environment. We believe that USF, by its very character, is a
compelling impact investment.
Core to the Company's investment and environmental objectives is
the intention to build a long-term, sustainable business.
Accordingly, the Directors and the Investment Manager are committed
to managing USF by the core principles of Environmental, Social and
Governance (ESG) practices, as well as running the business with a
focus on overall Sustainability Practices.
ESG principles at work in USF
Adherence to ESG principles requires US Solar Fund to consider
the broader impact of its activities and to incorporate practices
to further the aim of these principles.
Firstly, environmental considerations incorporate the impact on
both the local environment, as well as global issues like climate
change. USF's primary activity is investing in Solar Power Assets
which support renewable energy development and provide a clean
energy source to communities in rural and metro areas. Further,
USF's strategy of owning and operating solar power portfolios
directly contributes to the displacement of CO2 emissions and
assists states in their transition to a low carbon economy, helping
to achieve their respective renewable energy targets.
A specific example of USF's positive environmental impact can be
seen in USF's first investment, the Milford Solar project in Utah.
Once operational, this project will generate over 277,500 megawatt
hours of electricity annually. This volume of electricity is
equivalent to displacing approximately 235,000 tonnes of CO2
emissions, powering 31,000 homes, or removing 51,000 cars from the
road, every year. ([7])
Secondly, social considerations take into account the Company's
impact on the local community, job creation, and employee
relations. USF is committed to open and strong relationships with
the landowners on which its assets are located, as well as those in
close proximity to its assets. The company takes a preventative and
proactive approach when dealing with health and safety hazards,
rigorously implementing safety practices and reporting and
improving them. The Company is also committed to making tangible
contributions to the prosperity and economic development of the
regions in which it operates.
For example, the Company seeks to create quality jobs in the
communities in which it operates. It also seeks to partner with
educational and research institutions to share insights and data to
further advance the solar industry. These partnerships also help
USF to continue to improve its practices around land preservation,
a key consideration for the Company during the construction phase
of solar asset ownership as well as throughout an asset's
operational life.
Finally, governance considerations require a company to examine
its structure, leadership, shareholder rights and internal
controls. USF's Board of Directors is independent of the Investment
Manager and seeks to implement a system of rules and practices that
preserves the integrity and efficiency of its operations. It is
also committed to providing disclosure measures sufficient to meet
the interests of stakeholders including security holders,
customers, financiers, government, and the community. The Company
also considers acquisition and asset management principles and
practices as they relate to dealing with anti-corruption, labour
standards and other ethical factors.
USF recognizes that these governance considerations are critical
to building a successful, long term business.
Sustainability
The Company invests in Solar Power Assets that typically have an
asset life of at least 30 years. As a result, USF is focused on
building a business that can make a material and positive impact
to, at least, match that time horizon. Accordingly, sustainability
is essential to USF's business.
The United Nations says that "sustainable development has been
defined as development that meets the needs of the present without
compromising the ability of future generations to meet their own
needs" and that "sustainable development calls for concerted
efforts towards building an inclusive, sustainable and resilient
future for people and planet.([8]) In 2015, the United Nations
created a blueprint to address global challenges including poverty,
inequality, and climate change, incorporating 17 Sustainable
Development Goals (SDG). Each goal has specific targets to be
achieved within a 15-year timeframe (by 2030).
US Solar Fund is well-aligned with these goals, particularly
those concerning the environment (e.g. #13 Climate Action and #7
Affordable and Clean Energy), those concerning social issues (e.g.
#8 Decent Work and Economic Growth and #9 Industry Innovation and
Infrastructure) and those concerning governance (e.g. #16 Peace,
Justice and Strong Institutions). These are just a few of the goals
that the US Solar Fund is well-positioned to support. The Company
will consider its contribution to the achievement of the United
Nations SDG and will report regularly to shareholders on its
progress in this regard.
US Solar Fund is committed to reporting regularly on the
implementation of these ESG and Sustainability principles in its
business and, specifically, in its investment processes and asset
management operations. USF believes that it is important to
demonstrate to its internal and external stakeholders and,
particularly, to its shareholders both what its goals are and how
it is meeting them.
5. Directors' Report
The Directors present their report together with the audited
financial statements for the period from 10 January 2019
(incorporation date) to 30 June 2019 in accordance with section 839
(4) of the Companies Act 2006. This is also the first set of
financial information prepared by US Solar Fund Plc and therefore
no comparatives are provided.
PRINCIPAL ACTIVITY AND STATUS
US Solar Fund Plc was incorporated as a Public Company, limited
by shares, in England and Wales on 10 January 2019 with registered
number 11761009. The registered office of the Company is 7th Floor,
9 Berkeley Street, London, W1J 8DW. Its share capital is
denominated in US Dollars (USD or $) and currently consists of
ordinary shares. The Company's principal activity is to invest in a
diversified portfolio of Solar Power Assets located in North
America and other countries forming part of the Organisation for
Economic Co-operation and Development (OECD) in the Americas.
BUSINESS REVIEW
On 16 April 2019, the Company was admitted to the premium
listing segment of the Official List of the FCA and to trading on
the main market of the London Stock Exchange.
On 14 June 2019, the Company entered exclusivity with a US-based
solar developer, Longroad Energy, to acquire the Milford Solar
Project, a 128 MW(DC) utility-scale solar power project located in
the western United States. On 23 July 2019, the Company executed an
acquisition agreement for this project.
On 18 June 2019, the Company entered exclusivity with US-based
solar developer Cypress Creek Renewables to acquire a portfolio of
utility-scale solar power projects located in North Carolina and
Oregon.
During the period the Company established a wholly owned
subsidiary, USF Holding Corp and invested $50 million into the
entity. The Chair's statement and Investment Manager's report
expands on the business activity and acquisitions in the
period.
RESULTS AND DIVIDS
The Company generated a small net gain of $8,203 (0.004c per
share) during the period. Interest income of $697,161 and a small
net gain from investments of $45,878 was offset by operating
expenses of $582,799 and a foreign exchange mark-to-market loss of
$152,037 on funds that were retained in GBP. The financial
statements of the Company are presented on pages 29-46.
On 18 September 2019, the Board approved an interim dividend of
0.41 cents per share for the period ending 30 June 2019. This
represents an annualized dividend yield of 2% when measured against
the initial issue price of $1 per share. The dividend will be paid
on 8 November 2019.
SHARE CAPITAL
As at 30 June 2019, 200 million ordinary shares were on issue
and no other classes of shares were in issue at that date.
Following a successful application to the High Court and
lodgement of the Company's statement of capital with the Registrar
of Companies, the Company was permitted to cancel its share premium
account. This was effected on 21 June 2019 by a transfer of the
balance of $194 million from the share premium account to the
capital reduction reserve (refer to note 17). The capital reduction
reserve is classed as a distributable reserve and dividends to be
paid by the Company are to be offset against this reserve.
RISK MANAGEMENT AND INTERNAL CONTROL
The Board is responsible for financial reporting and controls,
including the approval of the Annual Report and Accounts, the
dividend policy, any significant changes in accounting policies or
practices, and treasury policies including the use of derivative
financial instruments. During the period the Board has carried out
a robust assessment of the principal risks and uncertainties facing
the Company and how they are being mitigated, as described in note
15.
In light of the Company's current position and principal risks
and uncertainties, the Board has assessed the prospects of the
Company for a period of 12 months from the date of this report,
reviewing the Company's liquidity position, together with forecasts
of the Company's future performance under various scenarios. The
Board has concluded there is a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities over that period. The Board has also assessed the
prospects of the Company over a longer period than the going
concern review and has a reasonable expectation that the Company
will be able to continue in business over the five year period
examined in that assessment. Whilst the Board has no reason to
believe the Company will not be viable over a longer period, given
the inherent uncertainty involved, the Board considers five years
as the appropriate period over which it is possible for form a
reasonable expectation as to the Company's longer term
viability.
DIRECTORS
All Directors are non-executive Directors.
The Company maintains GBP20 million of Directors' and Officers'
Liability Insurance cover for the benefit of the Directors, which
was in place throughout the period and which continues in effect at
the date of this report.
Details of the fees paid to Directors in the period are set out
below:
Received in period
ended 30 June
Annual fee 2019
Director (GBP) (GBP)
----------------- ---------- ------------------
Gillian Nott* 60,000 22,308
----------------- ---------- ------------------
Jamie Richards** 50,000 18,590
----------------- ---------- ------------------
Rachael Nutter 40,000 14,872
----------------- ---------- ------------------
Josephine Tan 40,000 14,872
----------------- ---------- ------------------
*This includes GBP20,000 per annum in respect of serving as
Chair of the Board.
*This includes GBP10,000 per annum in respect of serving as
Chair of the Audit committee.
In accordance with FCA Listing Rules 9.8.6(R)(1), Directors'
interest in the shares of the Company (in respect of which
transactions are notifiable to the Company under FCA Disclosure and
Transparency Rule 3.1.2(R)) as at 30 June 2019 are shown below:
Number of Percentage of issued
Director ordinary shares share capital
--------------- ---------------- --------------------
Gillian Nott 66,000 0.03%
--------------- ---------------- --------------------
Jamie Richards 65,495 0.03%
--------------- ---------------- --------------------
Rachael Nutter 26,196 0.01%
--------------- ---------------- --------------------
Josephine Tan 26,196 0.01%
--------------- ---------------- --------------------
SIGNIFICANT SHAREHOLDINGS
As at 30 June 2019 the Directors have been notified that the
following shareholders have a disclosable interest of 3% or more in
the ordinary shares of the Company:
Number of Percentage of issued
Shareholder ordinary shares share capital
------------------------------------------- ---------------- --------------------
Bank of New York (OCS) Nominees Limited 31,003,862 15.50%
------------------------------------------- ---------------- --------------------
The Bank Of New York (Nominees) Limited 18,250,371 9.13%
------------------------------------------- ---------------- --------------------
New Energy Solar Fund 15,000,000 7.50%
------------------------------------------- ---------------- --------------------
The Bank Of New York (Nominees) Limited 13,398,332 6.70%
------------------------------------------- ---------------- --------------------
Walsh & Company Investments Limited 10,000,000 5.00%
------------------------------------------- ---------------- --------------------
HSBC Global Custody Nominee (UK) Limited 8,954,865 4.48%
------------------------------------------- ---------------- --------------------
Nortrust Nominees Limited 8,859,375 4.43%
------------------------------------------- ---------------- --------------------
Harewood Nominees Limited 8,800,000 4.40%
------------------------------------------- ---------------- --------------------
Bbhisl Nominees Limited HSBC Institutional
Fund Services 6,240,000 3.12%
------------------------------------------- ---------------- --------------------
Nortrust Nominees Limited 6,192,375 3.10%
------------------------------------------- ---------------- --------------------
GOING CONCERN
The financial position of the Company, its cash flows, liquidity
position and borrowing facilities are described in the financial
statements and related notes. In addition, note 15 to the financial
statements includes the policies and processes for managing its
capital, its financial risk management, details of its financial
instruments and its exposure to credit risk and liquidity risk. The
Company has sufficient financial resources and expectation of
growth in the medium-term to meet its financial obligations. As
such the Directors believe that the Company will continue into the
foreseeable future and have adopted the going concern basis of
preparation in preparing these financial statements.
POLITICAL CONTRIBUTIONS
The Company made no political contributions during the
period.
EMPLOYEES
The Company has no employees and therefore no employees share
scheme or policies for the employment of disabled persons or
employee engagement.
OTHER DISCLOSURES
Disclosures of financial risk management objectives and policies
and exposure to financial risks are included in note 15 to the
financial statements.
Disclosures in relation to the Company's business model and
strategy as well as disclosures in relation to the main industry
trends and factors that are likely to affect the future performance
and position of the business have been included within the
Investment Manager's report on page 5. Disclosures in relation to
environmental matters, employees, social and human rights issues
and employee diversity have not been included, as the Directors do
not consider these to be relevant to the Company at this point in
time.
PUBLICATION OF NON STATUTORY ACCOUNTS
The financial information contained in this half-yearly report
relating to the period ended 30 June 2019 do not constitute
statutory accounts as defined in Section 435 of the Companies Act
2006. The financial information is however being used as initial
accounts in line with section 839 of the Companies Act 2006.
DISCLOSURE OF INFORMATION TO AUDITORS
All of the Directors have taken all the steps that they ought to
have taken to make themselves aware of any information needed by
the auditors for the purposes of their audit and to establish that
the auditors are aware of that information. The Directors are not
aware of any relevant audit information of which the auditors are
unaware.
Signed by order of the Board,
Gill Nott
Chair
Date: 18 September 2019
6. Directors' Responsibility
Statement
The Directors are responsible for preparing the half yearly
report and financial statements in accordance with applicable law
and regulations.
As a company listed on the London Stock Exchange, US Solar Fund
Plc is subject to the FCA's Listing Rules and Disclosure and
Transparency Rules, as well as to all applicable laws and
regulations in England and Wales where it is registered.
The half yearly report and financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union. Under company
law, the Directors must not approve the financial statements unless
they are satisfied they give a true and fair view of the state of
affairs of the Company and of the profit or loss for the period. In
preparing these financial statements, the Directors should:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable;
-- specify which generally accepted accounting principles have
been adopted in their preparation; and
-- prepare the financial statements on the going concern basis,
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records which are sufficient to show and explain the Company's
transactions and are to disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that the financial statements comply with the requirements
of the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are also responsible for preparing the half yearly
report and financial statements and the Directors confirm that they
consider that, taken as a whole, the half yearly report and
financial statements is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Company's performance, business model and strategy. In accordance
with the FCA's Disclosure and Transparency Rules, the Directors
confirm to the best of their knowledge that:
a) the financial statements, prepared in accordance with
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company taken as a whole;
b) The half year report and accounts include a fair view of
important events that have occurred during the first period of the
financial period, and their impact on the set of financial
statements, and description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
c) The half year report and accounts include the related
parties' transactions that have taken place in the first period of
the financial period and that have materially affected the
financial position or the performance of the enterprise during that
period.
The Directors have acknowledged their responsibilities in
relation to the financial statements for the period to 30 June
2019.
Signed by order of the Board,
Gill Nott
Chair
Date: 18 September 2019
7. Report of the Independent Auditor to
the members of US Solar Fund plc under
Section 839(5) of the Companies Act 2006
We have examined the initial accounts of US Solar Fund plc for
the period from 10 January 2019 to 30 June 2019 which comprises the
Statement of Profit and Loss and Other Comprehensive Income,
Statement of Financial Position, Statement of Changes in Equity,
Statement of Cash Flows and the related notes 1 to 22. The initial
accounts have been prepared under the accounting policies set out
therein.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As described in the Directors' responsibilities statement, the
Directors are responsible for the preparation of the initial
accounts in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
Our responsibility is to report to you our opinion as to whether
the initial accounts have been properly prepared within the meaning
of section 839(4) of the Companies Act 2006.
OPINION
In our opinion the initial accounts for the period from 10
January 2019 to 30 June 2019 have been properly prepared in
accordance with section 839(4) of the Companies Act 2006.
USE OF OUR REPORT
This report is made solely to the company in accordance with
section 839(5) of the Companies Act 2006. Our work has been
undertaken so that we might state to the company those matters that
we are required to state to it in an auditor's report on initial
accounts and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other
than the company, for our audit work, for this report, or for the
opinions that we have formed.
Anthony Matthews FCA
(Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
London
Date: 19 September 2019
8. Independent Review Report
to US Solar Fund plc
We have been engaged by the company to review the financial
statements in the half-yearly financial report for the period ended
30 June 2019 which comprises the Statement of Profit and Loss and
other Comprehensive Income, the Statement of Financial Position,
the Statement of Changes in Equity, the Statement of Cash Flows and
related notes 1 to 22. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
DIRECTORS' RESPONSIBILITIES
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
company are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report have been prepared in accordance with IFRSs as
adopted by the European Union.
OUR RESPONSIBILITY
Our responsibility is to express to the Company a conclusion on
the set of financial statements in the half-yearly financial report
based on our review.
SCOPE OF REVIEW
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that
causes us to believe that the financial statements in the
half-yearly financial report for the period ended 30 June 2019 is
not prepared, in all material respects, in accordance with IFRS as
adopted by the European Union and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
USE OF OUR REPORT
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, UK
Date: 19 September 2019
9. Statement of Profit and Loss
and Other Comprehensive Income
10 January
2019
to 30 June
Notes 2019
----------------------------------------------------- ----- -----------
USD
----------------------------------------------------- ----- -----------
Net gain on investments at fair value through profit
and loss 10 45,878
Interest income 6 697,161
----------------------------------------------------- ----- -----------
743,039
----------------------------------------------------- ----- -----------
Expenditure
Administrative and other expenses 7 (582,799)
----------------------------------------------------- ----- -----------
Operating profit for the period 160,240
Loss on foreign exchange (152,037)
----------------------------------------------------- ----- -----------
Profit before taxation 8,203
Taxation 8 -
----------------------------------------------------- ----- -----------
Profit and Total Comprehensive Income for the period 8,203
Earnings per share (basic and diluted) 9 (0.000)
----------------------------------------------------- ----- -----------
All items dealt with in arriving at the result for the period
relate to continuing operations.
The notes on pages 34 to 46 form an integral part of these
financial statements
10. Statement of
Financial Position
Notes 30 June 2019
------------------------------ ----- ------------
USD
------------------------------ ----- ------------
Non-current assets
Investment held at fair value 10 65,045,878
------------------------------ ----- ------------
65,045,878
------------------------------ ----- ------------
Current assets
Trade and other receivables 11 490,377
Cash and bank balances 12 131,023,974
------------------------------ ----- ------------
131,514,351
------------------------------ ----- ------------
Total assets 196,560,229
------------------------------ ----- ------------
Current liabilities
Trade and other payables 13 552,026
------------------------------ ----- ------------
Net current assets 130,962,325
------------------------------ ----- ------------
Total net assets 196,008,203
------------------------------ ----- ------------
Shareholders equity
Share capital 17 2,000,000
Capital reduction reserve 17 194,000,000
Retained earnings 18 8,203
------------------------------ ----- ------------
Total shareholders equity 196,008,203
------------------------------ ----- ------------
Net asset value per share 19 0.98
------------------------------ ----- ------------
The financial statements of US Solar Fund Plc (registered number
11761009) were approved by the Board of Directors and authorised
for issue on 18 September 2019. They were signed on its behalf
by:
Gill Nott
Director
Date: 18 September 2019
The notes on pages 34 to 46 form an integral part of these
financial statements.
11. Statement of
Changes in Equity
Capital
Share Share reduction Retained
Notes capital premium reserve earnings Total equity
------------------------------ ----- --------- ------------- ----------- --------- ------------
USD USD USD USD USD
------------------------------ ----- --------- ------------- ----------- --------- ------------
Balance at 10 January 2019 - - - - -
------------------------------ ----- --------- ------------- ----------- --------- ------------
Issue of share capital 17 2,000,000 198,000,000 200,000,000
Equity issue costs 17 - (4,000,000) - - (4,000,000)
Transfer to capital reduction
reserve 17 - (194,000,000) 194,000,000 - -
Total comprehensive income
for the period - - - 8,203 8,203
------------------------------ ----- --------- ------------- ----------- --------- ------------
Balance at 30 June 2019 2,000,000 - 194,000,000 8,203 196,008,203
------------------------------ ----- --------- ------------- ----------- --------- ------------
The notes on pages 34 to 46 form an integral part of these
financial statements.
12. Statement of
Cash Flows
10 January
2019 to 30
June 2019
-------------------------------------------------------------- ------------
USD
-------------------------------------------------------------- ------------
Cash flows from operating activities
Profit for the period 8,203
Adjustments for:
Net gain on investments at fair value through profit and loss (45,878)
Losses on foreign exchange 152,037
-------------------------------------------------------------- ------------
Operating cash flows before movements in working capital 114,362
-------------------------------------------------------------- ------------
Increase in trade and other receivables (381,490)
Increase in trade and other payables 552,026
Increase in interest receivable (108,887)
-------------------------------------------------------------- ------------
Net cash generated in operating activities 176,011
-------------------------------------------------------------- ------------
Cash flows used in investing activities
Investment in equity of subsidiary (50,000,000)
Loan advanced to subsidiary (15,000,000)
-------------------------------------------------------------- ------------
Net cash outflow from investing activities (65,000,000)
-------------------------------------------------------------- ------------
Cash flows used in financing activities
Proceeds from issue of ordinary shares at a premium 200,000,000
Share issue costs (4,000,000)
-------------------------------------------------------------- ------------
Net cash inflow from financing activities 196,000,000
-------------------------------------------------------------- ------------
Net increase in cash and cash equivalents for the period 131,176,011
Effect of foreign exchange rate movements (152,037)
Cash and cash equivalents at the beginning of the period -
-------------------------------------------------------------- ------------
Cash and cash equivalents at the end of the period 131,023,974
-------------------------------------------------------------- ------------
The notes on pages 34 to 46 form an integral part of these
financial statements.
13. Notes to the Financial
Statements
For the period from 10 January 2019 (incorporation date) to 30
June 2019
1. GENERAL INFORMATION
US Solar Fund Plc was incorporated as a Public Company, limited
by shares, in England and Wales on 10 January 2019 with registered
number 11761009. The registered office of the Company is 7th Floor,
9 Berkeley Street, London, W1J 8DW. Its share capital is
denominated in US Dollars and currently consists of ordinary
shares. The Company's principal activity is to invest in a
diversified portfolio of Solar Power Assets located in North
America and other countries forming part of the Organisation for
Economic Co-operation and Development in the Americas.
2. BASIS OF PREPARATION
The initial financial statements have been prepared in
accordance with International Financial Reporting Standards and
interpretations adopted by the European Union. The financial
statements have been prepared on a historical cost basis. The
principal accounting policies are set out in Note 5.
FUNCTIONAL AND PRESENTATION CURRENCY
The currency of the primary economic environment in which the
Company operates (the functional currency) is US Dollar which is
also the presentation currency.
GOING CONCERN
In assessing the going concern basis of accounting the Directors
have had regard to the guidance issued by the Financial Reporting
Council. In addition, note 15 to the financial statements includes
the policies and processes for managing its capital, its financial
risk management, details of its financial instruments and its
exposure to credit risk and liquidity risk. After making enquiries,
and bearing in mind the nature of the Company's business and
assets, the Directors consider the Company to have adequate
resources to continue in operational existence for the foreseeable
future. As such, they have adopted the going concern basis in
preparing the half yearly report and financial statements.
ASSESSMENT AS AN INVESTMENT ENTITY
Entities that meet the definition of an investment entity within
IFRS 10 are required to measure their subsidiaries at fair value
through profit or loss rather than consolidate them unless they
provided investment related services to the Company. To determine
that the Company continues to meet the definition of an investment
entity, the Company is required to satisfy the following three
criteria:
a) the Company obtains funds from one or more investors for the
purpose of providing those investors with investment management
services;
b) the Company commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
c) the Company measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Company meets the criteria as follows:
-- the stated strategy of the Company is to deliver stable
returns to shareholders through investing in a diversified
portfolio of utility scale solar power plants and associated
infrastructure, which may include transmission and storage (e.g.
batteries) assets which will typically be co--located with the
solar power plant (together, Solar Power Assets) located in North
America and other OECD countries in the Americas;
-- the Company provides investment management services and has
several investors who pool their funds to gain access to
infrastructure related investment opportunities that they might not
have had access to individually; and
-- the Company has elected to measure and evaluate the
performance of all of its investments on a fair value basis. The
fair value method is used to represent the Company's performance in
its communication to the market, including investor presentations.
In addition, the Company reports fair value information internally
to Directors, who use fair value as the primary measurement
attribute to evaluate performance.
The Directors are of the opinion that the Company has all the
typical characteristics of an investment entity and continues to
meet the definition in the standard. This conclusion will be
reassessed on an annual basis.
In respect of the second criterion the Company's purpose is to
invest funds for returns from capital appreciation and investment
income. In respect of the requirement that investments should not
be held indefinitely but should have an exit strategy for their
realisation the Company has started investing in solar projects.
The Company may hold these assets until the end of their expected
useful lives, unless there is an opportunity in the market to
dispose of the investments at a price that is considered
appropriate. There continues to be an active secondary market for
renewables projects in the countries in which we operate.
As at 30 June 2019, the Company only had one subsidiary, USF
Holding Corp. Being an investment entity, it is measured at fair
value as opposed to being consolidated on a line-by-line basis,
meaning its cash, debt and working capital balances are included in
the fair value of investments rather than the Group's current
assets.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of the financial statements requires management
to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amount of
assets, liabilities, income and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to the
accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected. During
the current period, no critical judgements were made in the
application of the accounting policies as per note 5.
During the period the Directors considered the following
significant judgements, estimates and assumptions:
KEY SOURCE OF ESTIMATION UNCERTAINTY
The valuation of the investment in subsidiary is based on the
net asset value of the subsidiary as at 30 June 2019 and as such,
no significant judgement/estimates has been applied in determining
the fair value of the instruments.
4. NEW AND REVISED STANDARDS AND INTERPRETATIONS
NEW AND REVISED IFRSS IN ISSUE BUT NOT YET EFFECTIVE
There are no standards, amendments or interpretations in issue
at the reporting date which have been issued but are not yet
effective and that are deemed to be material to the Company.
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies used in the preparation of the financial
statements have been consistently applied during the period ended
30 June 2019.
The principal accounting policies applied in the preparation of
the financial statements are set out below:
INCOME
Income comprises interest income (bank interest and loan
interest). Interest income is recognised when it is probable that
the economic benefits will flow to the Company and the amount of
revenue can be measured reliably. Loan interest income is accrued,
by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount on initial
recognition.
No income is earned from contracts with customers and as such
IFRS 15 has not been applied.
EXPENSES
Operating expenses are the Company's costs incurred in
connection with the on-going management of the Company's
investments and administrative costs. Operating expenses are
accounted for on an accruals basis.
The Company's management and administration fees, finance costs
and all other expenses are charged through the Statement of Profit
and Loss and Other Comprehensive Income.
Directly attributable acquisition costs of assets are
capitalised on purchase of assets. Costs directly relating to the
issue of Ordinary Shares are charged to share premium.
NET GAIN OR LOSS ON INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND
LOSS
The Company recognises movements in the fair value of
investments in subsidiaries through profit and loss.
TAXATION
The Company is approved as an Investment Trust Company under
sections 1158 and 1159 of the Corporation Taxes Act 2010 and Part 2
Chapter 1 Statutory Instrument 2011/29999 for accounting periods
commencing on or after 25 May 2018. The approval is subject to the
Company continuing to meet the eligibility conditions of the
Corporations Tax Act 2010 and the Statutory Instrument 2011/29999.
The Company intends to ensure that it complies with the Investment
Trust Company regulations on an ongoing basis and regularly
monitors the conditions required to maintain Investment Trust
Company status.
From 1 April 2015 there is a single corporation tax rate of 19%.
Tax is recognised in the Statement of Profit and Loss and Other
Comprehensive Income except to the extent that it relates to the
items recognised as direct movements in equity, in which case it is
similarly recognised as a direct movement in equity. Current tax is
the expected tax payable on any taxable income for the period,
using tax rates enacted or substantively enacted at the end of the
relevant period.
INVESTMENT IN SUBSIDIARIES
Subsidiaries are entities controlled by the Company. Control
exists when the Company is exposed, or has rights, to variable
returns from its involvement with the subsidiary entity and has the
ability to affect those returns through its power over the
subsidiary entity. In accordance with the exception under IFRS 10
Consolidated financial statements, the Company is an investment
entity.
The Company does not have any subsidiaries that provide
investment management services and are not themselves investment
entities. As a result the Company does not consolidate any of its
subsidiaries.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and deposits
held with the bank.
TRADE AND OTHER RECEIVABLES
Trade and other receivables are recognised initially at fair
value and subsequently stated at amortised cost less loss allowance
which is calculated using the provision matrix of the expected
credit loss model.
TRADE AND OTHER PAYABLES
Trade and other payables are recognised initially at fair value
and subsequently stated at amortised cost.
EQUITY
Equity instruments issued by the Company are recorded at the
amount of the proceeds received, net of directly attributable issue
costs. Costs not directly attributable to the issue are immediately
expensed in the Statement of Profit and Loss and Other
Comprehensive Income. The Company's capital is represented by the
Ordinary Shares, Share Premium (until cancellation), Accumulated
losses and Capital Reduction Reserve.
FINANCIAL INSTRUMENTS
In accordance with IFRS 9, the Company classifies its financial
assets and financial liabilities at initial recognition into the
categories of amortised cost or fair value through profit or
loss.
FINANCIAL ASSETS
The Company classifies its financial assets at amortised cost or
fair value through profit or loss on the basis of both:
-- the entity's business model for managing the financial assets
-- the contractual cash flow characteristics of the financial asset
FINANCIAL ASSETS MEASURED AT AMORTISED COST
A debt instrument is measured at amortised cost if it is held
within a business model whose objective is to hold financial assets
in order to collect contractual cash flows and its contractual
terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount
outstanding. The Company includes in this category short-term
non-financing receivables including cash, trade and other
receivables.
FINANCIAL ASSET MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS
(FVPL)
A financial asset is measured at fair value through profit or
loss if:
a) its contractual terms do not give rise to cash flows on
specified dates that are solely payments of principal and interest
(SPPI) on the principal amount outstanding; or
b) it is not held within a business model whose objective is
either to collect contractual cash flows, or to both collect
contractual cash flows and sell; or
c) it is classified as held for trading (derivative contracts in an asset position).
The Company's investment in subsidiaries (which comprises both
debt and equity) is held at fair value through profit or loss under
IFRS 9 as the equity portion of the investment does not meet the
SPPI test nor will the Company elect to designate the investments
at fair value through other comprehensive income. The debt
investment forms part of a group of assets that are managed and the
performance evaluated on a fair value basis.
The Company includes in this category equity instruments
including investments in subsidiaries (which comprises both debt
and equity). There are no consolidated subsidiaries.
FINANCIAL LIABILITIES MEASURED AT AMORTISED COST
This category includes all financial liabilities, other than
those measured at fair value through profit or loss, including
short-term payables.
RECOGNITION AND DERECOGNITION
Financial assets are recognised on trade date, the date on which
the Company commits to purchase or sell an asset. A financial asset
is derecognised where the rights to receive cash flows from the
asset have expired, or the Company has transferred its rights to
receive cash flows from the asset. The Company derecognises a
financial liability when the obligation under the liability is
discharged, cancelled or expired.
IMPAIRMENT OF FINANCIAL ASSETS
While cash and cash equivalents are also subject to the
impairment requirements of IFRS 9, there has been no impairment
loss identified. Investments held at fair value through profit or
loss is not subject to IFRS 9 impairment requirements.
For interest receivables on cash balances, the Company expected
credit loss (ECL) uses a 12 month expected loss allowance for all
interest receivables. The Company has completed some high-level
analysis and forward looking qualitative and quantitative
information, to determine if the interest receivable is low credit
risk. Based on this analysis the ECL on interest receivable is not
material and therefore no impairment adjustments were accounted
for.
FAIR VALUE MEASUREMENT AND HIERARCHY
Fair value is the price that would be received on the sale of an
asset, or paid to transfer a liability, in an orderly transaction
between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction takes
place either in the principal market for the asset or liability, or
in the absence of a principal market, in the most advantageous
market. It is based on the assumptions that market participants
would use when pricing the asset or liability, assuming they act in
their economic best interest. A fair value measurement of a
non-financial asset takes into account the best and highest value
use for that asset.
The fair value hierarchy to be applied under IFRS 13 is as
follows:
Level 1: Quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable.
Level 3: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are carried at fair value and
which will be recorded in the financial information on a recurring
basis, the Company will determine whether transfers have occurred
between levels in the hierarchy by reassessing categorisation at
the end of each reporting period.
6. INCOME
30 June
2019
USD
-------------- -------
Bank interest 687,401
Loan interest 9,760
Other income -
-------------- -------
697,161
-------------- -------
7. ADMINISTRATIVE AND OTHER EXPENSES
30 June
2019
USD
---------------------------------------------------------------------- -------
Administrative fees 28,253
Director & officer insurance 9,764
Directors fees 67,446
Fees payable to the Company's auditor for the review of the Company's
financial statements 25,435
Investment Management expenses 13,295
Investment Management fees 408,978
Sundry expenses 29,628
---------------------------------------------------------------------- -------
582,799
---------------------------------------------------------------------- -------
The Company has no employees and therefore no employee related
costs have been incurred.
8. TAXATION
The Company is recognised as an Investment Trust Company for
accounting periods beginning on or after 10 January 2019 and is
taxed at the main rate of 19%. An ITC may claim a tax deduction for
the distribution of income that arises from interest receipts on
the loan notes. Therefore, no corporation tax charge has been
recognised for the Company for the period to 30 June 2019.
30 June
2019
USD
----------------------------------------------------------- ----- -------
a) Tax charge in profit or loss
UK corporation tax -
b) Reconciliation of the tax charge for the period
Profit before tax 8,203
Tax at UK main rate of 19% 19% 1,559
Tax effect of:
Tax relief/designated as interest distributions (19%) (1,559)
----------------------------------------------------------- ----- -------
Tax charge for the period -% -
----------------------------------------------------------- ----- -------
9. EARNINGS PER SHARE
Earnings per share amounts are calculated by dividing the profit
or loss for the period attributable to ordinary equity holders of
the Company by the weighted average number of ordinary shares in
issue during the period. As there are no dilutive instruments
outstanding, basic and diluted earnings per share are
identical.
30 June
2019
USD
---------------------------------------------------------- -----------
Net profit attributable to ordinary shareholders 8,203
Weighted average number of ordinary shares for the period 200,000,000
---------------------------------------------------------- -----------
Earnings per share - Basic and diluted (0.000)
---------------------------------------------------------- -----------
10. INVESTMENT IN SUBSIDIARY
Place of Percentage
business ownership
------------------------------- ---------- ----------
USF Holding Corp. Delaware, US Delaware 100%
Equity acquisitions Loans: Opening Closing balance:
during the principal equity and Fair value equity and
period advanced loans movement loans
USD USD USD USD USD
---------------------------- ------------------- ---------- ----------- ---------- ----------------
USF Holding Corp. Delaware,
US 50,000,000 15,000,000 65,000,000 45,878 65,045,878
On 20 May 2019, the Company issued a loan of $15 million to its
subsidiary USF Holding Corp. The capital portion of the loan is
repayable in 7 years from 20 May 2019. The loan bears interest at a
rate of 5%, payable semi-annually in arrears.
On 28 June 2019, the Company entered into a Management Services
Agreement (MSA) with its subsidiary USF Holding Corp. The fair
value movement in the period to 30 June 2019 includes an MSA fee of
$643,197.
The Company meets the definition of an investment entity.
Therefore, it does not consolidate its subsidiaries but, rather,
recognises them as investments at fair value through profit or
loss. The Company is not contractually obligated to provide
financial support to the subsidiary and there are no restrictions
in place in passing monies up the structure.
11. TRADE AND OTHER RECEIVABLES
30 June 2019
USD
-------------------------------------- ------------
Deposit interest receivable 99,127
Intercompany loan interest receivable 9,760
Other receivables 155,053
Prepayments 36,863
VAT receivable 189,574
-------------------------------------- ------------
490,377
-------------------------------------- ------------
12. CASH AND CASH EQUIVALENTS
30 June
2019
USD
---------------------- -----------
Cash at bank 55,608,102
Deposits held at bank 75,415,872
---------------------- -----------
131,023,974
---------------------- -----------
13. TRADE AND OTHER PAYABLES
30 June
2019
USD
--------------------------------- -------
Creditors and Operating Accruals 143,048
Management Fee Accrual 408,978
--------------------------------- -------
552,026
--------------------------------- -------
4. CATEGORIES OF FINANCIAL INSTRUMENTS
30 June
2019
USD
-------------------------------------------------------- -----------
Financial assets
Financial assets at fair value through profit and loss:
Investment in subsidiary 65,045,878
Financial assets at amortised cost:
Trade and other receivables 453,514
Cash at bank 131,023,974
-------------------------------------------------------- -----------
Total financial assets 196,523,366
-------------------------------------------------------- -----------
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 552,026
-------------------------------------------------------- -----------
Total financial liabilities 552,026
-------------------------------------------------------- -----------
At the balance sheet date, all financial assets and liabilities
were measured at amortised cost except for the investment in
subsidiary which is measured at fair value as further explained in
note 16.
15. FINANCIAL RISK MANAGEMENT
The Company is exposed to certain risk through the ordinary
course of business and the Company's financial risk management
objective is to minimise the effect of these risks. The management
of risks is performed by the Directors of the Company and the
exposure to each financial risk considered potentially material to
the Company, how it arises and the policy for managing it is
summarised below:
CREDIT RISK
The Company is exposed to third party credit risk in several
instances and the possibility that counterparties with which the
Company and its subsidiaries, together the Group, contracts may
default or fail to perform their obligations in the manner
anticipated by the Group.
Counterparty Credit Risk exposure limits are determined based on
the credit rating of the counterparty. Counterparties are assessed
and monitored on the basis of their ratings from Standard &
Poor's and/or Moody's. No financial transactions are permitted with
counterparties with a credit rating of less than BBB- from Standard
& Poor's or Baa3 from Moody's unless specifically approved by
the Board.
Cash and other assets that are required to be held in custody
will be held at bank. Cash and other assets may not be treated as
segregated assets and will therefore not be segregated from the
banks own assets in the event of the insolvency of a custodian.
Cash held with the bank will not be treated as client money subject
to the rules of the FCA and may be used by the bank in the ordinary
course of its own business. The Company will therefore be subject
to the creditworthiness of the bank. In the event of the insolvency
of the bank, the Company will rank as a general creditor in
relation thereto and may not be able to recover such cash in full,
or at all.
Credit risk is managed by diversifying exposures among a
portfolio of counterparties and through applying credit limits to
those counterparties with lower credit standing.
Credit exposures may also be managed using credit
derivatives.
Cash and bank deposits are held with major international
financial institutions who each hold a Moody's credit rating of A2
or higher.
LIQUIDITY RISK
The objective of liquidity management is to ensure that all
commitments which are required to be funded can be met out of
readily available and secure sources of funding. The Company's only
financial liabilities are trade and other payables. The Company
intends to hold sufficient cash across operating accounts to meet
the working capital needs over a horizon of at least the next 6
months. Cash flow forecasts are prepared on a six-monthly basis to
assist in the ongoing analysis of daily cash flow.
The following table reflects the maturity analysis of financial
assets and liabilities.
1 to 2 2 to 5
< 1 year years years > 5 years Total
As at 30 June 2019 USD USD USD USD USD
------------------------------------ ----------- ------ ------ ---------- -----------
Financial assets
Financial assets at fair value
through profit and loss:
Investment in subsidiary* - - - 15,000,000 15,000,000
Financial assets at amortised cost:
Trade and other receivables 453,514 - - - 453,514
Cash at bank 131,023,974 - - - 131,023,974
------------------------------------ ----------- ------ ------ ---------- -----------
Total financial assets 131,477,488 - - 15,000,000 146,477,488
------------------------------------ ----------- ------ ------ ---------- -----------
Financial liabilities
Financial liabilities at amortised
cost:
Trade and other payables 552,026 - - - 552,026
------------------------------------ ----------- ------ ------ ---------- -----------
Total financial liabilities 552,026 - - - 552,026
------------------------------------ ----------- ------ ------ ---------- -----------
*excludes the equity portion of the investment in subsidiary
MARKET RISK
Market risk is the risk that the fair value or cash flows of a
financial instrument will fluctuate due to changes in market
prices. Market risk reflects interest rate risk, currency risk and
other price risks. The objective is to minimise market risk through
managing and controlling these risks to acceptable parameters,
while optimising returns. The Company uses financial instruments in
the ordinary course of business, and also incurs financial
liabilities, in order to manage market risks.
PRICE RISK
Price risk is the risk that the fair value or cash flows of a
financial instrument will fluctuate due to changes in market
prices. At 30 June 2019, the Company had no investments and the
effect of price risk on the Company was considered immaterial.
Electricity price risk refers to the potential for variations in
electricity prices, both on a spot and contract (forward) basis, to
produce variations in electricity revenues.
All assets to be acquired will be subject to PPAs with a minimum
term of 10 years. Wherever possible, the Company is to seek to
extend existing PPAs, or sign new PPAs on a forward basis. Where an
asset is not subject to a PPA for a period, The Company may hedge
the electricity price risk with electricity price / weather-linked
derivative instruments up to 100% of expected revenues for a tenor
of up to five years.
The Company intends to hold insurance policies which provide
protection from business disruption or implied shortfalls on
generation obligations in specific circumstances.
INTEREST RATE RISK
Interest Rate Risk is the risk of changes in the interest
expense for debt, or interest received on deposits, as measured in
the currency of that debt, due to movements in market interest
rates.
The Company does not have any borrowings as at 30 June 2019. The
Company may manage the cost of borrowing by borrowing using fixed
rate instruments, and/or by overlaying interest rate derivatives
against The Company's debt portfolio. Policy limits for the maximum
and minimum levels of hedging relative to the expected net debt
profile for rolling multi-year periods.
In considering whether to execute hedging transactions, the
costs and benefits of hedging will be balanced against the effects
of movements in interest rates on the debt portfolio.
The Company may be exposed to changes in variable market rates
of interest as this could impact the discount rate and therefore
the valuation of the projects as well as the fair value of the loan
to subsidiary.
CURRENCY RISK
The Net Asset Value of the Company is calculated in US Dollars
whereas the financial instruments at period end may be in other
currencies. The value in terms of USD of the financial instruments
of the Company, which may be designated in any currency, may rise
and fall due to exchange rate fluctuations of individual
currencies. Adverse movements in currency exchange rates can result
in a decrease and loss of capital.
As at 30 June 2019 the Company's net currency exposure was as
follows:
As at 30 June 2019 USD %
------------------- ------ -----
British Pound 54,008 0.03%
------------------- ------ -----
CAPITAL RISK MANAGEMENT
The capital structure of the Company at year end consists of
equity attributable to equity holders of the Company, comprising
issued capital, reserves and accumulated loss. The Company has no
return on capital benchmark, but the Board continues to monitor the
balance of the overall capital structure so as to maintain investor
and market confidence. The Company is not subject to any external
capital requirements.
16. FAIR VALUE MEASUREMENT
The level in the fair value hierarchy within which the fair
value measurement is categorised is determined on the basis of the
lowest level input that is signi cant to the fair value measurement
in its entirety. For this purpose signi cance of the inputs is
assessed against the fair value measurement in its entirety.
Assessing the signi cance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
speci c to the asset or liability. If a fair value measurement uses
observable inputs that require signi cant adjustment based on
unobservable inputs or any other signi cant unobservable inputs,
that measurement is a Level 3 measurement.
The following table analyses within the fair value hierarchy the
Company's assets measured at fair value at 30 June 2019:
Level 1 Level 2 Level 3
USD USD USD
------------------------- ------- ------- ----------
Investment in subsidiary - - 65,045,878
------------------------- ------- ------- ----------
The investment at fair value through profit or loss is a Level 3
in the fair value hierarchy and the reconciliation in the movement
of this Level 3 investment is presented below. No transfers between
levels took place during the period.
30 June
2019
USD
----------------------------------------------------- ----------
Opening balance -
Add: purchases during the year 50,000,000
Add: loans advanced 15,000,000
Total fair value movement through the profit or loss 45,878
----------------------------------------------------- ----------
Closing balance 65,045,878
----------------------------------------------------- ----------
The Company's policy is to recognise transfers into and
transfers out of fair value hierarchy levels as of the date of the
event or change in circumstances that caused the transfer.
Per the valuation policy, given the long-term nature of the
assets, the valuation inputs are assessed using long-term
historical data to reflect the asset life. Where possible,
assumptions are based on observable market and technical data.
The valuation at 30 June 2019 reflecting the status of the
investments to date was determined using the Net Assets
methodology, whereby the fair value is based on the Net Asset Value
of the investment.
This methodology involves deriving the value of an investment by
reference to the value of its net assets. This methodology is
likely to be appropriate for an investment whose value is derived
mainly from the underlying value of its assets rather than its
earnings, such as holding companies and investment businesses. In
using the Net Assets methodology to estimate the Fair Value of the
Investment, the Valuer should:
-- Derive the Gross Enterprise Value for the entity using
appropriate measures to value its assets and liabilities
(including, if appropriate, contingent assets and liabilities);
-- Deduct from the Gross Enterprise Value all amounts relating
to financial instruments ranking ahead of the highest ranking
instrument of the investor in a liquidation in order to derive the
Net Attributable Enterprise Value;
-- Apportion the Net Attributable Enterprise Value appropriately
between the relevant financial instruments.
There has been no change in the valuation methodology during the
period.
17. SHARE CAPITAL
Capital
Ordinary Share reduction Total shareholders
shares Share capital premium reserve equity
Number USD USD USD USD
-------------------------------------- ----------- ------------- ------------- ----------- ------------------
As at 10 January 2019 - - - - -
Issue of fully paid ordinary shares
at USD0.01 200,000,000 2,000,000 198,000,000 - 200,000,000
Equity issue costs - - (4,000,000) - (4,000,000)
Transfer to capital reduction reserve - - (194,000,000) 194,000,000 -
-------------------------------------- ----------- ------------- ------------- ----------- ------------------
As at 30 June 2019 200,000,000 2,000,000 - 194,000,000 196,000,000
-------------------------------------- ----------- ------------- ------------- ----------- ------------------
Share capital and share premium account and capital reduction
reserve
On incorporation the Company issued 1 ordinary share of $0.01
which was fully paid up.
On 10 April 2019, the Board approved the proposed placing and
offer for subscription (together the Placing) of up to 200 million
ordinary shares of $0.01 each in the capital of the Company at a
price of $1 per ordinary share, raising gross proceeds from the
Placing of $200 million.
Following a successful application to the High Court and
lodgement of the Company's statement of capital with the Registrar
of Companies, the Company was permitted to cancel its share premium
account. This was effected on 21 June 2019 by a transfer of the
balance of $194 million from the share premium account to the
capital reduction reserve. The capital reduction reserve is classed
as a distributable reserve and dividends to be paid by the Company
are to be offset against this reserve.
18. RESERVES
The nature and purpose of each of the reserves included within
equity at 30 June 2019 are as follows:
-- Share premium reserve: represents the surplus of the gross
proceeds of share issues over the nominal value of the shares, net
of the direct costs of equity issues and net of conversion
amount.
-- Capital reduction reserve: represents a distributable reserve
created following a Court approved reduction in capital.
-- Retained earnings represent cumulative net gains and losses
recognised in the Statement of Profit and Loss and Other
Comprehensive Income.
The only movements in these reserves during the period are
disclosed in the statement of changes in equity.
19. NET ASSET VALUE PER SHARE
Basic NAV per share is calculated by dividing the Company's net
assets as shown in the statement of financial position that are
attributable to the ordinary equity holders of the Company by the
number of ordinary shares outstanding at the end of the period. As
there are no dilutive instruments outstanding, basic and diluted
NAV per share are identical.
30 June
2019
USD
----------------------------------------------- -----------
Net assets per Statement of Financial Position 196,008,203
Ordinary shares in issue as at 30 June 2019 200,000,000
----------------------------------------------- -----------
NAV per share - Basic and diluted 0.98
----------------------------------------------- -----------
20. TRANSACTIONS WITH RELATED PARTIES
Following admission of the ordinary shares (refer to note 17),
the Company and the Directors are not aware of any person who,
directly or indirectly, jointly or severally, exercises or could
exercise control over the Company. The Company does not have an
ultimate controlling party.
Details of related parties are set out below:
NON-EXECUTIVE DIRECTORS
Directors are paid fees of GBP40,000 per annum. In addition to
this, Gillian Nott receives GBP20,000 per annum in respect of
serving as Chair of the Board and Jamie Richards receives GBP10,000
per annum in respect of serving as Chair of the Audit
committee.
Total Director's fees of $67,446 were incurred in respect of the
period with none being outstanding and payable at the period.
SUBSIDIARY
On 20 May 2019, the Company issued a loan of $15 million to its
subsidiary USF Holding Corp. Refer to note 10 for further
detail.
INVESTMENT MANAGER
The Investment Manager is entitled to management fees under the
terms of the Investment Management Agreement. The Company shall pay
to the Investment Manager an annual fee (exclusive of value added
tax, which shall be added where applicable) payable quarterly in
arrears calculated at the rate of:
Assets under management Fee based on NAV
-------------------------- ----------------
< $500 million 1.0% per annum
-------------------------- ----------------
$500 million to $1 billion 0.9% per annum
-------------------------- ----------------
> $1 billion 0.8% per annum
-------------------------- ----------------
Based on the Net Asset Value on the last Business Day of the
relevant quarter.
The Management Fee due in respect of each quarter shall be
invoiced by the Manager to the Company as at the final Business Day
of the relevant quarter, and shall be due and payable in the
following manner:
a) no later than 10 Business Days after the Payment Date, 90
percent of the Management Fee shall be paid to the Manager in cash
to such bank account as the Manager may nominate for this purpose;
and
10 percent of the Management Fee shall be paid to the Manager or
an Associate (as directed by the Manager) in the form of Ordinary
in accordance with the provisions stated in the Investment
Management Agreement.
For the avoidance of doubt, where there are C Shares in issue,
the advisory fee will be charged on the Net Asset Value
attributable to the Ordinary Shares and C Shares respectively.
A management fee of $408,978 was incurred during the period and
remained payable at 30 June 2019.
In addition to the management fee, the Manager shall also be
entitled to payment of the following:
a) a fee for any successful arrangement of debt services payable
at a rate of 0.5% of the debt face value; and
b) a fee for any oversight of asset construction services
payable at market rates, negotiated on an arms' length basis and
subject to the approval of the Board.
c) no debt services fees and no asset construction services fees were earned during the period.
21. CAPITAL COMMITMENTS
The Company had no contingencies and no other significant
capital commitments at the reporting date.
22. POST BALANCE SHEET EVENTS
On 18 June 2019, the Company entered exclusivity with US-based
solar developer Cypress Creek Renewables to acquire a portfolio of
utility-scale solar power projects located in North Carolina and
Oregon.
On 2 September 2019, the Company closed the acquisition and
financing of 100% of the cash equity interests in the 128 MW(DC)
Milford Solar Project. Construction is expected to begin
immediately with full commercial operations expected before the end
of 2020. The Company will fund the acquisition and construction of
Milford with initial equity of approximately $30m alongside
non-recourse construction debt provided by Zions Bancorporation
N.A. and KeyBank N.A. as Joint Lead Arrangers. Once complete,
approximately $50m of the construction debt will convert to
non-recourse senior debt provided by the same lender group. Wells
Fargo, an established and consistent leader in renewable energy and
cleantech financing since 2006, has committed to provide tax equity
funding for Milford upon achievement of construction
milestones.
On 18 September 2019, the Board approved an interim dividend of
0.41 cents per share for the period ending 30 June 2019. This
represents an annualized dividend yield of 2% when measured against
the initial issue price of $1 per share. The dividend will be paid
on 8 November 2019.
There were no further events after reporting date which requires
disclosure.
14. Directors and advisers
Directors Administrator and secretary
Appointed: 15 February 2019 JTC (UK) Limited
Gillian Nott 7th Floor
Jamie Richards 9 Berkeley Street
Rachael Nutter London
Josephine Tan W1J BDW
Registered office Joint Corporate Brokers
7th Floor Fidante Capital (until 1 July
9 Berkeley Street 2019)
London 1 Tudor Street
W1J BDW London
EC4Y 0AH
Cenkos Securities PLC (from 2
July 2019)
6, 7 & 8 Tokenhouse Yard
London
EC2R 7ASac
Macquarie Capital (Europe) Limited
(from 2 July 2019)
Ropemaker Place
28 Ropemaker Street
London
EC2Y 9HD
Investment Manager
New Energy Solar Manager Pty Limited
Level 15
100 Pacific Highway
North Sydney
NSW 2060
Legal Advisers
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
EC2A 2EG
[1] Target yield is 5.5% once fully operational and on a fully
invested and geared basis. An initial target annual dividend of
2-3% on the IPO issue price in respect of the period from listing
until 31 March 2020 or, if later, when all the Solar Power Assets
are fully operational.
[2] UK utility scale solar includes all installed solar PV with
capacity of 5MWDC and above.
[3] CO2 Emission Reduction is calculated using the United States
Environmental Protection Agency's "Avoided Emissions and Generation
Tool", which estimates the regional displacement of fossil fuels
for a new solar PV installation.
[4] The stated strategy of the Company is to deliver stable
returns to shareholders through investing in a diversified
portfolio of utility scale solar power plants and associated
infrastructure, which may include transmission and storage (e.g.
batteries) assets which will typically be co-located with the solar
power plant (together, Solar Power Assets).
[5] UK utility scale solar includes all installed solar PV with
DC capacity of 5MW(DC) and above
[6] For projects placed in service before the end of 2023, the
ITC is 30%, 26%, or 22% if the projects begin construction in 2019,
2020, or 2021 respectively. For projects placed in service after
the end of 2023, the ITC is 10%.
[7] CO2 Emission Reduction is calculated using the United States
Environmental Protection Agency's "Avoided Emissions and Generation
Tool", which estimates the regional displacement of fossil fuels
for a new solar PV installation.
[8] United Nations Sustainable Development Goals: The
Sustainable Development Agenda
(https://www.un.org/sustainabledevelopment/development-agenda/)
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SFDFAUFUSEEU
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