TIDMAEET
RNS Number : 5144Z
Aquila Energy Efficiency Trust PLC
15 September 2022
LEI No: 213800AJ3TY3OJCQQC53
AQUILA ENERGY EFFICIENCY TRUST PLC
HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHSED 30 JUNE
2022
INVESTMENT OBJECTIVE
AQUILA ENERGY EFFICIENCY TRUST PLC (THE "COMPANY" OR "AEET")
SEEKS TO GENERATE ATTRACTIVE RETURNS, PRINCIPALLY IN THE FORM OF
INCOME DISTRIBUTIONS BY INVESTING IN A DIVERSIFIED PORTFOLIO OF
ENERGY EFFICIENCY INVESTMENTS.
Financial Highlights
At 30 June At 31 Dec
Financial information 2022 2021
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Net asset value ("NAV") per Ordinary Share (pence)(1) 97.90 97.38
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Ordinary Share price (pence) 79.00 95.75
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Ordinary Share price discount to NAV(1) (19.3%) (1.7%)
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Net assets in GBP million 97.90 97.38
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Ongoing charges(1) 1.44% 0.9%
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Performance summary % change(2)
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For the six months ended 30 June 2022
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NAV total return per Ordinary Share(1) 0.5%
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Share price total return per Ordinary Share(1) (17.5%)
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Alternative Performance Measures ("APMs")
The disclosures as indicated in footnote 1 below are considered
to represent the Company's APMs. Definitions of these APMs and
other performance measures used by the Company, together with how
these measures have been calculated, can be found further below in
this Half-Yearly Report.
1 These are alternative performance measures.
2 Total returns in sterling for the six months to 30 June 2022.
STRATEGIC REPORT
CHAIR'S STATEMENT
I am pleased to present my Chair's Statement for the Company's
Half-yearly Financial Report ("Half-yearly Report") which covers
the six months to 30 June 2022 (the "Period"). The Company's
inaugural Annual Report for the period 9 April 2021 to 31 December
2021 was published on 24 June 2022 (the "2021 Annual Report").
Accordingly, there is some overlap in contents of the 2021 Annual
Report and this Half-Yearly Report.
Investment Performance
The Company's NAV as at 30 June 2022 was GBP97.9m (GBP97.4m as
at 31 December 2021), reflecting a small increase of +0.5%.
However, the Company's share price has recorded total returns in
sterling terms of -17.5%. The disappointing share price performance
has yet to reflect the increasing level of commitments that the
Company has achieved post Period end.
Commitments and Deployment
The Board is pleased to report that commitments had increased to
GBP32.3m as at 30 June 2022 and to GBP54.6m as at 31 August 2022.
However, deployment frequently takes place some time after a
contractual commitment has been made and requires the fulfilment of
conditions subsequent. The Board maintains close communication with
the Investment Adviser and monitors progress through monthly
reporting, with those reports reviewed independently by Complete
Strategy Ltd. The Board has welcomed the addition of two
origination specialists to the investment advisory team, and value
their contribution to the increase to the speed of origination and
execution for new investments.
Dividend
In light of slower than anticipated deployment, the Company does
not expect that its stated dividend target of 3.5 pence per
Ordinary Share for the financial year ending 31 December 2022 will
be fully covered by earnings. However, the Board has decided that
it will retain this dividend target for the current financial year
and meet any earnings shortfall through paying out of distributable
reserves.
The Board has therefore declared an interim dividend for the
quarter ended 30 June 2022 of 1.00 pence per Ordinary Share,
in-line with this target. This dividend will be paid to
shareholders on 31 October 2022.
Board
The Board is actively continuing the recruitment process for an
additional non-executive director, mindful of our commitment to
diversity and inclusion. Nick Bliss was appointed as Chair of the
Management Engagement Committee on 11 August 2022.
General Meeting
Shareholders will have the opportunity to vote on an ordinary
resolution on the continuation of the Company at a General Meeting
to be held in February 2023. More details of the February 2023
General Meeting will be announced closer to the time.
Outlook
The Board firmly believes that AEET has a differentiated
pan-European investment strategy that offers attractive
opportunities now and in the future, and has the potential to
provide Shareholders with an attractive risk-return profile, while
achieving a positive environmental impact for the real economy and
society. The pace of commitments is increasing, and your Board will
be actively engaged with the Investment Adviser to support them to
reach deployment targets and grow the Company.
Miriam Greenwood OBE DL
Chair of the Board
14 September 2022
INVESTMENT ADVISER`S REPORT
DEPLOYMENT UPDATE
The Company published its first annual report for the period
since incorporation (9 April 2021 to 31 December 2021) on 24 June
2022. After a slow start, there has been positive momentum in
commitments and deployment. As of 31 December 2021, total
commitments were at GBP14.1m with total deployment at GBP9.3m. As
of 31 August 2022, total commitments were at GBP54.6m and total
income generating deployed capital was at GBP32.1m, with an average
project yield of 8.1% over all investments.
PORTFOLIO OVERVIEW
As of 31 August 2022, AEET has a portfolio of 19 investments
that deliver reduced primary energy consumption (PEC) and other
economic savings and benefits, such as improved air quality. These
investments include:
Residential Energy Efficiency in Italy
AEET has committed a further GBP6.1m of which GBP1.8m has been
deployed in a project that invests in a cluster of 32 energy
efficiency projects for small residential buildings and
condominiums (including insulation, energy efficient heating
systems and other measures). These projects are supported by an
income tax (IRPEF) deduction incentive of up to 110%
("Superbonus"), which allows those doing restructuring and
upgrading work to enjoy deductions that will substantially reduce
the costs incurred for such work qualifying for the Superbonus
incentive scheme.
Solar PV Investments in Spain
In line with its pan-European investment strategy, AEET has
successfully committed GBP18.7m to its first four energy efficiency
projects in Spain including:
-- an investment of GBP2.8m in a 3.83MWp roof mounted solar PV
plant for self-consumption located near Tarragona,
-- an investment in a cluster of three solar PV plants for
self-consumption located in Zaragoza, Aragon, totalling 0.4MWp and
comprising two ground mounted and one roof mounted plants,
-- GBP9.4m has been committed to a cluster of up to 11 solar PV
plants totalling 13 MWp for industrial and commercial companies
originated by Solarnub, a fast-growing trading management platform
for solar companies.
Since the Company's trading update on 25 July 2022, AEET has
made a further investment of GBP6.1m to finance an 8MWp
ground-mounted solar PV project, with revenues generated through
off-site Power Purchase Agreements to commercial clients around
Borja (Zaragoza).
UK CHP Investments
The Company has invested in CHP projects in the UK for a total
investment value of GBP1.9m - developed by three separate energy
service companies (ESCOs) with whom additional investments are
expected to be made. One investment is for a project to be
installed at the manufacturing facility of food producer, Vale of
Mowbray, which has entered into a 15-year energy supply agreement.
This project has an investment tenure of 7 years.
OUTLOOK FOR FURTHER INVESTMENT COMMITMENTS
The Investment Adviser remains confident that the Company will
be able to commit substantially all the capital raised at its IPO
before the end of this calendar year and target full deployment in
Q1 2023. There remains a substantial pipeline of investment
opportunities, many of which are with ESCOs with whom the Company
has made investment commitments.
Market conditions remain supportive for investment in energy
efficiency measures as EU energy prices have surged from January
2021 until April 2022 by 260% on average. This has accelerated and
will continue to accelerate the adoption and implementation of
energy efficiency measures and decentralized energy generation.
Rising energy prices increase the potential savings of such energy
efficiency projects, resulting in shorter payback periods and
attractive returns for investors in line with target returns of
7.5%-9.5%.
Furthermore, increasing interest rates and economic uncertainty
also increases reliance on third-party financing for energy
efficiency projects, which are quite often considered non-core
investments.
Energy efficiency is a main pillar of the energy transition.
With the recent need to increase European energy independence,
energy efficiency is now a recognised mechanism to achieve this.
The European Commission's "Fit for 55" package (July 2021) is aimed
at making the green deal a reality by reducing GHG (Green House
Gas) emissions by 55% by 2030. With the war in Ukraine, a new
package "RePower EU" (March 2022) adds to this, with the ambitious
target of becoming completely independent from Russian Gas imports
by 2027. In the period from 2010 to 2019 EU imports of Russian gas
increased by almost 40%*. Energy efficiency measures yield
immediate results by reducing or replacing the demand for Russian
fuel completely, for example, through heat pumps or biomass. In
this environment, synergies between the private sector and
government subsidy programmes are of central importance. One
example is the Italian "Superbonus 110", which has already given a
strong boost to the implementation of efficiency measures in the
residential segment in Italy in recent years.
*Source: Eurostat; EU Commission (2022)
ENVIRONMENTAL AND SOCIAL GOVERNANCE
Investment Approach and ESG Approach
AEET's goal is to generate attractive returns for investors by
reducing Primary Energy Consumption ("PEC"). AEET's investments
positively impact the environment by reducing the amount of carbon
dioxide produced, by decreasing PEC and by increasing the amount of
renewable energy used. The synergies generated by the reduction of
PEC and simultaneously using renewable energy sources further
decrease CO(2) emissions.
This is reflected across the investment philosophy and approach,
including the Company's investment adviser, Aquila Capital
Investmentgesellschaft mbH ("Investment Adviser" or "Aquila"), who
is dedicated to the green energy transition. The Company is
committed to be a responsible investor, ensuring that
environmental, social and governance criteria are incorporated into
day-to-day investment decisions as well as generating a positive
impact for society.
AEET's investment approach is focused on investments in energy
efficiency projects located primarily in Europe. These investments
are predominantly into proven technologies that deliver energy
savings for commercial, industrial, and public sector buildings.
AEET seeks to invest in projects for the long term with a focus on
optimising and improving the assets' PEC.
Technologies typically include:
-- LED Lighting System
-- LED Street Lighting System
-- Solar PV
-- Biomass Boilers
-- HVAC/Buildings
-- Smart Metering/Submetering
-- Electrification of transportation vehicles (batteries)
Environmental Impact
The Company's investment approach is focused on reducing PEC,
which should lead to significant reductions in carbon dioxide
emissions. In addition, local production of energy (CHP, Biomass
Boilers, Solar PV) reduces transportation energy losses and grid
over-utilisation. Smart Meters and other control technologies
enable a better visibility and management of energy and therefore
represent a basis for energy savings.
All projects are managed within the guidelines of local,
regional, and national environmental laws to adhere to the DNSH
("do no significant harm") principles. Aquila Capital ensures all
required regulations and corresponding approvals are completed
prior to the acquisition of the assets (planning permission).
Social Impact
Energy efficiency measures not only reduce PEC but typically
also increase the life quality and health aspects for different
stakeholders, such as employees, users of public facilities and/or
private individuals. This is mainly achieved through advanced
solutions for lighting, heating, cooling and ventilation and the
associated control units.
All project developers are required to adhere to local,
regional, and national health & safety laws, to train and
educate employees accordingly in order to make sure casualties and
injuries are avoided.
The Company incorporates Aquila Capital's ESG policy, which
excludes suppliers and manufacturers that do not meet Aquila
Capital's criteria (exclusion of sectors/subsectors, companies that
use unfavourable labour conditions etc.).
For all counterparties a rating is performed (in collaboration
with a third-party rating agency) assessing creditworthiness of the
client as well as a 'Know Your Client' check for the relevant
parties involved to increase transparency of the counterparties'
activities.
Governmental Impact
All our business partners are required to adhere to the
requirements of the relevant social security and tax
authorities.
Where required by local, regional and/or national authorities
our business partner need to provide evidence that they adhere to
anti bribery and corruption laws.
Due Diligence
The Investment Advisor performs detailed ESG due diligence for
each asset prior to investment. The investment management team
follows a structured screening, due diligence and investment
process which is designed to ensure that investments are reviewed
and compared on a consistent basis. Execution of this process is
facilitated by the team's deep experience in energy efficiency
project investing. As part of this process, the Investment Adviser
will, as relevant for each investment, consider:
-- Total PEC reduction, and implied greenhouse gas emissions reduced and/or avoided; and/or
-- Total energy production from renewable and non-renewable sources.
Governance Framework
AEET benefits from an independent Board of Directors, as well as
Sanne Fund Management (Guernsey) Limited (part of Sanne Group)
functioning as the Alternative Investment Fund Manager ("AIFM").
The Board of Directors supervise the AIFM, which is responsible for
making recommendations in relation to any investment proposals put
forward by the Investment Adviser. The Investment Adviser is fully
regulated and supervised by BaFin in Germany.
The Company has established procedures to deal with any
potential conflicts of interest in circumstances where Aquila
Capital (or any affiliate) is advising both the AIFM (for the
Company) and other Aquila Capital managed funds who are
counterparties to the Company. In the context of an investment
decision, these procedures may include a fairness opinion in
relation to the valuation of an investment, which is obtained from
an independent expert.
Monitoring of ESG:
The Company's commitment to and compliance with the highest ESG
standards is monitored on a continuous basis throughout the
lifecycle of investments, including:
-- Ongoing monitoring of the PEC based on the energy consumption
and deriving from that the CO(2) savings, where appropriate,
monitoring additional environment and ESG relevant developments
both at the portfolio and asset level
-- Annual reporting, including ESG aspects, to relevant
stakeholders including ad-hoc reporting of any material and urgent
issues identified in the monitoring process.
-- Semi-annual ESG risk reporting to the Board.
AEET has been awarded the Green Economy Mark from the London
Stock Exchange. The Green Economy Mark identifies London-listed
companies and funds that generate between 50% and 100% of total
annual revenues from products and services that contribute to the
global green economy.
Aquila Capital Investmentgesellschaft mbH
Investment Adviser
14 September 2022
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management
Report in accordance with the Financial Conduct Authority ("FCA")
Disclosure Guidance and Transparency Rules ("DTR"). The Directors
consider that the Chair's Statement and the Investment Adviser's
Report in this Half-yearly Report, provide details of the important
events which have occurred during the six months ended 30 June 2022
("Period") and their impact on the financial statements. The
statement on related party transactions and the Directors'
Statement of Responsibility (below), the Chair's Statement and the
Investment Adviser's Report together constitute the Interim
Management Report of the Company for the Period. The outlook for
the Company for the remaining six months of the year ending 31
December 2022 is discussed in the Chair's Statement and the
Investment Adviser's Report.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Company are
summarised below:
(i) Counterparty /Credit
(ii) Concentration Risk
(iii) Environmental /Social /Governance (ESG)
(iv) Premium/Discount Management
(v) Interest Rates/ Inflation
(vi) Exchange Rates
(vii) Supply chain and inflation
(viii) Equity Market Volatility
(ix) Investment Performance
(x) Pipeline, Investment Deployment and Cash Drag
(xi) Competition for Assets
(xii) Changes to subsidies or other support mechanisms for the Company's investments
(xiii) Inappropriate Investment Advice
(xiv) IT Security
(xv) Portfolio Valuation
(xvi) Regulatory Risk
The Board also identified 'Act of War /Sanctions' as an emerging
risk to the Company.
The Company's Annual Report for the period ended 31 December
2021 contains more detail on the Company's principal risks and
uncertainties, including the Board's ongoing process to identify,
and where possible mitigate, the risks. The Annual Report can be
found on the Company's website.
Related Party Transactions
Details of the investment advisory arrangements were provided in
the Annual Report. There have been no changes to the related party
transactions described in the Annual Report that could have a
material effect on the financial position or performance of the
Company. Amounts payable to the Investment Adviser in the period
are detailed in the unaudited Statement of Profit or Loss and
Comprehensive Income in this Half-Yearly Report.
Going Concern
The Company continues to meet day-to-day liquidity needs through
its cash resources. The Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for at least twelve months from the date of this
document.
In reaching this conclusion, the Directors have considered the
Company's cash position, income and expense flows. The Company's
net assets at 30 June 2022 were GBP97.9million. As at 30 June 2022,
the Company held GBP77.0million in cash and cash equivalents. The
total expenses for the period ended 30 June 2022 was
GBP0.38million, which represented approximately 0.39% of average
net assets during the period. At the date of approval of this
document, based on the aggregate of investments and cash held, the
Company has substantial operating expenses cover.
The major cash outflows of the Company are the payment of
dividends and costs relating to the acquisition of new investments.
The Directors are confident that the Company has sufficient cash
balances to fund commitments to acquisitions should they become
payable.
In light of the secondary effects of the COVID-19 pandemic and
the war in Ukraine, the Directors have considered each of the
Company's investments. The Directors do not foresee any immediate
material risk to the Company's investment portfolio. A prolonged
and deep market decline could lead to falling values to the
underlying business or interruptions to cashflow, however, the
Company currently has more than sufficient liquidity available to
meet any future obligations.
Following the slower than anticipated investment deployment and
the consequential appointment of an independent consultant to
review the Company's investment strategy, the results of this
review were announced on 21 April 2022. The review concluded that
the market opportunity for the Company remains attractive and that
the actions to be taken in relation to the execution of the
investment strategy and other changes provided an improved basis
for the Company to execute its investment objective, with full
deployment targeted by the end of December 2022 or early 2023. In
reaching this conclusion, the Directors consulted with shareholders
who, overall, were supportive of the continuation of the Company
with these changes. An element of the consultation process was the
Directors' proposal to bring forward the Initial Continuation
Resolution to February 2023, or earlier if appropriate. A further
resolution will be put at the February 2023 General Meeting,
conditional upon the Continuation resolution being passed, to amend
the Articles of Association of the Company so that a Continuation
vote will be put at the AGM of the Company to be held in 2026 and
every four years thereafter, as envisaged in the May 2021 IPO
Prospectus. If any Continuation resolution put to shareholders is
not passed, then the Directors shall, within six months of such
Continuation resolution not being passed, put proposals to
shareholders for the reconstruction, reorganisation or liquidation
of the Company. Taking into account the factors above, the
Directors have assessed that the Initial Continuation Resolution
will pass, however, the Directors recognize that the outcome of
this is not yet known and therefore creates material uncertainty
around going concern, due to the event falling within 12-month
period from the approval of this Interim Report. The Directors note
that these conditions indicate the existence of material
uncertainty which may cast significant doubt about the Company's
ability to continue as a going concern.
Based on the assessment and considerations above, the Directors
have concluded that the financial statements of the Company should
be prepared on a going concern basis.
Directors' Statement of Responsibility
The Directors confirm to the best of their knowledge that:
-- the condensed set of financial statements contained within
the Interim Financial Report has been prepared in accordance with
IAS 34 Interim Financial Reporting and gives a true and fair view
of the assets, liabilities, financial position and return of the
Company;
-- the Interim Management Report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.7R;
and
-- the Interim Financial Report includes a fair review of the
information required by Disclosure and Transparency Rule
4.2.8R.
Miriam Greenwood OBE DL
Chair of the Board of Directors
14 September 2022
FINANCIAL STATEMENTS
STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS TO 30 JUNE 2022
Six months
to
30 June
2022
(Unaudited)
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
-------------------------------------------- ----- ------- ------- -----------
Unrealised gains on investments 3 - 946 946
Net foreign exchange gains - 61 61
Investment Income 4 314 - 314
Investment Advisory fees 5 (112) - (112)
Other expenses (581) - (581)
-------------------------------------------- ----- ------- ------- -----------
Gain on ordinary activities before taxation (379) 1,007 628
Taxation - - -
-------------------------------------------- ----- ------- ------- -----------
Gain on ordinary activities after taxation (379) 1,007 628
Return per Ordinary Share 6 (0.38p) 1.00p 0.63p
-------------------------------------------- ----- ------- ------- -----------
The total column of the Statement of Profit or loss and
Comprehensive Income is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period.
Return on ordinary activities after taxation is also the "Total
profit or loss and comprehensive income for the period".
The accompanying notes form part of these financial
statements.
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
As at
As at 31 December
30 June 2022 2021
(Unaudited) (Audited)
Notes GBP'000 GBP'000
------------------------------------------------- ----- ------------ -----------
Assets
Fixed assets
Investments held at fair value through profit or
loss 3 13,314 12,307
------------------------------------------------- ----- ------------ -----------
Current assets
Trade and other receivables 8,134 5,274
Cash and cash equivalents 76,953 80,129
------------------------------------------------- ----- ------------ -----------
85,087 85,403
------------------------------------------------- ----- ------------ -----------
Creditors: amounts falling due within one year (505) (329)
------------------------------------------------- ----- ------------ -----------
Net current assets 84,582 85,074
------------------------------------------------- ----- ------------ -----------
Net assets 97,896 97,381
------------------------------------------------- ----- ------------ -----------
Capital and reserves: equity
Share capital 8 1,000 1,000
Share premium - -
Special reserve 96,887 97,000
Capital reserve 961 (46)
Revenue reserve (952) (573)
------------------------------------------------- ----- ------------ -----------
Shareholders' funds 97,896 97,381
------------------------------------------------- ----- ------------ -----------
Net asset value per Ordinary Share 9 97.90p 97.38p
------------------------------------------------- ----- ------------ -----------
No. of ordinary shares in issue 100,000,000 100,000,000
------------------------------------------------- ----- ------------ -----------
Approved by the Board of Directors on and authorised for issue
on 14 September 2022 and signed on their behalf by:
Miriam Greenwood OBE DL
Chair of the Board of Directors
Aquila Energy Efficiency Trust PLC is registered in England and
Wales with number 13324616.
The accompanying notes form part of these financial
statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS TO 30 JUNE 2022 (UNAUDITED)
Share
Share premium Special Capital Revenue
capital account reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------- ------- ------- ------- ------- -------
Opening equity as at 1 January 2022 1,000 - 97,000 (46) (573) 97,381
Shares issued in period - - - - - -
Share issue costs - - (113) - - (113)
Profit/(Loss) for the period - - - 1,007 (379) 628
------------------------------------ ------- ------- ------- ------- ------- -------
Closing equity as at 30 June 2022 1,000 - 96,887 961 (952) 97,896
------------------------------------ ------- ------- ------- ------- ------- -------
The accompanying notes form part of these financial
statements.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS TO 30 JUNE 2022
Six months
to
30 June
2022
(Unaudited)
Notes GBP'000
----------------------------------------------- ----- -----------
Operating activities
Profit on ordinary activities before taxation 628
Adjustment for unrealised gains on investments (946)
Increase in trade and other receivables (2,860)
Increase in creditors 176
----------------------------------------------- ----- -----------
Net cash flow used in operating activities (3,002)
----------------------------------------------- ----- -----------
Investing activities
Purchase of investments 3 (61)
----------------------------------------------- ----- -----------
Net cash flow used in investing activities (61)
----------------------------------------------- ----- -----------
Financing activities
Share issue costs (113)
Net cash flow used in financing activities (113)
----------------------------------------------- ----- -----------
Increase in cash and cash equivalents (3,176)
----------------------------------------------- ----- -----------
Cash and cash equivalents at start of period 80,129
----------------------------------------------- ----- -----------
Cash and cash equivalents at end of period 76,953
----------------------------------------------- ----- -----------
The accompanying notes form part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD TO 30 JUNE 2022
1. GENERAL INFORMATION
Company information
Aquila Energy Efficiency Trust Plc (the "Company") is a public
Company limited by shares incorporated in England and Wales on 9
April 2021 with registered number 13324616. The Company is
domiciled in England and Wales. The Company is a closed-ended
investment company with an indefinite life. The Company commenced
its operations on 2 June 2021 when the Company's Ordinary Shares
were admitted to trading on the London Stock Exchange. The
Directors intend, at all times, to conduct the affairs of the
Company as to enable it to qualify as an investment trust for the
purposes of section 1158 of the Corporation Tax Act 2010, as
amended.
The registered office address of the Company is 6th Floor, 125
London Wall, London, EC2Y 5AS.
The Company's investment objective is to generate attractive
returns, principally in the form of income distributions, by
investing in a diversified portfolio of Energy Efficiency
Investments.
Sanne Fund Management (Guernsey) Limited acts as the Company's
Alternative Investment Fund Manager (the "AIFM") for the purposes
of Directive 2011/61/EU on alternative investment fund managers
("AIFMD").
The Company's Investment Adviser is Aquila Capital
Investmentgesellschaft mbH authorised and regulated by the German
Federal Financial Supervisory Authority.
Sanne Fund Services (UK) Limited (the "Administrator") provides
administrative and company secretarial services to the Company
under the terms of an administration agreement between the Company
and the Administrator.
2. BASIS OF PREPARATION
The financial statements included in this Interim Report have
been prepared in accordance with IAS 34 "Interim Financial
Reporting". The accounting policies, critical accounting
judgements, estimates and assumptions are consistent with those
used in the latest audited financial statements to 31 December 2021
and should be read in conjunction with the Company's annual audited
financial statements for the period ended 31 December 2021. The
financial statements for the period ended 31 December 2021 have
been prepared in accordance with the UK adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006. The financial statements have been prepared on
the historical cost basis, as modified for the measurement of
certain financial instruments at fair value through profit or
loss.
The interim financial statements have also been prepared as far
as is relevant and applicable to the Company in accordance with the
Statement of Recommended Practice ("SORP") issued by the
Association of Investment Companies ("AIC") issued in July
2022.
These financial statements do not include all information and
disclosures required in the annual financial statements and should
be read in conjunction with the Company's annual financial
statements as of 31 December 2021. The audited annual accounts for
the period ended 31 December 2021 have been delivered to the
Companies House. The audit report thereon was unmodified.
The functional currency of the Company is Sterling. Accordingly,
the financial statements are presented in Sterling rounded to the
nearest thousand, unless otherwise stated. As at period end, the
rate of Euro against Sterling is at 0.86.
Accounting for Subsidiary
The Company owns 100% of its subsidiary Attika Holdings Limited
("HoldCo"), the registered office address of the HoldCo is Leaf B,
20th Floor, Tower 42, Old Broad Street, London, England, EC2N 1HQ.
The Company has acquired certain Energy Efficiency Investments
through its investment in the HoldCo. The Company finances the
HoldCo through a mix of SPV investments, equity and direct
investments. The Company meets the definition of an investment
entity as described by IFRS 10. Under IFRS 10 an investment entity
is required to hold subsidiaries at fair value through profit or
loss and therefore does not consolidate the subsidiary.
The HoldCo is an investment entity and as described under IFRS
10 values its SPVs investments at fair value through profit or
loss.
Going concern
The Directors have adopted the going concern basis in preparing
the financial statements. Details of the Directors' assessment of
the going concern status of the Company, which considered the
adequacy of the Company's resources and the impacts of the COVID-19
pandemic and the Ukraine war, are given within this Half-Yearly
Report.
Segmental reporting
The Chief Operating Decision Maker, which is the Board, is of
the opinion that the Company is engaged in a single segment of
business, being a Company investing in a diversified portfolio of
Energy Efficiency Investments to generate investment returns. The
financial information used by the Chief Operating Decision Maker to
manage the Company presents the business as a single segment.
Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires the
application of estimates and assumptions which may affect the
results reported in the financial statements. Estimates, by their
nature, are based on judgement and available information.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying value of assets and
liabilities are those used to determine the fair value of the
investments as disclosed in note 3 to the financial statements.
The Directors have concluded that the Company meets the
definition of an investment entity as defined in IFRS 10.
The key assumptions that have a significant impact on the
carrying value of the Company's investments and underlying
investments in SPVs are the contractual period of the assets, the
discount factors, the rate of inflation, the price at which the
power and associated benefits can be sold and the amount of
electricity the assets are expected to produce.
The discount factors are subjective and therefore it is feasible
that a reasonable alternative assumption may be used resulting in a
different value. The discount factors applied to the cashflows are
reviewed semi-annually by the Investment Adviser to ensure they are
at the appropriate level. The Investment Adviser will take into
consideration market transactions, where of similar nature, when
considering changes to the discount factors used.
The operating costs of the operating companies are frequently
partly or wholly subject to indexation and an assumption is made
that inflation will increase at a long-term rate.
Energy Efficiency investments are not sensitive to fluctuations
in future revenues if a fixed indexation clause is applied to its
cashflow schedule.
Comparatives
As the Company began trading on 2 June 2021, there are no
comparatives for the six months to 30 June 2022. The financial
information for the period ended 31 December 2021 has been
extracted from the audited Annual Report and Accounts for the
period ended 31 December 2021.
3. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
As at 31 December 2021
As at 30 June 2022 (Unaudited) (Audited)
SPV Equity SPV Equity
investments investments Total investments investments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
(a) Summary of valuation
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
Investments at fair value
through profit or loss 12,878 436 13,314 12,154 153 12,307
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
12,878 436 13,314 12,154 153 12,307
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
(b) Movements during the
period
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
Opening balance of investments,
at cost 12,324 - 12,324 - - -
Additions, at cost 61 - 61 12,324 - 12,324
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
Cost of investments 12,385 - 12,385 12,324 153 12,324
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
Revaluation of investments
to fair value:
Unrealised movement in fair
value of investments 493 436 929 (170) 153 (17)
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
Balance of capital reserve
- investments held 493 436 929 (170) 153 (17)
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
Fair value of investments 12,878 436 13,314 12,154 153 12,307
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
(c) Gains/(loss) on investments
in period (per Statement
of Comprehensive Income)
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
Movement during the period
on unrealised valuation
of investments held 663 283 946 (170) 153 (17)
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
Gains/(losses) on investments 663 283 946 (170) 153 (17)
-------------------------------- ------------ ----------- ------- ----------- ----------- -------
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level.
The level of fair value hierarchy within the financial assets or
financial liabilities is determined on the basis of the lowest
level input that is significant to the fair value measurement.
Financial assets and financial liabilities are classified in their
entirety into only one of the following 3 levels:
Level 1
The unadjusted quoted price in an active market for identical
assets or liabilities that the entity can access at the measurement
date.
Level 2
Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data) for the asset or
liability, either directly or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
The classification of the Company's investments held at fair
value is detailed in the table below:
As at 30 June 2022 (Unaudited)
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- -------- -------- ------- -------
Investments at fair value through profit
or loss - - 13,314 13,314
----------------------------------------- -------- -------- ------- -------
- - 13,314 13,314
----------------------------------------- -------- -------- ------- -------
As at 31 December 2021 (Audited)
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments at fair value through profit
or loss - - 12,307 12,307
----------------------------------------- -------- -------- -------- --------
- - 12,307 12,307
----------------------------------------- -------- -------- -------- --------
Due to the nature of the investments, they are always expected
to be classified as level 3. There have been no transfers between
levels during the period ended 30 June 2022 (31 December 2021:
none).
The movement on the Level 3 unquoted investments during the
period is shown below:
As at
As at 31 December
30 June
2022 2021
(Unaudited) (Audited)
(GBP'000) (GBP'000)
Opening balance 12,307 -
Additions during the period 61 12,324
Unrealised gains/(losses) on investments adjustments 946 (17)
Closing balance 13,314 12,307
----------------------------------------------------- ----------- -----------
Valuation Methodology
SPV investments
The Investment Adviser has carried out fair market valuations of
the SPV investments as at 30 June 2022 and the Directors have
satisfied themselves as to the methodology used, key assumptions
applied, and the valuation. SPV investments are measured at fair
value through profit or loss and are valued using the IFRS 13
framework for fair value measurement. The valuation methodology
used is based on the International Private Equity and Venture
Capital Valuation Guidelines (IPEV).
The fair value for the SPV investments is derived from the
present value of the investment's expected future cash flows, using
reasonable assumptions (market knowledge, risk free rate and
country risk) and forecasts for revenues and operating costs, and
an appropriate discount rate. The discount rate used is based on
the project IRR.
Equity investments
The Company owns 100% of its subsidiary Attika Holdings Limited
("HoldCo"). The Company meets the definition of an investment
entity as described by IFRS 10, as such the Company's investment in
the HoldCo is valued at fair value. HoldCo's working capital
balances and fair value of investments are included in calculating
fair value of the HoldCo.
4. INVESTMENT INCOME
Six months
ended
30 June
2022
(Unaudited)
Income from investments (GBP'000)
--------------------------- -----------
Investment interest income 186
Bank interest income 128
--------------------------- -----------
Total Income 314
--------------------------- -----------
5. INVESTMENT ADVISORY FEES
Six months ended 30 June
2022
(Unaudited)
Revenue Capital Total
GBP'000 GBP'000 GBP'000
------------------------- ------- ----------- -------
Investment Advisory fees 112 - 112
------------------------- ------- ----------- -------
Under the Investment Advisory Agreement, the following fee is
payable to the Investment Adviser:
(i) 0.95 per cent. per annum of Committed Capital of the Company
up to and including GBP500 million; and
(ii) 0.75 per cent. per annum of Committed Capital of the
Company above GBP500 million.
6. RETURN PER ORDINARY SHARE
Return per Ordinary Share is based on the net gains for the
period of GBP628,000 attributable to the weighted average number of
Ordinary Shares in issue of 100,000,000 in the period. Revenue loss
and capital gains are (GBP379,000) and GBP1,007,000,
respectively.
7. TAXATION
Six months ended 30 June
2022
(Unaudited)
Revenue Capital Total
GBP'000 GBP'000 GBP'000
------------------------------- ------- ----------- -------
Corporation tax - - -
------------------------------- ------- ----------- -------
Total tax charge for the period - - -
------------------------------- ------- ----------- -------
Investment companies which have been approved by the HM Revenue
& Customs under section 1158 of the Corporation Tax Act 2010
are exempt from tax on capital gains. Due to the Company's status
as an investment trust, and the intention to continue meeting the
conditions required to obtain approval in the foreseeable future,
the Company has not provided for deferred tax on any capital gains
or losses arising on the revaluation of investments.
8. SHARE CAPITAL
As at 31 December
As at 30 June 2022 2021
(Unaudited) (Audited)
No. of shares GBP'000 No. of shares GBP'000
-------------------------------------- ------------- ------- ------------- -------
Allotted, issued and fully paid:
Ordinary Shares of 1p each ('Ordinary
Shares') 100,000,000 1,000 100,000,000 1,000
-------------------------------------- ------------- ------- ------------- -------
Total 100,000,000 1,000 100,000,000 1,000
-------------------------------------- ------------- ------- ------------- -------
On incorporation, the issued share capital of the Company was 1
ordinary share of GBP0.01 issued to the subscriber to the Company's
memorandum. The Company's issued share capital was increased by
GBP50,000 represented by 50,000 Management Shares of nominal value
GBP1.00 each, which were subscribed for by the Investment Adviser.
Following admission, the Management Shares were redeemed by the
holder.
On admission 2 June 2021, 99,999,999 Ordinary Shares were
allotted and issued to shareholders as part of the placing and
offer for subscription in accordance with the Company's prospectus
dated 10 May 2021.
9. NET ASSETS PER ORDINARY SHARE
Net assets per Ordinary Share as at 30 June 2022 is based on
GBP97,896,000 (31 December 2021: GBP97,381,000) of net assets of
the Company attributable to the 100,000,000 Ordinary Shares in
issue as at 30 June 2022 (31 December 2021: 100,000,000).
10. RELATED PARTY TRANSACTIONS
Fees payable to the Investment Advisor are shown in the Income
Statement. As at 30 June 2022, the fee outstanding to the
Investment Adviser was GBP112,000. The Company owns 100% of Attika
Holdings Limited, as disclosed in note 2. As at 30 June 2022, the
Company has a receivable balance of GBP7,721,000 with Attika
Holdings Limited.
Fees payable to the directors during the period were based on an
annual rate of GBP55,000 to the Chairman, GBP42,000 to the Chairman
of the Audit and Risk Committee and GBP37,000 to the other
directors, at the same rate paid for the period ended 31 December
2021. On 28 January 2022 two directors resigned and on 29 April
2022 one director was appointed.
The directors had the following shareholdings in the Company,
all of which were beneficially owned.
Ordinary shares Ordinary shares
at 30 June at 31 December
2022 2021
------------------------ --------------- ---------------
Miriam Greenwood OBE DL 24,000 24,000
Nicholas Bliss 20,000 20,000
David Fletcher 40,506 -
------------------------ --------------- ---------------
11. POST BALANCE SHEET EVENTS
Subsequent to 30 June 2022, a further GBP11.6 million was
deployed.
12. STATUS OF THIS REPORT
These Half-yearly financial statements are not the Company's
statutory accounts for the purposes of section 434 of the Companies
Act 2006. They are unaudited. The unaudited Half-yearly Financial
Report will be made available to the public at the registered
office of the Company. The report will also be available in
electronic format on the Company's website,
www.aquila-energy-efficiency-trust.com.
The information for the period ended 31 December 2021 has been
extracted from the last published audited financial statements,
unless otherwise stated. The audited financial statements have been
delivered to the Registrar of Companies. PricewaterhouseCoopers LLP
reported on those accounts and their report was unqualified, did
not draw attention to any matters by way of emphasis and did not
contain a statement under sections 498(2) or 498(3) of the
Companies Act 2006.
The Half-yearly Financial Report was approved by the Board on 14
September 2022.
OTHER INFORMATION
ALTERNATIVE PERFORMANCE MEASURES ("APM")
APMs are often used to describe the performance of investment
companies although they are not specifically defined under IFRS.
APM calculations for the Company are shown below.
Discount
The amount, expressed as a percentage, by which the share price
is less than the Net Asset Value per Ordinary Share.
30 June 31 December
2022 2021
------------------------------- ------------- ------- -----------
NAV per Ordinary Share (pence) a 97.90 97.38
Share price (pence) b 79.00 95.75
-------------------------------- ------------ ------- -----------
Discount (b÷a)-1 (19.3%) (1.7%)
-------------------------------- ------------ ------- -----------
Ongoing charges
A measure, expressed as a percentage of average net assets
during the period, of the regular, recurring annual costs of
running the Company, based on the numbers for the six months ended
30 June 2022.
Six months to 30 June 2022
--------------------------- ----------- ------
Average NAV a 97,522
Annualised expenses b 1,405
---------------------------- ---------- ------
Ongoing charges (b÷a) 1.44%
---------------------------- ---------- ------
Total return
A measure of performance that includes both income and capital
returns. This takes into account capital gains and reinvestment of
dividends paid out by the Company into the Ordinary Shares of the
Company on the ex-dividend date.
Six months to 30 June 2022 Share price NAV
------------------------------ ------------- ----------- -----
Opening at 1 January 2022 (p) a 95.75 97.38
Closing at 30 June 2022 (p) b 79.00 97.90
------------------------------- ------------ ----------- -----
Total return (b÷a)-1 (17.5%) 0.5%
------------------------------- ------------ ----------- -----
Note: There were no dividends paid during the period end 30 June
2022 (31 December 2021: none).
For further information contact:
Secretary and registered office:
Sanne Fund Services (UK) Limited
6th Floor, 125 London Wall, London, EC2Y 5AS
The Half-yearly financial report will be submitted to the
National Storage Mechanism and will shortly be available for
inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
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END
IR BIGDCCSBDGDS
(END) Dow Jones Newswires
September 15, 2022 02:00 ET (06:00 GMT)
Aquila Energy Efficiency (LSE:AEEE)
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Aquila Energy Efficiency (LSE:AEEE)
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