TIDMRNEW
RNS Number : 4814I
Ecofin US Renewables Infrastr.Trust
19 April 2022
LEI: 2138004JUQUL9VKQWD21
Ecofin U.S. Renewables Infrastructure Trust PLC
Annual Financial Report
for the period from incorporation on 12 August 2020 to 31
December 2021
Ecofin U.S. Renewables Infrastructure Trust plc ("RNEW" or the
"Company") is pleased to announce its audited results for the
period from incorporation on 12 August 2020 to 31 December 2021
("Period").
Chair's comment
"On behalf of the Board, I am pleased to present the Company's
first Annual Financial Report. The Company is off to a promising
start having fully invested its IPO proceeds into a diversified
portfolio of U.S. solar and wind assets that supported declaring
dividends totalling 3.2 cents per share, which was ahead of the 2-3
cents per share IPO target for the Period."
Patrick O' Donnell Bourke
Objective
The Company's investment objective is to provide Shareholders
with an attractive level of current distributions by investing in a
diversified portfolio of mixed renewable energy and sustainable
infrastructure assets predominantly located in the U.S. with
prospects for modest capital appreciation over the long term.
Highlights
As at 31 December 2021
Net Asset Value ("NAV") per Share NAV Share Price
98.9 cents $123.7 million 99.0 cents
73.1 pence GBP91.4 million 74.0 pence
NAV total return since Initial Market capitalisation Share price total return
Public Offering ("IPO")(1) since IPO(1)
2.8% $123.8 million 0.8%
Dividends per Share declared for IPO proceeds committed(2) Number of renewable energy
the Period assets
3.2 cents 100% 61
Portfolio generating capacity(3) Households supplied Weighted average remaining
term of
155 MW 15,794 revenue contracts
16.7 years(5)
Clean electricity generated since Tonnes of Co(2) e avoided(4)
IPO(3)
169GWh 89,458
Figures reported either as at the referenced date or over the
reporting period ended 31 December 2021. All references to cents
and dollars ($) are to the currency of the U.S., unless stated
otherwise.
1. These are alternative performance measures. ("APMs").
2. As at 31 December 2021, the Company held $5.4 million in cash
and had $60 million headroom on its Revolving Credit Facility
("RCF") for potential future commitments.
3. Represents the Company's proportionate share.
4. CO(2) e based on the Company's proportionate share. CO(2) e
calculations are derived using the U.S. Environmental Protection
Agency's ("EPA") Emissions & Generation Resources Integrated
Database.
5. Includes all construction and committed assets.
Key milestones during the period
2020
v Dec.
Ø 22 December Company's IPO, with 125.0 million shares
issued
Closed and funded first three investments in solar assets
(Oliver Solar, Ellis Road Solar, and SED Solar Portfolio) totalling
$36 million
2021
v Feb.
Closed and funded fourth investment in two operating utility
scale solar assets in California (Beacon Solar 2 & 5) totalling
$24.8 million
v May
Ø Declared inaugural dividend (for quarter ended 31 March) of
0.40 cents per Share (one quarter ahead of IPO target)
Ø Committed to fifth investment in a commercial solar asset
(Skillman Solar) in New Jersey totalling $6.2 million
v July
Ø Committed $25 million to sixth investment in a diversified
portfolio of eleven solar projects totalling 62 MW* (Echo Solar
Portfolio) spanning three states
v Aug.
Ø Declared second dividend (for quarter ended 30 June) of 0.60
cents per Share
v Sept.
Ø Closed solar project in Minnesota representing the largest
solar asset (25% of portfolio value) in the Echo Solar
Portfolio
v Oct.
Ø RNEW Capital, LLC raised a $65.0 million revolving credit
facility with KeyBank to provide operational flexibility
Ø Completed $49.0 million acquisition of an operating wind
project in Texas, achieving full deployment of IPO proceeds (ahead
of IPO target)
Ø Declared third dividend (for quarter ended 30 Sept) of 0.80
cents per Share
Ø Closed on Skillman Solar and additional $2.8 million
investment to acquire a 2MW commercial solar operating project in
New Jersey (Delran Solar)
2022
v Jan.
Ø Declared fourth dividend (for quarter ended 31 December) of
1.4 cents per Share, exceeding 2-3% year 1 dividend yield
guidance
Ø NAV of $98.9 cents, up 0.9% since the IPO
Ø Closed on $15.9M construction debt facility for Echo Solar
Portfolio - Minnesota asset
* Previously reported as a 69.4MW investment comprising 12
ground-mounted solar projects. One solar project from within the
Echo Solar Portfolio has been released from commitment due to
development delays (without any investment made) and will be
reconsidered for future investment upon achieving its
milestones.
Portfolio
Remaining
revenue
Number contract
Investment Capacity of term
name Sector (MW)(1) assets State Ownership(2) Phase Status (years)
------------ --------------- --------- ------- --------------- ------------- ------------- ---------- ----------
SED Solar Commercial Massachusetts,
Portfolio Solar 11 53 Connecticut 100% Operational Closed 14.7
Ellis Road
Solar Commercial 7 1 Massachusetts 100% Operational Closed 19.5
Solar
Oliver Solar Commercial 5 1 California 100% Operational Closed 13.9
Solar
Beacon 2 Utility-Scale 29 1 California 49.5% Operational Closed 21.0
Solar
Beacon 5 Utility-Scale 24 1 California 49.5% Operational Closed 21.0
Solar
Skillman
Solar Commercial 3 1 New Jersey 100% Construction Closed 15.0
Solar
Echo Solar Commercial 14 1 Minnesota 100% Construction Closed 25.0
Portfolio Solar
- MN
Delran Solar Commercial 2 1 New Jersey 100% Operational Closed 13.5
Solar
Whirlwind Wind 60 1 Texas 100% Operational Closed 6.0
------------ --------------- --------- ------- --------------- ------------- ------------- ---------- ----------
Subtotal
(Closed) 155 61 14.2(3)
----------------------------- --------- ------- --------------- ------------- ------------- ---------- ----------
Echo Solar Commercial 48 10 Virginia, 100% Construction Committed 25.0
Portfolio Solar Delaware
- VA/DE
------------ --------------- --------- ------- --------------- ------------- ------------- ---------- ----------
Total (Committed) 203 71 16.7(3)
----------------------------- --------- ------- --------------- ------------- ------------- ---------- ----------
1. Represents RNEW's proportionate ownership interest in the assets.
2. Cash equity ownership.
3. Average remaining revenue contract term (years).
Chair's Statement
Introduction
On behalf of the Board, I am pleased to present the first Annual
Report for Ecofin U.S. Renewables Infrastructure Trust PLC for the
Period. In operating terms, the Annual Report covers the period
from the Company's successful IPO on 22 December 2020 until 31
December 2021.
Throughout the Period and in 2022 to date, the Company and its
advisers have coped well with the impact of the COVID-19 pandemic.
We are fortunate in that there has been no material impact on the
Company's operations or its portfolio. At the time of writing,
authorities in both the U.S. and the UK have lifted or are about to
lift many of the ongoing restrictions related to COVID-19.
Milestones
In its inaugural financial Period, RNEW achieved significant
milestones:
-- completion, before the end of 2020, of the acquisition of
three of the four seed assets set out in the Company's IPO
prospectus. This was followed by completion of the fourth seed
asset in February 2021;
-- further investments in solar projects, namely two separate
ground-mounted solar projects in New Jersey (2.6 MW and 2.0 MW);
and a 62 MW portfolio comprising 11 ground-mounted solar projects
across Minnesota, Virginia and Delaware(1) ;
-- the Company's first wind investment, comprising a 59.8 MW
operating asset in Texas. With the completion of this asset in
October, the Company's net IPO proceeds of $122.5 million became
fully committed, well within the target of 12 months following
IPO;
-- the signing of a $65 million RCF made up of a $50 million
two-year tranche and a $15 million three-year tranche. The facility
also benefits from the added flexibility of an accordion option for
an additional $20 million of capital which can be accessed subject
to certain conditions; and
-- an annual dividend yield for 2021 of 3.2%, above the 2-3%
range indicated in the IPO prospectus. Our ability to exceed the
2-3% range in our first Period was due to the strong operating
performance of the Company's diversified portfolio to date.
Portfolio overview
As at 31 December 2021, the Company's portfolio, which was well
diversified in terms of both off-taker and geography, consisted
of:
-- SED Solar Portfolio - a 100% interest in an 11.3 MW
commercial rooftop and ground-mounted solar portfolio consisting of
53 operating assets in Massachusetts and one operating asset in
Connecticut, which have 100% of their revenues contracted for a
weighted average remaining term of 14.7 years;
-- Ellis Road Solar - a 100% interest in a 7.1 MW ground-mounted
solar project in Massachusetts which has 100% of its revenues
contracted for a remaining term of 19.5 years;
-- Oliver Solar - a 100% interest in a 4.8 MW commercial rooftop
solar project in California which has 100% of its revenues
contracted for a remaining term of 13.9 years;
-- Beacon Solar 2 & 5 - a 49.5% interest in a 107.8 MW solar
portfolio comprising two operating assets in California, which have
100% of their revenues contracted with an investment grade rated
utility for a remaining term of 21 years;
-- Skillman Solar - a 100% interest in a 2.6 MW solar project in
New Jersey with revenues contracted for a remaining term of 15
years, which has completed construction and is expected to become
operational in Q2 2022;
-- Echo Solar - a 100% interest in a 62 MW portfolio comprising
11 ground-mounted solar projects across Minnesota, Virginia and
Delaware which have 100% of their revenues contracted for 25
years(1) ; as at 31 December 2021, the Company had closed on the
13.7 MW solar project in Minnesota and expects to close on five
additional solar assets in Virginia and Delaware during Q2 2022
totalling 23 MW. The remaining five assets are expected to close in
H2 2022 upon full completion of various development milestones;
-- Delran Solar - a 100% interest in a 2.0 MW solar project in
New Jersey, which has 100% of its revenues contracted for a
remaining term of 13.5 years; and
-- Whirlwind - a 100% interest in a 59.8 MW operating wind farm
in Texas with revenues contracted for a remaining term of 6.0
years.
Total generation from the Company's assets during the Period was
169.2 GWh, 1.9% above budget, and the portfolio's remaining
weighted average contracted period as at the year-end was 16.7
years(2) . More details on each asset and its performance are set
out in the Investment Manager's Report.
Results
NAV as at 31 December 2021 was originally announced as 100.4
cents per Share. This was updated to 98.9 cents on 11 March 2022 to
reflect a change in the valuation of Holdco, which had been updated
to take account of an accrual for deferred tax in the U.S on assets
acquired shortly after the IPO. For the period since IPO as a
whole, NAV per Share grew by 0.9% as further described in the
Portfolio Valuation section of the Investment Manager's Report.
This is net of dividends paid of $2.3 million or 1.8 cents per
Share during the Period.
The valuation of the portfolio at 31 December 2021 was supported
by an independent valuation firm, Marshall & Stevens, and
reflects an underlying blended weighted average pre-tax discount
rate of 7.2%.
RNEW's total profit before tax for the Period was $3.4 million
and earnings per Share, based on distributions received from RNEW's
unconsolidated subsidiary, RNEW Holdco LLC ("Holdco") (which
indirectly holds RNEW's assets through underlying subsidiaries),
were 3.7 cents per Share. As at 31 December 2021, of the total 61
closed assets, 59 assets were in operation and 2 assets were under
construction and scheduled to become operational.
Dividends
In May 2021, earlier than envisaged at the time of the IPO, the
Board declared a maiden quarterly dividend of 0.4 cents per Share
in respect of the period from IPO to 31 March 2021. This was
followed by further dividends of 0.6 cents per Share for the
quarter ended 30 June 2021, 0.8 cents per Share for the quarter
ended 30 September 2021, and 1.4 cents per Share for the quarter
ended 31 December 2021.
As a result of these progressive increases, I am very pleased to
say the Company exceeded its target initial dividend yield of 2-3%
in respect of the extended period from IPO until 31 December 2021,
with a 3.2% dividend yield. Dividend cover was 1.1 times(3) .
If the dividend of 1.4 cents per Share for the quarter ended 31
December 2021 was maintained throughout 2022, this would result in
a dividend yield of 5.6% (based on the IPO share price) which
aligns with RNEW's IPO dividend target range for 2022 of
5.25%-5.75%.
Share price
At 31 December 2021 the share price was 99.0 cents per Share, a
very slight 0.1% premium to the NAV of 98.9 cents per Share at the
same date. Both the Board and the Investment Manager believe that
the strong fundamentals of the Company, its portfolio, and the
depth of the U.S. renewable energy middle market opportunity,
together with the potential for a look-forward dividend yield for
2022 in line with the 5.25% to 5.75% target range stated in the IPO
prospectus, provide the basis for the share price to continue
trading at a consistent premium to NAV. During 2022 to date, the
RNEW Share price has traded in a range from 99.0 cents to 108.0
cents per Share (RNEP 73.0p to 83.5p per Share).
Board
The Board has worked well since the Company's IPO. The
Investment Management team and one of the Directors are based in
the U.S. and as a result Board meetings are held remotely as a
matter of course, but where possible and within the COVID-19
guidelines, Board members and advisers based in the UK met in
person during 2021.
I would like to thank my fellow Directors, the Ecofin team and
all our advisers for the significant progress made since RNEW's IPO
and for the Company's performance to date.
Annual General Meeting
We look forward to welcoming Shareholders to the Company's
Annual General Meeting ("AGM") to be held on 22 June 2022 at 125
London Wall, London EC2Y 5AS. More details can be found in the
Notice of AGM.
Outlook
In December 2020, the U.S. Congress passed a broad spending bill
which included a two-year extension of the Investment Tax Credit
("ITC") for solar power (retaining the 2020 rate of 26% which had
been due to step down to 22% in 2021) and a one-year extension to
the production tax credit ("PTC") for wind power.
Some of the first actions undertaken by the new U.S.
administration which took office in early 2021 included President
Biden signing an executive order to bring the U.S. back into the
Paris Agreement as well as establishing a goal for the U.S. power
sector to be carbon-free by 2035. The Infrastructure Investment and
Jobs Act, which was heavily supported by President Biden and signed
into law in November 2021, includes a substantial programme to
update and modernise the electric grid in the U.S. through
investments in transmission to accommodate increasing levels of
renewable energy, together with investment to build out a national
network of electric vehicle (EV) chargers, which will serve to
increase demand for electricity. While the Build Back Better Act,
which had over $500 billion allocated to climate-related
infrastructure, did not obtain sufficient support in the Senate to
become law, its climate related provisions are expected to be
revisited in 2022.
Another feature of the last year or so has been the substantial
increase in natural gas prices in the U.S. as in other
industrialised nations. These higher prices tend to lead to higher
wholesale electricity prices, especially in those U.S. power pools
where natural gas is the marginal fuel. This upward trend in
natural gas prices represents a positive factor for RNEW from a
vantage point of re-contracting assets within the portfolio over
the medium to long term.
While the Russian invasion of Ukraine in early 2022 is deeply
concerning on a humanitarian, geopolitical and macro--economic
basis, RNEW's investments in U.S. renewable energy assets with
long-term revenue contracts are well positioned to provide a
resilient source of cash flow during these uncertain times.
Overall, the backdrop remains very supportive for further growth
of the renewable sector in the U.S., which continues to be very
active.
In terms of upcoming investments, as set out in more detail in
the Investment Manager's Report, the Company ended the Period with
$45(4) million of unlevered equity commitments, net of anticipated
tax equity financing and adjusted for projects to be contractually
dropped and added, and adjusted by renegotiated purchase prices
anticipated to be contracted with respect to the Echo Solar
Portfolio and $62 million of additional opportunities in
exclusivity.(5) In addition, the Company's near-term pipeline of
potential investment opportunities remained very healthy and
totalled $3.0 billion comprising 55 deals as at 31 December 2021.
The Investment Manager is actively working on a number of potential
investments in both solar and wind opportunities and the Board
remains very positive about the scale of opportunity for RNEW and
its outlook for the future.
Patrick O'D Bourke
Chair of the Board
14 April 2022
1. Previously reported as a 69.4MW investment comprising 12
ground-mounted solar projects. One solar project comprising the
Echo Solar Portfolio has been released from commitment due to
development delays (without any investment made and without any
impact on the remainder of the Echo Solar Portfolio) and will be
reconsidered for future investment upon achieving its
milestones.
2. Includes all construction and committed assets.
3. Calculated based on Portfolio net cash distributions divided
by dividends paid in respect of the quarters ended 31 March 2021,
30 June 2021 and 30 September 2021 and the dividend declared in
respect of the quarter ended 31 December 2021.
4. Future equity obligations and commitments are estimates and subject to change.
5. Investment opportunities in exclusivity are contingent to
completion of satisfactory due diligence, Ecofin investment
committee approval, and negotiation. There is no guarantee that
investment opportunities currently in exclusivity will be committed
to the portfolio.
Investment Manager's Report
Overview
We are pleased with the progress made over the Period to fully
invest the IPO proceeds in a high-quality portfolio spanning a
diversified set of 61 solar and wind assets totalling 155 MW across
six U.S. states(6) . Importantly, the portfolio benefits from fully
contracted revenues predominantly with investment grade quality
counterparties and a weighted average remaining contract term of
16.7 years(7) . The portfolio quality is evidenced through a 2.8%
NAV total return since IPO and an increasing dividend (from
earnings) each quarter that in aggregate exceeded the IPO target
for the first year. Furthermore, we put in place a $65 million RCF
on attractive terms from KeyBank, a leading U.S. renewable energy
lender, which will provide operating flexibility to facilitate
RNEW's sustained growth. Looking ahead, we continue to see positive
market developments including strong sustained policy support for
the renewables sector from the Biden administration.
We finished 2021 with $4.5(8) million of pending future equity
obligations on closed construction assets and a committed pipeline
of 10 solar assets (48 MW in the Echo Solar Portfolio in
Virginia/Delaware) totalling $40.0 million in unlevered equity
value for a collective future unlevered net equity commitment
amount of $44.5 million(9) . We also maintain several investment
opportunities on which we have exclusivity comprising i) a $11
million equity investment to acquire a single 13 MW construction
stage solar asset in the northeast region of the U.S., ii) a $9
million preferred equity investment in seven operating wind assets
totalling 27 MW in the Midwest region of the U.S., and iii) a $42
million preferred equity investment in two construction stage wind
and wind/solar hybrid assets across two midwestern states.(9)
Collectively, this near-term pipeline of committed and exclusive
opportunities of unlevered net equity investment opportunities
totals $107 million that provides a glidepath for the Company's
growth in 2022.
6. Excludes assets that are committed but not yet closed.
7. Includes all construction and committed assets.
8. Figures are shown net of anticipated tax equity financing and
adjusted for projects to be contractually dropped and added, and
adjusted by renegotiated purchase prices anticipated to be
contracted with respect to the Echo Solar Portfolio. Future equity
obligations and commitments are estimates and subject to
change.
9. Investment opportunities in exclusivity are contingent on
completion of satisfactory due diligence and negotiation. There is
no guarantee that investment opportunities currently in exclusivity
will be committed to the portfolio.
Acquisitions
Since the IPO on 22 December 2020, the Company has closed and
funded eight investments adding 61 assets totalling 155 MW across
six U.S. states. The initial three investments in 55 assets (SED
Solar Portfolio, Ellis Road Solar, and Oliver Solar) totalled $36
million and closed by 31 December 2020.
On 2 February 2021, the Company closed its fourth investment
(56(th) and 57(th) assets) collectively totalling $24.8 million to
acquire a 49.5% equity interest in Beacon Solar 2 & 5, two
operating utility scale solar photovoltaic ("solar PV") assets in
California.
On 4 May 2021, the Company announced its fifth investment, a
commitment to acquire a 100% interest in a commercial solar PV
asset in New Jersey for $6.2 million, comprising approximately $4.2
million of equity value ("Skillman Solar"). The Skillman Solar
acquisition (58(th) asset) closed on 30 September 2021 and funding
is expected to be completed in Q2 2022 as the asset reaches
completion.
On 22 July 2021, the Company announced its sixth investment with
the signing of a purchase agreement to acquire twelve solar PV
assets at construction stage ("Echo Solar Portfolio"), subject to
customary closing conditions. Since the announcement, one solar
asset within the Echo Solar Portfolio has been released from
commitment due to development delays (without any investment having
been made) and will be reconsidered by RNEW for future investment
upon achieving its milestones. The released asset has no impact on
the economics of the remaining Echo Solar Portfolio.
On 17 September 2021, the Company closed the acquisition of the
13.7 MW solar asset (59(th) asset) in Minnesota representing
approximately 28% of Echo Solar Portfolio's committed equity value.
Construction is underway and the project is expected to begin
operations in Q3 2022.
On 12 October 2021, the Company closed its seventh investment
(60(th) asset) to acquire a 100% interest in a further operating
commercial solar asset in New Jersey for $2.8 million ("Delran
Solar").
On 26 October 2021, the Company completed its eighth investment
(61(st) asset) to acquire its first wind asset, through a $49
million acquisition to acquire a 100% interest in an operating wind
asset in Texas ("Whirlwind). During Q4 2021, amounts were drawn on
the RCF during the closing of Whirlwind and a $5 million balance
remained outstanding as at 31 December 2021.
On 7 January 2022, the Company obtained a $15.9 million
non-recourse construction loan from Seminole Financial Services,
LLC, a U.S. specialist renewable lender, for the Echo Solar
Portfolio - Minnesota asset. The Company expects to close on an
additional four solar assets in Virginia and one solar asset in
Delaware within the Echo Solar Portfolio totalling $19 million in
unlevered equity value, net of tax equity commitments in the first
half of 2022, funding of which will occur through the construction
period.
Cumulative Invested Capital and Commitments at Each Period Since
IPO ($ millions)
Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021
Closed/ Funding in Construction
Assets $11 $4 - $9 -
Closed/ Funding in Operating
Assets $21 $25 - - $52
Closed/ Funded in Prior
Periods - $32 $61 $61 $69
Closed/ Remaining Commitments $4 - - $12 $5
Signed/ Future Commitments - - $4 $40 $40
$36 $61 $65 $122 $166
Portfolio Breakdown
Investment type 1. SED Solar Portfolio 2. Ellis Road Solar 3. Oliver Solar
------------------- -------------------------- ------------------- -----------------
U.S. State Massachusetts, Connecticut Massachusetts California
Sector Commercial solar: Commercial solar: Commercial solar:
rooftop groundmount rooftop
Capacity (MW) 11.3 7.1 4.8
Status Operating Operating Operating
COD 2012-2019 2021 2021
Ownership 100% 100%(1) 100%(1)
Number of Projects 53 1 1
Offtaker(s) Municipality/School/ Electric Utility Corporate
University/Corporate
Remaining contract
term
(in years) 14.7 19.5 13.9
Project leverage None None None
(U.S.$m)
Investment Date December 2020 December 2020 December 2020
------------------- -------------------------- ------------------- -----------------
1. Represents percentage ownership of class B membership
interest in the tax equity partnership.
Investment type 4. Beacon Solar 2 5. Beacon Solar 5 6. Skillman Solar
------------------- -------------------- -------------------- -----------------
U.S. State California California New Jersey
Sector Utility scale solar: Utility scale solar: Commercial solar:
groundmount groundmount groundmount
Capacity (MW) 29.5 23.9 2.6
Status Operating Operating Construction
COD 2017 2017 Q2 2022
Ownership 49.5%(1) 49.5%(1) 100%
Number of Projects 1 1 1
Offtaker(s) Electric Utility Electric Utility Corporate/Utility
Remaining contract
term
(in years) 21.0 21.0 15.0
Project leverage
(U.S.$m) 26,086 20,995 None
Investment Date February 2021 February 2021 September 2021
------------------- -------------------- -------------------- -----------------
1. Represents percentage ownership of class B membership
interest in the tax equity partnership.
Investment type 7. Echo Solar Portfolio 8. Delran Solar 9. Whirlwind
------------------- ----------------------- ----------------- ------------
U.S. State Minnesota New Jersey Texas
Sector Commercial solar: Commercial solar:
groundmount rooftop Wind
Capacity (MW) 13.7 2.0 59.8
Status Construction Operating Operating
COD Q3 2022 (estimated) 2020 2007
Ownership 100% 100% 100%
Number of Projects 1 1 1
Offtaker(s) Utility Corporate/Utility Utility
Remaining contract
term (in years) 25.0 13.5 6.0
Project leverage
(U.S.$m) None(1) None None
Investment Date October 2021 October 2021 October 2021
------------------- ----------------------- ----------------- ------------
1. On 7 January 2022, Ecofin obtained a $15.9 million
non-recourse construction loan from Seminole, a U.S. specialist
renewable lender, for this project.
Summary of Investments
1. SED Solar Portfolio
SED Solar Portfolio consists of 52 predominantly rooftop
commercial solar projects in Massachusetts and 1 rooftop commercial
solar project in Connecticut. The projects' output is fully
contracted to a variety of investment grade quality schools,
universities, municipalities, and corporations under long term
fixed price power purchase agreements ("PPAs") . This investment
demonstrates many of the most favorable aspects of Ecofin as a
highly experienced manager specializing in the middle market. This
opportunity arose from one of Ecofin's portfolio managers seeing a
transaction announcement from the vendor which prompted a cold call
to its CEO. The timing was ideal as the vendor was considering
monetizing its interest in the SED Solar Portfolio which it had
successfully developed and operated for several years. Given the
middle market scale, the vendor was seeking an acquirer who had the
expertise to efficiently underwrite and reliably execute the
acquisition spanning 53 assets and dozens of revenue
counterparties. Ecofin demonstrated its ability and closed on the
portfolio acquisition just days after completing RNEW's IPO in
December 2020. While the acquisition process was quite intensive,
the effort has been worthwhile with the SED Solar Portfolio
contributing substantial cash flow immediately following closing to
facilitate RNEW's inaugural dividend in respect of the period ended
31 March 2021. Since closing the transaction, Ecofin has secured a
fixed price revenue contract with an investment grade rated
electric power company to hedge the price risk for 100% of SED
Solar Portfolio's solar renewable energy credits ("SREC") through
2027.
2. Ellis Road Solar
Ellis Road Solar is a 7.1 MW ground mount solar project in
Massachusetts that commenced operations in 2021. This project sells
100% of its output to an investment grade utility on a fixed price
basis for 20 years through the state of Massachusetts's renewable
incentive program, Solar Massachusetts Renewable Target (SMART).
Ellis Road was initially sourced bilaterally by Ecofin through its
relationship with a commercial solar developer focused on
Northeastern U.S. markets and became one of the four of the seed
assets identified as part of RNEW's IPO. Since closing the
acquisition in December 2020, Ecofin has actively monitored the
remaining construction process through to its successful completion
and secured a tax equity investment on customary terms from a large
U.S. corporate with which Ecofin has transacted previously.
3. Oliver Solar
Oliver Solar is a 4.8 MW commercial solar project in San Joaquin
County, California that commenced operations in 2021. The project
is strategically located on a major logistics and distribution
centre for a global commerce company that serves as the power
purchaser under a long-term fixed price PPA. This project was
sourced bilaterally with a leading global renewable energy company
where Ecofin has a longstanding relationship and has transacted
with repeatedly. This project did experience construction delays
due to COVID-19 related impacts but Ecofin has actively managed the
process and no negative impact on valuation has occurred. Since
closing the acquisition, Ecofin has secured a tax equity investment
on customary terms from a large U.S. corporation with which it has
transacted previously.
4. Beacon Solar 2
Beacon Solar 2 is a 59.6 MW utility scale solar project in Kern
County, California that has been operating since December 2017. The
project's location in Southern California, in the Mojave desert,
contributes to its strong solar resource. In addition, the project
has in place a fixed price PPA with an investment grade rated
utility for 100% of its output on an as-generated basis to provide
a long term stable source of revenues. Ecofin secured this
acquisition bilaterally from a leading infrastructure investor
where there existed a longstanding relationship and the vendor
valued reliable execution to close in 2020 over achieving the very
best price. RNEW obtained a 49.5% ownership interest to align with
certain structuring objectives of the vendor. An equivalent 49.5%
ownership interest was sold to an international infrastructure
company. Since closing in December 2020, Ecofin has established a
strong operating cadence and relationship with our new partner
through monthly operations meetings and quarterly Board meetings.
Both parties share a mutual objective of optimizing operations and
cash flow. Of note, we have expanded the use of NextTracker's
TrueCapture technology designed to increase project output through
real-time tracker adjustments to reduce row-to-row shading that
occurs at different points of the day. We have also collaborated
with the operator to assess the level of equipment spares and
procure an increased level of solar module spares to reduce
downtime over the next two years.
5. Beacon Solar 5
Beacon Solar 5 is a 48.2 MW utility scale solar project in Kern
County, California that has been operating since December 2017. The
project was developed in parallel with Beacon Solar 2 and shares an
almost identical project contractual structure including a PPA with
the same offtaker. The project is located in close proximity to
Beacon Solar 2 which provides operating and maintenance synergies.
Beacon Solar 5 was acquired in parallel with Beacon Solar 2 from
the same vendor and has the same ownership structure in place. For
additional information, see the summary above on Beacon Solar
2.
6. Skillman Solar
Skillman Solar is a 2.6 MW commercial solar project in New
Jersey that completed construction in Q1 2022 and is expected to
achieve COD in Q2 2022. The project provides power under a
long-term fixed-price PPA to a corporate campus of a privately held
financial, software, data, and media corporation that is a global
leader in its respective segments. The project also generates
substantial revenues through the state of New Jersey's fixed-price
feed-in-tariff style renewable incentive program for a 15 year
period. This project was originated bilaterally through a
longstanding relationship with the commercial solar developer with
which Ecofin has transacted in the past. While this project did
experience some construction delays, Ecofin is actively managing
the process with the construction firm through its contractual
rights to ensure RNEW is not adversely impacted. Due to the
investment structure, no negative impact has occurred to the
investment valuation.
7. Echo Solar Portfolio
As at 31 December 2021, the Company had closed on one
construction stage solar project in Minnesota totalling 13.7 MW
within the Echo Solar Portfolio. A further 10 assets totalling 48
MW in Virginia and Delaware represent conditional acquisitions and
are anticipated to be closed during 2022 upon the development
milestones and other conditions having been completed. The Echo
Solar Portfolio sells 100% of its output to two investment grade
rated utilities under long term fixed price PPAs. This portfolio
was originated through a leading global renewable energy company
with which Ecofin has a longstanding relationship and has
transacted with in the past to provide the vendor with confidence
in our reliable execution. Ecofin is actively managing the
construction process through weekly calls with the construction
firm to approve milestone based payments and address issues. With a
view to maintaining RNEW's capacity for ongoing investment, on 7
January 2022, Ecofin obtained a $15.9 million non-recourse
construction loan from Seminole, a U.S. specialist renewable
lender, for the Minnesota solar project. The loan with Seminole
provides the Company with the possibility of expanding the
financing to other Echo Solar assets depending on the Company's
capital growth needs in 2022.
8. Delran Solar
Delran Solar is a 2.0 MW commercial rooftop solar project in New
Jersey that commenced operations in 2020. The project provides
power under a long-term fixed-price PPA to a corporate campus of a
large publicly traded U.S. media corporation. The project also
generates substantial revenues through the state of New Jersey's
fixed-price feed-in-tariff style renewable incentive program for a
remaining 13.5 year period. This project was originated bilaterally
through a longstanding relationship with the commercial solar
developer where Ecofin has transacted in the past.
9. Whirlwind
Whirlwind is a proven operating wind asset, placed in service in
December 2007, using 26 Siemens 2.3 MW wind turbine generators with
O&M performed by Siemens Gamesa under a long-term service and
maintenance agreement. It benefits from a fixed-price PPA with an
investment grade electric utility with approximately 6 years
remaining on the initial contract term, providing predictable cash
flow. Whirlwind is located in Texas, which is experiencing
sustained growth in electricity demand due to population growth and
corporations migrating to this business friendly state. With
electricity prices linked to natural gas prices, which have been
rising, these factors provide a good backdrop for recontracting in
the future and potential for inflation protection. Whirlwind
demonstrates Ecofin's sourcing network breadth beyond solar and was
originated bilaterally with the vendor, which we believe generates
value for RNEW's investors. As part of our portfolio management
strategy, Ecofin will continue to evaluate potential to install
battery storage on site as battery costs decline and/or tax credits
are expanded for batteries. Given the deregulated nature of the
Texas power market, it represents one of the most attractive for
siting battery storage and potential for enhancing Whirlwind's
offering of dispatchable power under medium term recontracting
scenarios.
As at 31 December 2021, the portfolio was heavily weighted
towards operating assets with 94% of NAV invested in operating
assets at fair market value ("FMV") (66% of total invested and
committed net equity capital(9) ), reflecting the completion of
construction at Ellis Road Solar, Oliver Solar and the operating
asset acquisitions of Delran Solar and Whirlwind. The portfolio
benefits from geographic diversification spanning six states to
provide risk mitigation against regulatory and resource exposures.
Furthermore, RNEW's portfolio reflects diversification across three
renewable energy sectors of: utility scale solar (15%); commercial
solar (58%); and wind (27%) to mitigate resource, regulatory,
technology and market risks.
Portfolio Summary Charts(10)
Asset Name
Asset Name Portfolio %
Beacon 2&5 16%
------------
SED Solar Portfolio 11%
------------
Oliver Solar 4%
------------
Ellis Road Solar 6%
------------
Skillman Solar 2%
------------
Delran Solar 2%
------------
Whirlwind 27%
------------
Echo Solar - MN 9%
------------
Echo Solar - VA/DE 23%
------------
Sector FMV
Sector Portfolio %
Utility Scale Solar 15%
------------
Commercial Solar 58%
------------
Wind 27%
------------
10. Includes all closed and committed assets based on equity exposure.
Asset Status
Operating - 66%
Construction - 34%
Contracted Revenues
The objective of RNEW's investment strategy is, among other
things, to produce a stable and resilient cash flow through
investment in renewable energy assets that benefit from a high
degree of contracted revenues with creditworthy counterparties.
RNEW's portfolio had 100% of its revenue contracted with a weighted
average remaining term of 16.7(11) years as at 31 December 2021.
The stability of revenues is further evidenced by the predominantly
investment grade credit ratings of its assets' PPA counterparties.
Throughout the COVID-19 pandemic to date, the Company has not
experienced any payment delinquencies or defaults.
Revenue Contract Credit Ratings(12)
Credit Rating Percentage of Estimated 2022 Revenue
AA 66%
-------------------------------------
AA- 6%
-------------------------------------
A+ 3%
-------------------------------------
A- 5%
-------------------------------------
BBB+ 4%
-------------------------------------
BBB- 16%
-------------------------------------
11. Includes all construction and committed assets.
12. Reported as a percentage of estimated 2022 revenue. Includes
PPA and SREC contract counterparties. Reported S&P or S&P
equivalent rating.
Approximately 99% of the portfolio benefits from fixed price
revenues (many with annual escalators of 1-2%) through PPAs,
contracted renewable energy incentive programs (SREC/RECs), and
fixed rents under leases. These fixed price revenue contracts
mitigate market price risk for the term of the contracts.
Approximately 1% of the portfolio has a variable form of revenue
contract. These contracts are set at a fixed discount to a defined
Massachusetts utility electric rate, which provides an ongoing
economic benefit to the customer (i.e., the offtaker/rooftop
owner), as opposed to receiving the higher utility electric rate
when consuming electricity from the grid. While the variable rate
contract introduces an element of price volatility to the project,
it also offers the potential to hedge inflation risk as utility
rates in Massachusetts have appreciated 2.5% on average per annum
from 1990-2019.
The revenue profile reported below represents a snapshot of
RNEW's existing revenue contracts as at 31 December 2021 and does
not assume any replacement revenue contracts following the expiry
of these contracts. With increased adoption of renewable energy in
the U.S. and rising natural gas prices (which tend to result in
higher power prices in U.S. markets where natural gas is the
marginal fuel), we believe that RNEW's prospects for re-contracting
at the end of revenue contract terms remain positive.
RNEW Portfolio Revenue Breakdown
Contracted Contracted
Contracted - Variable - Fixed Price Uncontracted
- Fixed Price Price Revenue Incentive - Market Revenue
Year Revenue (%) (%) Revenue (%) (%)
2021 76.2 0.7 23.1 -
------------------------- ------------------------- ------------------------- -------------------------
2022 85.7 0.4 13.9 -
------------------------- ------------------------- ------------------------- -------------------------
2023 88.7 0.9 10.4 -
------------------------- ------------------------- ------------------------- -------------------------
2024 90.5 0.9 8.6 -
------------------------- ------------------------- ------------------------- -------------------------
2025 90.3 2.0 7.7 -
------------------------- ------------------------- ------------------------- -------------------------
2026 89.8 2.0 8.2 -
------------------------- ------------------------- ------------------------- -------------------------
2027 91.9 2.1 6.0 -
------------------------- ------------------------- ------------------------- -------------------------
2028 57.1 2.6 2.8 37.5
------------------------- ------------------------- ------------------------- -------------------------
2029 56.5 2.6 2.5 38.4
------------------------- ------------------------- ------------------------- -------------------------
2030 55.7 2.6 2.5 39.2
------------------------- ------------------------- ------------------------- -------------------------
2031 55.2 2.7 2.4 39.7
------------------------- ------------------------- ------------------------- -------------------------
2032 55.1 2.7 2.5 39.7
------------------------- ------------------------- ------------------------- -------------------------
2033 54.7 2.7 2.4 40.2
------------------------- ------------------------- ------------------------- -------------------------
2034 54.1 2.8 2.3 40.8
------------------------- ------------------------- ------------------------- -------------------------
2035 53.9 2.7 1.7 41.7
------------------------- ------------------------- ------------------------- -------------------------
2036 50.8 2.6 1.2 45.4
------------------------- ------------------------- ------------------------- -------------------------
2037 49.6 2.5 0.3 47.6
------------------------- ------------------------- ------------------------- -------------------------
2038 85.9 3.0 - 11.1
------------------------- ------------------------- ------------------------- -------------------------
2039 86.3 0.2 - 13.5
------------------------- ------------------------- ------------------------- -------------------------
2040 86.4 - - 13.6
------------------------- ------------------------- ------------------------- -------------------------
2041 82.7 - - 17.3
------------------------- ------------------------- ------------------------- -------------------------
Present
Contracted - Fixed Price
Revenue: 99%
Contracted - Variable Price
Revenue: 1%
Year 20
Contracted - Fixed Price
Revenue: 83%
Contracted - Variable Price
Revenue :0%
Uncontracted - Market Revenue:17%
Portfolio Performance
In the Period ended 31 December 2021, the portfolio generated
169.2 GWh of clean energy, 1.9% ahead of budget. Of the total, the
solar assets generated 130.2 GWh, 3.6% lower than budget (see
project variances and explanations below) and Whirlwind generated
39.0 GWh, 25.7% higher than budget (principally due to lower than
forecasted economic curtailment) since its acquisition in October
2021.
The performance of the underlying operating portfolio combined
with its 100% contracted revenue structure generated revenues of
$6.1 million for the Company, which was ahead of budget due to
higher than expected cash distributions from Whirlwind in Q4 2021,
offset by lower than expected distributions from solar assets. This
enabled the Company to declare dividends totalling 3.2 cents per
share, which exceeded the targeted dividend yield of 2-3% (based on
the share price at launch) for the extended Period through to 31
December 2021.
Net Production Variance vs. Budget (GWh)
GWh Above % Above
Actual Budget (Below) (Below)
Investment Name(2) Sector State (GWh) (GWh) Budget Budget
-------------------- ----------------- --------------------------- ------- ------- --------- ----------
Utility-Scale
Beacon 2 Solar California 62.8(1) 65.9(1) (3.1) (4.8%)(a)
Utility-Scale
Beacon 5 Solar California 50.1(1) 51.2(1) (1.1) (2.1%)(b)
SED Solar Portfolio Commercial Solar Massachusetts, Connecticut 12.3 12.4 (0.1) (1.0%)(c)
Ellis Road Solar Commercial Solar Massachusetts 4.6 5.2 (0.6) (11.2%)(d)
Delran Solar Commercial Solar New Jersey 0.4 0.4 (0.0) (3.6%)(e)
-------------------- ----------------- --------------------------- ------- ------- --------- ----------
Solar Subtotal 130.2 135.1 (4.9) (3.6%)
-------------------------------------------------------------------- ------- ------- --------- ----------
Whirlwind Wind Texas 39.0 31.0 8.0 25.7%(f)
-------------------- ----------------- --------------------------- ------- ------- --------- ----------
Wind Subtotal 39.0 31.0 8.0 25.7%
-------------------------------------------------------------------- ------- ------- --------- ----------
Total 169.2 166.1 3.1 1.9%
-------------------------------------------------------------------- ------- ------- --------- ----------
Values and totals have been rounded to the nearest decimal.
1. Reflects RNEW's pro forma share of production based on ownership.
2. Oliver Solar reached COD on 29 November 2021 and has been
accruing PPA revenue based on P50 modelled production since that
date. However, due to some commissioning and testing delays with
its power purchaser, a global commerce company, the system was not
energised as at 31 December 2021.
Production variance summary:
a, b Underperformance primarily due to lower insolation and
soiling in Q3 due to California wildfires along with fuse failures
in combiner boxes (which are being replaced and remediated).
c Underperformance primarily due to lower insolation in Q3
including a historically high level of rain occurring in July
across Massachusetts.
d Underperformance primarily due to start-up issues including
inverter faults during Q2 and lower insolation in Q3 due to the
aforementioned historically high level of rain occurring in July
across Massachusetts, which was partially offset by project
outperformance in Q4.
e Underperformance primarily due to marginally lower insolation in Q4.
f Outperformance primarily due to lower than forecasted levels of economic curtailment.
Financing
As at 31 December 2021, the Company's U.S. subsidiaries at a
project level had debt balances of $47.1 million, which correspond
to approximately 27.3% of Gross Asset Value ("GAV"). Other
leverage, based on drawn debt on the RCF, totalled $5.0 million,
which corresponds to approximately 2.9% of GAV. This combined
leverage compares to the maximum limit of 65% in the Company's
Investment Policy, as further detailed in the table below. Given
that the Company's portfolio primarily comprises operating assets
that have long-term fixed-price revenue contracts with investment
grade counterparties, construction and term loan financing
opportunities at both a project and group level are widely
available on attractive terms. With that in mind, the Company's
Investment Manager and Board favour a measured approach to using
leverage to mitigate interest rate and default risk. The Company
proactively and successfully put in place both a RCF and
non-recourse construction loan at its U.S. subsidiaries as
described below:
On 19 October 2021, RNEW Capital, LLC, entered into a $65
million secured RCF with KeyBank, one of the premier lenders to the
U.S. renewable energy industry. The RCF comprises a $50 million,
two-year tranche priced at LIBOR plus 1.75% and a $15 million,
three-year tranche priced at LIBOR plus 2.00%. The RCF is secured
upon certain of the Company's investment assets and offers the
ability to substitute reference assets. The RCF also includes an
accordion option which provides access to an additional $20 million
of capital which can be accessed subject to certain conditions.
This substantial commitment with attractive pricing and terms
reflects the high quality of RNEW's portfolio.
On 7 January 2022, a wholly-owned U.S. subsidiary of RNEW,
Westside Solar Partners, LLC (i.e. "Echo Solar - MN"), entered in a
$15.9 million non-recourse construction loan related to and secured
by the 13.7 MW Minnesota commercial solar asset within the Echo
Solar Portfolio.
Through the 49.5% acquisition of the Beacon 2 and 5 operating
solar assets, the Company assumed its share of amortising project
term loans that totalled $47.1 million, as referred to above.
On 31 December 2021, the Company had GAV of $172.7 million, and
total recourse and non-recourse debt of $52.1 million, resulting in
total leverage of 30.2%.
The borrowing facilities available to the Company and its
subsidiaries at 7 January 2022 were as set out in the table
below:
Facility Amount drawn Applicable
Loan type Provider Borrower amount ($m) ($m)(13) Maturity rate
--------------------- --------- --------------- ------------ ------------ -------- -----------
Revolving credit
facility KeyBank RNEW Capital, $50.0 $5.0 Oct-23 LIBOR+1.75%
LLC(14) $15.0 $- Oct-24 LIBOR+2.00%
Project construction Westside Solar
loan Seminole Partners, LLC $15.9(15) $- Nov-22 5.0%
Beacon Solar
Term loan KeyBank 2 $26.1 $26.1 May-26 LIBOR+1.25%
Beacon Solar
Term loan KeyBank 5 $21.0 $21.0 May-26 LIBOR+1.25%
Total Debt $128.0 $52.1
------------------------------------------------- ------------ ------------ -------- -----------
13. As at 31 December 2021.
14. Includes security interests in the borrower and several of
its direct and indirect subsidiaries.
15. Closed 7 January 2022.
Portfolio Valuation
Valuation of the Company's portfolio is performed on a quarterly
basis. A discounted cash flow ("DCF") valuation methodology is
applied which is customary for valuing privately owned renewable
energy assets. The valuation is performed by Ecofin at 31 March and
30 September, and by an independent valuation firm at 30 June and
31 December.
Fair value for each investment is derived from the present value
of the investment's expected future cash flows, using reasonable
assumptions and forecasts for revenues and operating costs, and an
appropriate discount rate. More specifically, such assumptions
include annual energy production, curtailment, merchant power
prices, useful life of the assets, and various operating expenses
and associated annual escalation rates often tied to inflation,
including asset management, balance of plant, land leases,
insurance, property and other taxes, decommissioning bonds, among
other items.
At IPO on 22 December 2020, the Company raised $125.0 million
(before costs) by issuing 125,000,000 Shares.
As set out in the NAV bridge below, the Company's NAV as at 31
December 2021 was $123.7 million, predominantly reflecting movement
in the valuation of investments and dividends paid.
NAV Bridge Since 31 December 2020 ($M)
NAV 31 Dec 2020 $122.2
Change in ProjectCo DCF (Fair Value
of Holdco) ($0.2)
-------
Change in ProjectCo Financial Assets,
net of Distributions to RNEW (Fair
Value of Holdco) ($0.1)
-------
Q1-Q4 Cash Distributions from ProjectCos
to RNEW $6.1
-------
Q1-Q3 Cash Dividends to Shareholders ($2.3)
-------
Deferred Tax Liability (Fair Value
of Holdco) ($1.9)
-------
Net accrued expenses ($0.1)
-------
NAV, 31 Dec. 2021 $123.7
-------
Change in ProjectCo DCF: Represents the impact on the fair value
of Holdco and RNEW NAV from changes to a) DCF
depreciation/Quarterly cashflow roll-forward, b) Change in
project-level debt, c) Adjustments to discount rates/factors, and
d) Adjustments to DCF assumptions. As of 31 December 2021, NAV had
decreased by $0.2M millions since 31 December 2020 due to changes
in DCF FMV of the underlying assets.
Change in ProjectCo Financial Assets, net of distributions to
RNEW: Represents the impact on the fair value of Holdco and RNEW
NAV due to increases or decreases in cash, receivables, payables
and other net working capital account balances at the project
company level.
Q1-Q4 Cash distributions from ProjectCos to RNEW: Represents
cash generated by project companies which was distributed up to
RNEW during the Period for purposes of paying dividends to
Shareholders.
Q1-Q3 Cash dividends to Shareholders: Dividends of $2.3 million
(1.8 cents per Share) were paid during the Period in respect of the
period to 30 September 2021. In addition, after the Period end, the
Company declared a further dividend of 1.4 cents per Share in
respect of the quarter ended 31 December 2021. Over the Period, the
portfolio generated net revenue sufficient to cover the dividend
approximately 1.1 times.
Deferred Tax Liability: Represents the impact on the fair value
of Holdco and RNEW NAV due to an accrual for deferred tax at RNEW
Holdco, LLC, the Company's wholly-owned U.S. subsidiary, which is
subject to U.S. income taxes.
Net accrued expenses: Represents both the impact on fair value
of Holdco due to increases or decreases in cash, receivables,
payables and other net working capital account balances at the
Holdco level as well as the change in net working capital at the
RNEW level.
The assumptions set out in this section remain subject to
continuous review by the Investment Manager and the Board.
Portfolio Valuation Sensitivities
The figure below shows the impact on the portfolio valuation of
changes to the key input assumptions ("sensitivities") with the
horizontal x-axis reflecting the impact on NAV per Share. The
sensitivities are based on the portfolio of assets as at 31
December 2021. For each sensitivity illustrated, it is assumed that
potential changes occur independently with no effect on any other
assumption. It should be noted that the relatively moderate impact
of a change in forecast merchant power prices reflects the long
term fixed price contracted revenues of the Company's portfolio,
with a weighted average remaining contracted term of 16.7 years(16)
as at 31 December 2021. Similarly, the moderate impacts due to
variations in operational expenses reflect a number of the
Company's assets having fixed price, long-term operating expenses
including O&M, property leases, and payments in lieu of
taxes.
Sensitivity Impact on NAV per Share
Energy Production P75/P25 (6.8%) to 6.7%
------------------------
Discount Rates +/- 50bps (5.4%) to 5.8%
------------------------
Merchant power prices +/-10% (5.0%) o 5.0%
------------------------
Operating Expenses +/-10% (4.3%) to 4.3%
------------------------
Curtailment (Wind) +/- 50% (4.3%) to 3.9%
------------------------
16. Includes all construction and committed assets.
Market Outlook
The period since RNEW's IPO has seen a number of positive
developments in the U.S. renewable energy industry. In 2021, U.S.
solar and wind installations represented over 80% of new power
capacity, contributing more than 28 GW. By way of comparison, this
new clean energy capacity is more than four times that of new
gas-fired power installations last year. With these additions,
renewable energy now represents more than 25% of U.S. power
generating capacity and is forecasted to exceed 30% by 2024
according to Federal Energy Regulatory Commission ("FERC") data.
While acknowledging the human suffering arising out of the
Russian-Ukraine conflict, we believe that it should have a positive
impact on propelling renewable energy in the U.S. and globally as
nations revisit their reliance on imported fossil fuels and
reorient their policies to enhance domestic energy security.
Furthermore, with rising fossil fuel costs, particularly natural
gas, which sets the marginal power price across most U.S. power
markets, renewables competitive positioning has strengthened due to
its abundant and free fuel source. We also believe that these
factors contribute to an improved outlook for recontracting RNEW's
assets over the medium term.
In late December 2020, the Consolidated Appropriations Act 2021
extended the existing solar ITC for two additional years and the
onshore wind PTC for one additional year. Solar projects on which
construction starts in 2020 through 2022 qualify for a 26% ITC,
reducing to 22% in 2023. All such projects that start construction
through 2022 must be placed in service by the end of 2025. This is
alongside the current regulations governing tax credits which
require that projects must be completed within four years after
construction starts, thereby providing a multi-year pipeline of
solar and wind opportunities that began construction in 2021 and
can still access the current year ITC or PTC through 2025.
The inauguration of President Biden in January 2021 marked a
further strengthening of the Federal Government's support for
renewable energy. The climate agenda is a central priority for
President Biden who, on his first day in office, signed an
executive order to bring the U.S. back into the Paris Agreement
(which took effect on 19 February 2021). He also issued a series of
executive actions in support of policies seeking to combat climate
change by using a "whole of government" approach. He established a
goal for the U.S. power sector to be carbon-free by 2035, a very
ambitious objective considering the U.S. power grid is still 60%
reliant on fossil fuel generation. These orders included directing
federal agencies to eliminate fossil fuel subsidies and procure
carbon pollution-free electricity for federal facilities. On 8
December 2021, he issued a series of climate related executive
orders including directing the Federal Government to use its
procurement power to achieve 100% carbon pollution free electricity
by 2030. Given that the Federal Government is the largest U.S.
landowner and energy consumer, we expect this order to have a
positive impact on solar, wind and battery storage project
development and construction in the years to come. This order alone
is projected to result in the Federal Government procuring more
than 10 GW of renewable energy by 2030. In addition to these
actions, President Biden supports legislation for a 10-year ITC
extension and a direct pay or refundable tax credit to be enacted,
both of which would require Congressional approval.
For several months in 2021, Congress debated a large social and
climate infrastructure bill known as the Build Back Better ("BBB")
Act. In November, the Democratic Party controlled U.S. House of
Representatives passed the $2.2 trillion act, which included
approximately $555 billion allocated to climate related investments
including the multi-year extension of various tax credits for solar
and wind. In December, with Democratic Senator Joe Manchin's
announced "no" decision, the U.S. Senate was unable to obtain the
50 votes needed to pass BBB. While BBB would have expanded tax
credits to standalone battery storage and extended tax credits for
wind and solar for 10 years, we do not believe that BBB has a
material impact on our near-to-medium-term outlook for RNEW's
addressable U.S. solar and wind markets given the multi-year tax
credit policies currently in place. The Democratic Congressional
leadership has signalled its intent to continue pressing for a
modified BBB bill in 2022. We believe that BBB's inability to be
enacted in 2021 was more attributable to the enormous cost of its
social welfare agenda rather than its climate related package.
Therefore, we remain optimistic that a scaled down
bill with material renewable tax credit extensions will gain
bi-partisan support in 2022, particularly after the mid-term
Congressional elections in November 2022.
Over the last several months, inflation and supply chain
concerns across many industries including wind and solar power have
garnered attention as economies emerge from the slack demand
related to COVID-19 and experience supply and demand imbalances.
Moreover, the Russia-Ukraine conflict has had an impact of
increasing aluminium and steel prices which are inputs into the
installation of solar systems. We expect equipment prices to
continue to rise in the near term as they have in the past when
various supply and demand catalysts such as tariffs, tax credit
extension and expiration, pandemics, and other factors have
occurred. To date, the Company has not experienced any material
impacts due to inflation across its construction and operating
stage assets. As a general matter, the Company invests
predominantly in construction and operating stage assets where the
risks of inflation in construction costs are mitigated through
fixed price EPC contracts and/or purchase agreements where
potential cost overruns and delays are allocated to the
construction firm or vendor. Similarly, the Company typically
structures O&M services for its projects under medium to long
-- term (i.e. 3-10 years) fixed priced contracts with experienced
operators to mitigate temporary price fluctuations. Finally, with
the U.S. renewable energy industry's projected sustained growth
through the coming decade, we expect the number of O&M service
providers to increase over time which will continue to increase
competition to service the Company's growing portfolio and cushion
potential inflationary pressures.
2021 also saw substantial capital inflows into sustainable and
renewables-focused investment vehicles. Ecofin's observation is
that the lion's share of fund flows continues to go into large ($
billion) infrastructure funds while acknowledging increasing flows
broadly across the renewable energy spectrum. RNEW's focus is on
the "middle market" of U.S. renewable energy, where Ecofin sees
less deep capital markets relative to the large -- scale segment,
which is more heavily targeted by large funds and strategic
investors (i.e., utilities, independent power producers ("IPPs"),
etc.) acquiring assets through advisor led auctions. Based on
Ecofin's experience of evaluating dozens of solar and wind
acquisition opportunities and committing to new investments for
RNEW, our view is that market conditions and discount rates for
U.S. renewables assets should remain stable relative to the past
couple of years.
Solar
The U.S. solar industry continues to demonstrate remarkable
growth, representing the single largest share (52%) of new U.S.
electric generating capacity additions in 2021. In 2021, 12.8 GW of
utility scale solar was installed and approximately 5.0 GW of
distributed solar (less than 1 MW) was installed. With 5.4 GW of
solar capacity added in Q3 2021, the U.S. now has 113.5 GW of
installed solar capacity, enough to power 21.8 million American
homes.
This growth is particularly impressive as the industry navigated
through international trade policy and supply chain related
challenges. In November 2021, the U.S. solar industry welcomed the
Department of Commerce ("DOC") dismissing petitions to issue
anti-dumping and countervailing duties ("AD / CVD") on solar cells
from Malaysia, Thailand, and Vietnam, which would have
significantly increased module prices. On the same day, the U.S.
Customs and Border Protection clarified its policies around the
enforcement of its Withhold Release Order against silica-based
products from Hoshine Silicon Industry Co. in China's Xinjiang
region. However, in March 2022, the DOC initiated a new AD / CVD
case against crystalline silicon photovoltaic (PV) based products
from Vietnam, Malaysia, Thailand, and Cambodia intended to provide
broader enforcement of the Section 201 tariffs on imported Chinese
solar modules, which was extended for four years in February 2022.
We anticipate that this development will dampen the forecasted pace
of growth for the U.S. solar industry while the case runs its
course over the next several months. As a policy matter, these
developments reinforce the desire of the U.S. government to create
a level playing field with China and promote the development of
domestic solar PV module manufacturing. On a positive note, the
Section 201 tariff extension includes an exemption for bi-facial PV
modules, which are a primary component used in utility scale solar
projects.
During Q3 2021, 6.1 GW of new revenue contracts were signed,
bringing the total to 81 GW of U.S. utility scale projects in
development with revenue contracts. Similarly, we are seeing strong
interest across the country from corporations, municipalities,
universities, schools, and hospitals to enter into PPAs with
commercial scale solar systems. Given near term supply chain
constraints introducing delays and equipment cost inflation, we
expect to see developers being more selective on the projects they
advance in 2022 and potentially electing to defer marginal projects
until 2023 to optimise economics.
From RNEW's vantage point, investments in contracted solar
assets remain at the core of achieving its investment objectives.
As we look to investing in 2022, RNEW benefits from having a
sizeable pipeline of announced conditional acquisitions (the Echo
Solar Portfolio of 10 solar assets in Virginia and Delaware that
are anticipated to close in 2022 totalling $41 million of equity
value) where the cost inflation risks are mitigated through the
contractual structure with a financially strong and large global
renewable energy company. As of 31 December 2021, Ecofin's pipeline
of commercial and utility scale solar opportunities consisted of
more than 35 deals totalling in excess of $1.3 billion. Taking
stock of the current market and policy environment, we remain
confident in our ability to source operating and ready-to-build
contracted solar opportunities to fuel RNEW's growth, consistent
with its investment objective.
Wind
U.S. wind power capacity totals 133 GW, making it the
third-largest source of electricity generation in the country. In
2021, 10.8 GW of wind power capacity was installed. Of this total,
several projects involved repowering older wind farms with larger
and more efficient components such as longer blades and updated
controls to enhance performance and re-access available PTCs. At
the end of 2021, FERC estimated 21.6 GW of high probability wind
projects in development with potential to come online by 2024. The
Biden administration strongly supports the growth of the U.S. wind
industry. While it has heavily promoted the nascent offshore wind
industry through a series of executive actions and permit
approvals, the Biden administration has also signalled its support
for the more mature onshore wind industry through endorsing the ten
year extension of PTCs, which is being actively considered and
requires Congressional approval.
With the successful closing of Whirlwind in October 2021, RNEW
has achieved its sector diversification objective through a proven
operating wind asset with a long-term fixed price PPA with an
investment grade utility. As at 31 December 2021, Ecofin's pipeline
of wind investment opportunities comprised eighteen deals totalling
over $1.5 billion. Within this, Ecofin is under exclusivity to
invest $9 million in a portfolio of seven operating stage and one
construction stage wind projects totalling 27 MW and $42 million in
two construction stage wind and wind/solar hybrid projects. The
wind investments under exclusivity are both structured as preferred
equity to enable regular quarterly payments of a 7.5% annual
dividend yield from inception through the construction period into
operations. Based on the wind investment opportunities in the
pipeline and screened during the Period, we remain convinced about
wind's role in providing meaningful diversification benefits,
particularly as RNEW grows and broadens its access to larger wind
assets and portfolios readily accessible in the market.
In summary, we believe that the Company's investment strategy of
focusing on a diversified set of proven renewable energy assets in
the U.S. middle market remains differentiated. Moreover, Ecofin,
with its seasoned investment team and proprietary sourcing network,
is uniquely positioned to access the sustained growth of U.S.
renewables that is decarbonising the U.S. power system while
achieving RNEW's investment objective. With the IPO proceeds fully
deployed into a well-diversified portfolio of solar and wind assets
selling power under contract to investment grade quality
counterparties and a substantial pipeline of near-term investment
opportunities secured under contract, RNEW is well-positioned for
the year ahead. At a time of substantial geopolitical and market
uncertainty, we believe that RNEW offers investors an opportunity
to access predictable and uncorrelated dividends from this unique
sustainable infrastructure investment.
Impact Report
ESG Integration and Impact
Impact goal: Allocate capital using an ESG integrated investment
process to build and operate a diversified portfolio of renewable
energy assets that achieves RNEW's investment objective
The Company's emphasis on ESG comes from the top: its Board of
Directors is diverse and has substantial and relevant investment
experience to provide strong corporate governance.
RNEW is focused on allocating capital using an investment
process which fully integrates ESG considerations and analysis to
build and operate a diversified portfolio of renewable energy
assets consistent with RNEW's investment objective. The Company has
selected Ecofin as its Investment Manager which aligns with its
investment and impact objectives.
Ecofin, through its parent company, is a signatory to the
Principles for Responsible Investment (PRI) and incorporates ESG
analysis into its investment and reporting process. All of Ecofin's
investment strategies for renewables infrastructure are designed to
provide investors with attractive long-term returns and a level of
impact that aligns with United Nations Sustainable Development
Goals:
This strategy seeks to achieve positive impacts that align with
the following UN Sustainable Development Goals:
v 7 Affordable and Clean Energy
v 8 Decent Work and Economic Growth
v 9 Industry, Innovation and Infrastructure
v 11 Sustainable Cities and Communities
v 13 Climate Action
The Investment Manager's sustainability and impact policy is
further described in the Sustainability & Impact section of its
website ecofininvest.com/sustainability-impact.
ESG integration
The Company has been established to offer investors direct
exposure to renewable energy and sustainable infrastructure assets
including solar, wind, and battery storage that reduce greenhouse
gas ("GHG") emissions and promote a positive environmental impact.
The Investment Manager integrates analysis of ESG issues throughout
the lifecycle of its investment activities spanning due diligence,
investment approval, and ongoing portfolio management.
Environmental criteria analysis considers how an investment
performs as a steward of nature; social criteria analysis examines
its impact and relationships with employees, suppliers, customers
and the communities in which it operates; and governance analysis
examines internal controls, business ethics, compliance and
regulatory status associated with each investment.
Ecofin has developed a proprietary ESG due diligence risk
assessment framework (ESG Risk Assessment) that combines both
qualitative and quantitative data. This ESG Risk Assessment is
embedded in Ecofin's investment memoranda and systematically
applied by the investment team to all opportunities prior to
investment authorisation by Ecofin's Investment Committee. Each of
the Company's eight closed and committed investments spanning 71
assets was analysed through Ecofin's ESG Risk Assessment prior to
investment commitment. Ecofin believes this approach to assessing
ESG issues serves to mitigate risk and enhance RNEW's impact.
Environmental factors affecting climate risk are reviewed to
determine an investment's impact and ability to reduce GHG
emissions, air pollution and water consumption. Analysis of
environmental issues also considers the impact that the investment
will have on land use and considers mitigation plans when issues
are identified. Analysis of social issues may encompass an
investment's impact on the local community and consider health and
safety together with the counterparties to be engaged to construct
and operate the assets. Governance is reviewed in partnership with
qualified third-party legal counsel to ensure compliance with all
laws and regulations, strong ongoing corporate governance through
strict reporting protocols with qualified operators and project
asset managers and annual independent financial statement
audits.
Ecofin applies a systematic approach to ESG monitoring once
acquisitions are closed. Through Ecofin's engagement with third
party operations and maintenance and asset management service
providers, Ecofin reviews asset level reporting on health and
safety metrics, environmental matters, and compliance. Issues
identified are reviewed and addressed with service providers
through periodic meetings such as monthly operations meetings.
Importantly, ESG factors are analysed and reported in a
transparent manner so that investors and key stakeholders can
measure their impact.
Impact
RNEW's portfolio produced approximately 169.2 GWh of clean
electricity during 2021, enough to power approximately 15,800
homes, offsetting approximately 89,500 tonnes of CO(2) e and
avoiding the consumption of approximately 22,000 million litres of
water. RNEW focuses on investments that have a positive
environmental impact by reducing GHG emissions, air pollution and
water consumption. Ecofin seeks to analyse and report on ESG
factors on a consistent basis to maximise the impact of its
investment activities. To assess environmental impact, Ecofin goes
beyond measuring CO(2) emissions avoided and quantifies other GHG
emissions, such as methane and nitrous oxide, and also measures the
contribution that investments make to save water consumption. Water
is consumed by thermoelectric (i.e. coal and gas) power plants in
the cooling process associated with steam turbine generators. Water
savings occur in the same way that renewable energy generation
offsets CO(2) emissions from thermoelectric generators. Ecofin
calculates estimated water savings by reference to the U.S. Energy
Information Administration's ("EIA") thermoelectric cooling water
data by location and applying it to the production from RNEW's
portfolio.
Ecofin's methodology for calculating the environmental impact of
investments relies on trusted data sources including the U.S. EPA
and the EIA.
Portfolio impact
89,458 22,179M
Tonnes of CO(2) e Reduction Litres of water savings
15,794 8,872
Households supplied Olympic size pools
Task Force on Climate-related Financial Disclosures
Investment in renewables is considered an important component of
climate mitigation as replacing fossil-based forms of electrical
generation is a key component in helping the global energy sector
transition to a lower carbon economy. While investment in
renewables helps mitigate the effects of climate change, renewable
investments are not exempt from the potential impacts of climate
change. RNEW routinely identifies climate-related risks and
opportunities that may have a material financial impact on the
performance of its investments.
The Task Force on Climate-Related Financial Disclosures ("TCFD")
was established to develop voluntary, consistent climate-related
financial risk disclosures for use by companies in providing
information to investors, lenders, insurers, and other
stakeholders. The TCFD recommends that all organizations provide
climate-related disclosures in their annual report and accounts,
providing a framework to help companies assess the risks and
opportunities associated with climate change.
The Financial Conduct Authority ("FCA") issued a proposal at the
start of 2020 that would require all premium listed companies with
a financial year end from December 2021 to align their reporting to
the TCFD framework. While RNEW, as an Investment Trust, is
currently exempt from this reporting requirement, RNEW has decided
to begin making specific disclosures on opportunities and risks the
Company faces relating to climate change. An outline of RNEW's
current approach to the recommendations suggested by TCFD is
included below.
TCFD Recommendation RNEW Disclosure
------------------------------------------------- -------------------------------------------------------------
Governance
------------------------------------------------- -------------------------------------------------------------
Disclose the organisation's governance The Company has an independent board
around climate-related risks and opportunities. of four non-executive directors. The
Board's role is to oversee the governance
of the Company in the interests of
Shareholders and other stakeholders.
In particular, the Board monitors
adherence to the Investment Policy,
determines the risk appetite, sets
Company policies and monitors the
performance of the Investment Manager
and other key service providers. The
Board is responsible for the ongoing
identification, evaluation and management
of the principal risks (including
climate-related risks and opportunities)
faced by the Company and the Board
has established a process for the
regular review of these risks and
their mitigation. The Board meets
a minimum of four times a year for
scheduled Board meetings, with additional
ad hoc meetings taking place dependent
upon the requirements of the business.
The Board reviews the performance
of all key service providers on an
annual basis through its Management
Engagement Committee. Under their
ongoing supervision, the Directors
have delegated responsibility for
managing the assets in the RNEW portfolio
to Ecofin.
In managing the RNEW portfolio to
achieve its investment objective,
Ecofin employs an institutional grade
investment process to identify and
mitigate risk (including climate-rated
risks) covering sourcing, underwriting,
due diligence and portfolio management.
------------------------------------------------- -------------------------------------------------------------
Strategy
------------------------------------------------- -------------------------------------------------------------
Disclose the actual and potential Consideration of climate-related opportunities
impacts of climate-related risks and and risks is embedded throughout RNEW's
opportunities on the organisation's business and investment strategies,
businesses, strategy, and financial as implemented by Ecofin. Examples
planning where such information is of areas considered include:
material. * Consideration of changing weather conditions that may
positively or negatively impact renewable energy
generation or cause issues related to the physical
placement of assets.
* Political conditions that may or may not make a 2.0
degree centigrade rise in temperature more likely
through increasing / impairing the value and pace of
investment in Renewable Assets.
* Changes in technology or the cost of technology that
could make a 2.0 degree centigrade rise in global
temperature more or less likely and positively
/negatively impact the value of existing and future
Renewable Assets investments.
* How the deployment of renewable energy and future
technology may impact commodity prices including the
future price of electricity and have a positive or
negative impact on existing and future Renewable
Assets investments.
As these and other material or potentially
material risks and opportunities are
identified, management will seek to
incorporate structuring mitigation
(i.e. obtain insurance for those risks)
and/or perform sensitivities on power
price forecasts and adjust required
returns on investment.
------------------------------------------------- -------------------------------------------------------------
Risk Management
------------------------------------------------- -------------------------------------------------------------
Disclose how the organisation identifies, The Directors and Ecofin understand
assesses, and manages climate-related that climate change could impact RNEW's
risks. strategy and underlying assets and
include the consideration of climate
change opportunities and risks throughout
the investment process. When conducting
due diligence on new investment opportunities,
Ecofin uses its ESG Risk Assessment
framework to evaluate the impact of
CO(2) and other GHG emissions / pollutants,
assess the impact on the site (through
review of a Phase I Environmental
Site Assessment), and compliance with
permits and regulations. Environmental
factors are considered during both
the initial screening process as well
as during the project-focused due
diligence stage in concert with specialist
environmental consultants and legal
advisors, as needed. These environmental
factors and risks are documented in
Ecofin's investment memoranda that
are reviewed by its Investment Committee
prior to investments being approved.
When a new asset is added to the portfolio,
Ecofin establishes a monitoring plan
that is aligned with mitigating the
key risks and achieving RNEW's investment
objective. Environmental factors are
included in the ongoing analysis and
reporting process for each asset in
the portfolio.
------------------------------------------------- -------------------------------------------------------------
Metrics and Targets
------------------------------------------------- -------------------------------------------------------------
Disclose the metrics and targets used Due to the nature of the Renewable
to assess and manage relevant climate-related Assets in the portfolio, the Scope
risks and opportunities where such 1 & 2 emissions for RNEW are de minimis.
information is material. The power generated from the Renewable
Assets displaces electricity generated
from marginal fossil fuel emitting
sources. As part of the investment
diligence and monitoring, Ecofin attempts
to quantify the negative environmental
factors avoided from the actual or
anticipated generation of its assets.
Ecofin analyses and considers several
environmental factors including GHG
emissions from CO(2) , methane (CH(4)
) and nitrous oxide (N(2) O), air
pollutants such as sulphur dioxide
(SO(2) ) and nitrogen oxides (NOX)
as well as the project's water consumption
to provide a broad view of environmental
impact. For calculating the emission
reductions from Ecofin investments
in Renewable Assets, non-baseload
fossil fuel generation emission rates
are appropriate. Non-baseload fossil
fuel generation represents the generation
most likely to be reduced or replaced
by energy efficiency projects or renewable
energy projects. Ecofin aggregates
and evaluates data according to the
EPA's eGrid subregions in the U.S.
These subregions are defined by the
EPA to establish an aggregated area
where emission rates are anticipated
to most accurately represent the generation
and emissions from the power plants
operating within that region. This
allows the environmental impact from
an Ecofin investment in Renewable
Assets to be more accurately quantified
from the asset's operation.
For reporting purposes, non-CO(2)
GHG emissions are often converted
to CO(2) equivalent and reported in
aggregate as CO(2) e.
------------------------------------------------- -------------------------------------------------------------
Investment Objective and Investment Policy
The Company's investment objective and investment policy
(including defined terms) are as set out in its IPO prospectus.
Investment objective
The Company's investment objective is to provide Shareholders
with an attractive level of current distributions by investing in a
diversified portfolio of mixed renewable energy and sustainable
infrastructure assets ("Renewable Assets") predominantly located in
the United States with prospects for modest capital appreciation
over the long term.
Investment policy and strategy
The Company intends to execute its investment objective by
investing in a diversified portfolio of Renewable Assets
predominantly in the United States, but it may also invest in other
OECD countries.
Whilst the principal focus of the Company will be on investment
in Renewable Assets that are solar and wind energy assets ("Solar
Assets" and "Wind Assets" respectively), sectors eligible for
investment by the Company will also include different types of
renewable energy (including battery storage, biomass, hydroelectric
and microgrids) as well as other sustainable infrastructure assets
such as water and waste water.
The Company will seek to invest primarily through
privately-negotiated middle market acquisitions of long-life
Renewable Assets which are construction-ready, in-construction
and/or currently in operation with long-term PPAs or comparable
offtake contracts with investment grade quality counterparties,
including utilities, municipalities, universities, schools,
hospitals, foundations, corporations and others. Long-life
Renewable Assets are those which are typically expected by Ecofin
to generate revenue from inception for at least 10 years.
The Company intends to hold the Portfolio over the long term,
provided that it may dispose of individual Renewable Assets from
time to time.
Investment restrictions
The Company will invest in a diversified portfolio of Renewable
Asset subject to the following investment limitations which, other
than as specified below shall be measured at the time of the
investment:
-- once the Net Initial Proceeds are substantially fully
invested, a minimum of 20 per cent. of Gross Assets will be
invested in Solar Assets;
-- once the Net Initial Proceeds are substantially fully
invested, a minimum of 20 per cent. of Gross Assets will be
invested in Wind Assets;
-- a maximum of 10 per cent. of Gross Assets will be invested in
Renewable Assets that are not Wind Assets or Solar Assets;
-- exposure to any single Renewable Asset will not exceed 25 per cent. of Gross Assets;
-- exposure to any single Offtaker will not exceed 25 per cent. of Gross Assets;
-- once the Net Initial Proceeds are substantially fully
invested, investment in Renewable Assets that are in the
construction phase will not exceed 50 per cent. of Gross Assets,
but prior to such time investment in such Renewable Assets will not
exceed 75 per cent. of Gross Assets. The Company expects that
construction will be primarily focussed on Solar Assets in the
shorter term until the Portfolio is more substantially invested and
may thereafter include Wind Assets in the construction phase;
-- exposure to Renewable Assets that are in the development
(namely pre-construction) phase will not exceed 5 per cent. of
Gross Assets;
-- exposure to any single developer in the development phase
will not exceed 2.5 per cent. of Gross Assets;
-- the Company will not typically provide Forward Funding for
development projects. Such Forward Funding will, in any event, not
exceed 5 per cent. of Gross Assets in aggregate and 2.5 per cent.
of Gross Assets per development project and would only be
undertaken when supported by customary security;
-- Future Commitments and Developer Liquidity Payments, when
aggregated with Forward Funding (if any), will not exceed 25 per
cent. of Gross Assets;
-- once the Net Initial Proceeds are substantially fully
invested, Renewable Assets in the United States will represent at
least 85 per cent. of Gross Assets; and
-- any Renewable Assets that are located outside of the United
States will only be located in other OECD countries. Such Renewable
Assets will represent not more than 15 per cent. of Gross
Assets.
References in the investment restrictions detailed above to
"investments in" or "exposure to" shall relate to the Company's
interests held through its Investment Interests.
For the purposes of this Prospectus, the Net Initial Proceeds
will be deemed to have been substantially fully invested when at
least 75 per cent. of the Net Initial Proceeds have been invested
in (or have been committed in accordance with binding agreements to
investments in) Renewable Assets.
The Company will not be required to dispose of any investment or
to rebalance the Portfolio as a result of a change in the
respective valuations of its assets. The investment limits detailed
above will apply to the Group as a whole on a look-through basis,
namely, where assets are held through a Project SPV or other
intermediate holding entities or special purpose vehicles, and the
Company will look through the holding vehicle to the underlying
assets when applying the investment limits.
Gearing policy
The Group primarily intends to use long-term debt to provide
leverage for investment in Renewable Assets and may utilise
short-term debt, including, but not limited to, a revolving credit
facility, to assist with the acquisition of investments.
Long-term debt shall not exceed 50 per cent. of Gross Assets and
short-term debt shall not exceed 25 per cent. of Gross Assets,
provided that total debt of the Group shall not exceed 65 per cent.
of Gross Assets, in each case, measured at the point of entry into
or acquiring such debt.
The Company may employ gearing either at the level of the
relevant Project SPV or at the level of any intermediate subsidiary
of the Company. Gearing may also be employed at the Company level,
and any limits set out in this Prospectus shall apply on a
consolidated basis across the Company, the Project SPVs and any
such intermediate holding entities (but will not count any
intra-Group debt). The Company expects debt to be denominated
primarily in U.S. Dollars.
For the avoidance of doubt, financing provided by tax equity
investors and any investments by the Company in its Project SPVs or
intermediate holding companies which are structured as debt are not
considered gearing for this purpose and are not subject to the
restrictions in the Company's gearing policy.
Currency and hedging policy
The Group may use derivatives for the purposes of hedging,
partially or fully:
-- electricity price risk relating to any electricity or other
benefit including renewable energy credits or incentives, generated
from Renewable Assets not sold under a PPA, as further described
below;
-- currency risk in relation to any Sterling (or other non-U.S.
Dollar) denominated operational expenses of the Company;
-- other project risks that can be cost-effectively managed
through derivatives (including, without limitation, weather risk);
and
-- interest rate risk associated with the Company's debt facilities.
In order to hedge electricity price risk, the Company may enter
into specialised derivatives, such as contracts for difference or
other hedging arrangements, which may be part of a tripartite or
other PPA arrangement in certain wholesale markets where such
arrangements are required to provide an effective fixed price under
the PPA.
Members of the Group will only enter into hedging or other
derivative contracts when they reasonably expect to have an
exposure to a price or rate risk that is the subject of the
hedge.
Cash management policy
Until the Company is fully invested the Company will invest in
cash, cash equivalents, near cash instruments and money market
instruments and treasury notes ("Near Cash Instruments"). Pending
re-investment or distribution of cash receipts, the Company may
also invest in Near Cash Instruments as well as Investment Grade
Bonds and exchange traded funds or similar ("Liquid Securities"),
provided that the Company's aggregate holding in Liquid Securities
shall not exceed 10 per cent. of Gross Assets measured at the point
of time of acquiring such securities.
Amendments to the investment objective, policy and investment
restrictions
In the event that the Board considers it appropriate to amend
materially the investment objective, investment policy or
investment restrictions of the Company, Shareholder approval to any
such amendment will be sought by way of an ordinary resolution
proposed at an annual or other general meeting of the Company.
Risk Management
Principal Risks
The Board is responsible for the ongoing identification,
evaluation and management of the principal risks faced by the
Company. On behalf of the Board, the Risk Committee has established
a process for the regular review of these risks and their
mitigation. This process principally involves a semi-annual review
of the Company's risk matrix and accords with the UK Corporate
Governance Code (the "UK Code") and the Financial Reporting
Council's ("FRC") Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting. The Directors have
carried out a robust assessment of the principal risks facing the
Company, including those that would threaten its business model,
future performance, solvency and liquidity. The following sections
detail the risks the Board considers to be the most significant to
the Company:
Principal Risks and Uncertainties Mitigation
--- ----------------------------------------- -----------------------------------------------
1. Cyber Risk: Ecofin's information The Company relies on the systems
and technology systems and those of its service providers. Cyber security
of other service providers to the policies and procedures are implemented
Company may be vulnerable to cyber by key service providers and are reported
security breaches and identity to the Board periodically. Ecofin,
theft which could adversely impact the Administrator and the Board include
the Company's ability to continue cyber risk in their reviews of counterparties.
to operate without interruption.
--- ----------------------------------------- -----------------------------------------------
2. Electricity price risk: Lower electricity The Company's policy is to reduce
prices in the U.S. could negatively its exposure to electricity price
impact the Company's returns and/or risk by investing in Renewable Assets
the value of its investments. which sell their output under long
term offtake arrangements with credit
worthy counterparties. As at 31 December
2021, the portfolio benefited from
a weighted average revenue contract
term of 16.7 years. In its asset valuations,
the Company uses long-term electricity
price forecasts prepared by third
parties. Ecofin also performs a sensitivity
analysis to show the impact of a 10%
increase/ decrease in electricity
prices during each project's remaining
economic useful life. As at 31 December
2021, a 10% increase in electricity
prices from forecast levels would
increase NAV by 5% and a 10% decrease
in electricity prices from forecast
levels would reduce NAV by 5%.
--- ----------------------------------------- -----------------------------------------------
3. Interest rate, currency and inflation Interest, currency and inflation rates
risk: The Company may be adversely are monitored regularly by the Company.
affected by changes in interest The Company may implement interest
rates, inflation and currency exchange and currency rate hedging by fixing
rates. a portion of the Company's exposure
to any floating rate obligation using
interest or currency rate swaps or
other means. Where possible, the Company
enters into medium to long term contracts
to fix costs. Inflation risk can also
be partly mitigated where projects'
revenue offtake arrangements are subject
to indexation.
In light of the macro-economic situation
brought about by the Russian invasion
of Ukraine, the Directors fully considered
each of the Company's investments.
The Directors do not foresee any immediate
material risk to the Company's investment
portfolio and income from underlying
SPVs.
--- ----------------------------------------- -----------------------------------------------
4. Investment performance risk: Ecofin has a well-defined investment
The Company may not achieve its strategy and processes in place which
investment objective; are regularly reviewed and monitored
The Company may fail to deliver by the Board. Ecofin has significant
its target returns; experience originating, underwriting,
The Company may not be able to and managing renewable energy assets
acquire suitable Renewable Assets and applies its experience to mitigate
consistent with its investment risks and achieve the investment objective.
policy; and The Board reviews the portfolio quarterly
The Company's revenue can vary and discusses new investments, the
due to variations in the amount investment rationale, and the performance
of power that can be generated of the Company at each Board meeting.
and sold. By their nature, solar irradiation
and wind speed are outside the Company's
control, albeit some projects' returns
are neither wholly nor directly linked
to the volume of power produced.
--- ----------------------------------------- -----------------------------------------------
5. Investment valuation risk: The Ecofin has significant experience
valuation of assets is inherently in the valuation of renewable assets
subjective and uncertain. Projections and through its investment activities
are based on the Investment Manager's is continually exposed to the prices
assessment at the date of valuation paid for renewable assets in the U.S.
and are only estimates of future market. The Board and Ecofin review
results. Actual results may vary asset valuations quarterly. The Company
significantly from projected amounts. has appointed an independent external
firm to conduct a valuation of its
assets, including a review of discount
rates, on a semi-annual basis.
--- ----------------------------------------- -----------------------------------------------
6. Political and regulatory risk: As described in the Investment Manager's
Future investment opportunities report, both the current U.S. Administration
and/or the value of existing investments and individual states are supportive
may be impacted by government policy of renewable energy. Ecofin has significant
changes (e.g. increased property experience investing in renewable
taxes, lower tax credits), government assets and undertakes due diligence
policy incentives or changes in at purchase with support from its
U.S. tax laws. legal advisers and performs ongoing
monitoring of political and regulatory
risks. When incentive programs are
changed, the changes typically affect
projects that have yet to be built.
Existing projects are usually grandfathered
and retain the benefits associated
with the incentive scheme in place
when they were constructed. Ecofin
seeks to reduce exposure to political
and regulatory risk by entering into
long term contracts to fix both revenue
streams associated with incentives
and costs (e.g. property taxes). Ecofin
also actively monitors potential changes
in policy that could affect RNEW's
portfolio.
--- ----------------------------------------- -----------------------------------------------
7. Premium/discount risk: The Shares The Company's Brokers monitor the
may trade at a discount to NAV, market for the Company's Shares and
which may make it more difficult report at quarterly Board meetings.
for the Company to raise new equity The Board regularly reviews the relative
for future investments. level of discount and/or premium against
the sector. The Board has authority
to buy back Shares.
--- ----------------------------------------- -----------------------------------------------
8. Service provider risk: The Company The Board meets with Ecofin and the
has no employees and is reliant Administrator on a quarterly basis
on the performance of third-party to review their work and monitor their
service providers. performance. Additionally, through
its Management Engagement Committee,
the Board conducts a formal assessment
of each key service provider's performance
once a year. To assist its ability
to properly oversee the Company's
service providers, the Board requires
service providers to notify it as
soon as reasonably practicable following
any material breach of their contracts
with the Company.
--- ----------------------------------------- -----------------------------------------------
9. COVID-19 risk: A pandemic, such Updates on operational resilience
as COVID-19, could create operational are received from the Investment Manager,
challenges for the Company's service Administrator and other key service
providers and with the operation providers. In addition, the Investment
of the Company's assets. Manager is in close contact with each
asset's O&M provider. Ecofin continues
to work with counterparties to identify
and mitigate any risk posed by the
COVID-19 pandemic.
--- ----------------------------------------- -----------------------------------------------
10. Counterparty risk: There is the A fundamental part of the Investment
potential for losses to be incurred Manager's due diligence process involves
due to default by an offtaker or reviewing the most recent credit rating
other counterparty. of the offtaker provided by a third
party credit rating agency or performing
an independent credit review of the
offtaker's credit status. The credit
status of other counterparties is
also assessed.
--- ----------------------------------------- -----------------------------------------------
11. Climate and ESG risk: The Company When conducting due diligence on potential
is exposed to the impacts of climate investments, the Investment Manager
change i.e. risks relating to weather considers the potential impact the
conditions and performance of equipment. weather may have on electricity production.
ESG risks such as health and safety, Ecofin also considers the impact of
respect for human rights, bribery, storms and other weather conditions
corruption, environmental management when determining the appropriate level
practices, duty of care and compliance of insurance coverage for an asset.
with relevant laws and regulations, Investing in diverse projects spread
may also arise. across the U.S. mitigates the impact
of any localised, potentially unfavourable
weather conditions.
ESG is embedded in Ecofin's investment
process via a formal ESG rating matrix.
The Company monitors the portfolio
and quantifies the ESG impact of its
investments.
Each service provider has and is responsible
for its health and safety policies
and procedures.
--- ----------------------------------------- -----------------------------------------------
Emerging risks
The Directors have identified the following emerging risk:
Chinese Solar Materials Tied to Forced Labour
On December 23, 2021, President Biden signed the Uyghur Forced
Labor Prevention Act ("UFLPA") into law. The UFLPA is the latest in
a line of U.S. efforts to address the plight of Uyghurs and other
persecuted minority groups in China's Xinjiang Uyghur Autonomous
Region ("XUAR"). A key feature of UFLPA is the creation of a
rebuttable presumption that all goods manufactured even partially
in the XUAR are the product of forced labour and therefore not
entitled to entry at U.S. ports.
A significant portion of the world's polysilicon, which is used
to make solar panels, comes from China. In order to help ensure
that the solar supply chain remains free of forced labour and to
raise awareness within the industry, the Solar Energy Industries
Association ("SEIA") has been calling on solar companies to move
their supply chains out of XUAR. SEIA has been informed that many
companies have moved supply chains out of XUAR, and many are having
independent third-party audits. These audits are conducted to
verify that supply chain partners do not use forced labour and that
materials in solar products do not come from Xinjiang.
Risk Management
Risks are managed and mitigated by the Board through continual
review, policy setting, and regular reviews of the Company's risk
matrix by the Board's Risk Committee to ensure that procedures are
in place with the intention of minimising the impact of the
above-mentioned risks.
Directors on the Risk Committee bring external knowledge of the
renewable energy, investment trust (and financial services
generally) marketplace, trends, threats etc. as well as macro/
strategic insight. The Risk Committee carried out a formal review
of the Company's risks at its meeting held on 31 August 2021.
The Investment Manager advises the Board at quarterly Board
meetings on industry trends, providing insight on the political and
regulatory environment in which the Company's assets operate, and
future challenges in these markets. The Company's Brokers regularly
report to the Board on markets, the investment company sector and
the Company's peer group. The Investment Manager works with
reputable EPC firms to reduce the risk that any materials sourced
from vendors employing the use of forced labour end up in the
Company's projects and actively monitors developments on this
issue. The Company is not aware of any such materials having been
used in the Company's projects.
The Company Secretary briefs the Board on forthcoming
legislation/regulatory change in the UK that might impact on the
Company. The Auditor also provides an annual update on regulatory
changes relevant to the Company.
The Company is a member of the Association of Investment
Companies ("AIC"), which provides regular technical updates as well
as drawing members' attention to forthcoming industry/ regulatory
issues and advising on compliance obligations.
When required, experts are employed to provide information and
technical advice, including legal advisers, tax advisers and other
advisers.
Key Performance Indicators
The Company's Board of Directors meets regularly and at each
meeting reviews performance against a number of key performance
indicators which include the following:
-- Performance;
-- Dividends and Dividend Target;
-- Premium/discount of share price to NAV per Share; and
-- Ongoing charges ratio.
Performance
As the Company's objective is to seek to provide Shareholders
with an attractive level of distributions with prospects of modest
capital growth over the long term, performance is best measured in
terms of total return. The Company's NAV and share price total
returns for the Period were 2.8% and 0.8% respectively. There is no
single index against which the Company's performance may be
meaningfully assessed. Therefore, the Board refers to a variety of
relevant data and this is reflected in both the Chair's Statement
and the Investment Manager's Report. As explained in the Chair's
Statement, the Board has reviewed the performance in the Period and
is satisfied with the longer term prospects of the portfolio.
The Company's NAV per Share is shown on the Statement of
Financial Position.
Dividends and Dividend Target
Dividends form a key component of the total return to
Shareholders and the Company exceeded its dividend target of 2 - 3%
(based on the IPO issue price of 100 cents per Share) in respect of
the Period. The Company declared four interim dividends in respect
of the Period (aggregate total of 3.2 cents per Share),
representing a 3.2% return on investment (based on the IPO issue
price of 100 cents per Share). In its IPO Prospectus, the Company
set out a 5.25% - 5.75% annual dividend target range for 2022 and
beyond.
The Board's Dividend Payment Policy is to pay dividends on a
quarterly basis in May, August, November and February in respect of
each accounting year. The timing of these regular three-monthly
payments means that Shareholders do not have an opportunity to vote
on a final dividend. Recognising the importance of shareholder
engagement, although not required by any regulation, Shareholders
will be given an opportunity to vote on this policy at the
forthcoming AGM.
Premium/discount of share price to net asset value per Share
The Board monitors the price of the Company's Shares in relation
to their NAV and the premium/discount at which the Shares trade.
The Company has Shareholder authority to issue and buy back Shares,
which could assist short term management, however the level of
discount or premium is mostly a function of investor sentiment and
demand for the Shares, over which the Board may have limited
influence. The share price stood at a 0.1% premium to NAV as at 31
December 2021. Further details are provided in the Chair's
Statement.
Ongoing charges ratio
The expenses of managing the Company are carefully monitored by
the Board. The standard performance measure of these is the ongoing
charges ratio ("OCR"), which is calculated by dividing the sum of
such expenses over the course of the year, including those charged
to capital, by the average NAV over the year. This ratio provides a
guide to the effect on performance of annual operating costs. The
Company's OCR for the period from IPO to 31 December 2021 year was
1.47%.
Statement of Directors' Responsibilities in Respect of the
Financial Statements
Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 (the "Act") and applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the financial statements in accordance with
international accounting standards in conformity with the
requirements of the Act. Under company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss for the Company for that period.
The Directors are also required to prepare financial statements in
accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Act, subject to any material departures
disclosed and explained in the financial statements
-- state whether they have been prepared in accordance with
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union,
subject to any material departures disclosed and explained in the
financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
-- prepare a Directors' Report, a Strategic Report and
Directors' Remuneration Report which comply with the requirements
of the Act.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and 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 Act and, as regards the
financial statements, Article 4 of the IAS Regulation.
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
responsible for ensuring that the Annual Report and accounts, taken
as a whole, are fair, balanced, and understandable and provide the
information necessary for Shareholders to assess the Company's
performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Investment
Manager and the Directors. The Directors' responsibility also
extends to the ongoing integrity of the financial statements
contained therein.
Directors' responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
-- The financial statements have been prepared in accordance
with the applicable set of accounting standards and Article 4 of
the IAS Regulation and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Company;
and
-- The Annual Report includes a fair review of the development
and performance of the business and the financial position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
Patrick O'D Bourke
Chair of the Board
14 April 2022
Statement of Comprehensive Income
Period from Incorporation on 12 August 2020 to 31 December
2021
Revenue Capital Total
Notes $'000 $'000 $'000
---------------------------------------------- ----- ------- ------- -------
Losses on investment 4 - (322) (322)
Net foreign exchange losses - (334) (334)
Income 5 6,130 - 6,130
Investment management fees 6 (872) - (872)
Other expenses 7 (1,056) (103) (1,159)
---------------------------------------------- ----- ------- ------- -------
Profit/(loss) on ordinary activities before
taxation 4,202 (759) 3,443
Taxation 9 - - -
---------------------------------------------- ----- ------- ------- -------
Profit/(loss) on ordinary activities after
taxation 4,202 (759) 3,443
Earnings per Share (cents)- basic and diluted 8 4.54c (0.82c) 3.72c
---------------------------------------------- ----- ------- ------- -------
The total column of the Statement of Comprehensive Income is the
profit and loss account of the Company.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the Period.
Profit on ordinary activities after taxation is also the total
comprehensive profit for the Period.
Statement of Financial Position
As at 31 December 2021
Notes $'000
---------------------------------------------------- ----- -------
Non-current assets
Investments at fair value through profit or loss 4 118,882
Current assets
Cash and cash equivalents 5,362
Trade and other receivables 10 1
---------------------------------------------------- ----- -------
5,363
Current liabilities: amounts falling due within one
year
Trade and other payables 11 (522)
---------------------------------------------------- ----- -------
Net current assets 4,841
Net assets 123,723
Capital and reserves: equity
Share capital 12 1,251
Share premium 29
Special distributable reserve 14 121,250
Capital reserve (759)
Revenue reserve 1,952
---------------------------------------------------- ----- -------
Total Shareholders' funds 123,723
---------------------------------------------------- ----- -------
Net assets per Share (cents) 15 98.9c
---------------------------------------------------- ----- -------
Approved and authorised by the Board of directors for issue on
14 April 2022.
Patrick O'D Bourke
Chair of the Board
Ecofin U.S. Renewables Infrastructure Trust PLC was incorporated
in England and Wales with registered number 12809472.
Statement of Changes in Equity
Period from Incorporation on 12 August 2020 to 31 December
2021
Special
Share Share distributable Capital Revenue
capital premium reserve reserve reserve Total
Notes $'000 $'000 $'000 $'000 $'000 $'000
----------------------- ----- ------- --------- ------------- ------- ------- -------
Opening equity as
at
12 August 2020 - - - - - -
Transactions with
Shareholders
Shares issued at
IPO 12 1,250 123,750 - - - 125,000
Shares issued to
investment
manager 12 1 52 53
Share issue costs - (2,523) - - - (2,523)
Transfer to Special
distributable reserve - (121,250) 121,250 - - -
Dividend distribution 13 - - - - (2,250) (2,250)
----------------------- ----- ------- --------- ------------- ------- ------- -------
Total transactions
with Shareholders 1,251 29 121,250 - (2,250) 120,280
----------------------- ----- ------- --------- ------------- ------- ------- -------
Profit and total
comprehensive income
for the Period - - - (759) 4,202 3,443
----------------------- ----- ------- --------- ------------- ------- ------- -------
Closing equity as
at 31 December 2021 1,251 29 121,250 (759) 1,952 123,723
----------------------- ----- ------- --------- ------------- ------- ------- -------
The Company's distributable reserves consist of the Special
distributable reserve, Capital reserve attributable to realised
gains and Revenue reserve. Total distributable reserves as of 31
December 2021 were $123.2 million.
The Company may use its distributable reserves to fund
dividends, redemptions of Shares and share buy backs.
Statement of Cash Flows
Period from Incorporation on 12 August 2020 to 31 December
2021
As at 31
December
2021
Notes $'000
-------------------------------------------------- ----- ---------
Operating activities
Profit on ordinary activities before taxation 3,443
Adjustment for unrealised losses on investments 322
Adjustment for non-cash investment management fee 53
Increase in trade and other receivables (1)
Increase in trade and other payables 522
-------------------------------------------------- ----- ---------
Net cash flow from operating activities 4,339
-------------------------------------------------- ----- ---------
Investing activities
Purchase of investments 4 (119,204)
-------------------------------------------------- ----- ---------
Net cash flow used in investing (119,204)
-------------------------------------------------- ----- ---------
Financing activities
Proceeds of share issues 12 125,000
Share issue costs (2,523)
Dividends paid 13 (2,250)
-------------------------------------------------- ----- ---------
Net cash flow from financing 120,227
-------------------------------------------------- ----- ---------
Increase in cash 5,362
-------------------------------------------------- ----- ---------
Cash and cash equivalents at start of the Period -
-------------------------------------------------- ----- ---------
Cash and cash equivalents at end of the Period 5,362
-------------------------------------------------- ----- ---------
As at 31
December
2021
$'000
----------------------------------------------------- ---------
Cash and cash equivalents
Cash at bank 1
Money market cash deposits 5,361
----------------------------------------------------- ---------
Total cash and cash equivalents at end of the Period 5,362
----------------------------------------------------- ---------
Notes to the Financial Statements
Period from incorporation on 12 August 2020 to 31 December
2021
1. General Information
Ecofin U.S. Renewables Infrastructure Trust PLC ("RNEW" or the
"Company") is a public company limited by shares incorporated in
England and Wales on 12 August 2020 with registered number
12809472. The Company is a closed-ended investment company with an
indefinite life. The Company commenced operations on 22 December
2020 when its Shares were admitted to trading on the LSE. The
Directors intend, at all times, to conduct the affairs of the
Company so as to enable it to qualify as an investment trust for
the purposes of section 1158 of the Corporation Tax Act 2010, as
amended.
The registered office and principal place of business of the
Company is 6th Floor, 125 London Wall, London, EC2Y 5AS.
At the Company's IPO, 125,000,001 Shares were admitted to the
premium segment of the LSE, upon raising gross proceeds of US$125.0
million.
The Company's investment objective is to provide Shareholders
with an attractive level of current distributions, by investing in
a diversified portfolio of mixed renewable energy and sustainable
infrastructure assets predominantly located in the U.S. with
prospects for modest capital appreciation over the long term.
The financial statements comprise only the results of the
Company, as its investment in RNEW Holdco, LLC ("Holdco") is
included at fair value through profit or loss as detailed in the
key accounting policies below.
The Company's AIFM and Investment Manager is Ecofin Advisors,
LLC.
Sanne Fund Services (UK) Limited, (formerly PraxisIFM Fund
Services (UK) Limited), 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 have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with
international financial reporting standards ("IFRS") adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. 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
("FVTPL").
The 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 AIC in
April 2021.
The functional currency of the Company is U.S. Dollars as this
is the currency of the primary economic environment in which the
Company operates and where its investments are located. The
Company's investment is denominated in U.S. Dollars and a
substantial majority of its income is receivable, and of its
expenses is payable, in U.S. Dollars. Also, a majority of the
Company's cash and cash equivalent balances is retained in U.S.
Dollars. Accordingly, the Financial Statements are presented in
U.S. Dollars rounded to the nearest thousand dollars.
There are no comparatives as this is the Company's first
accounting period.
Basis of consolidation
The Company has adopted the amendments to IFRS 10 which states
that investment entities should measure all of their subsidiaries
that are themselves investment entities at fair value.
The Company owns 100% of its subsidiary Holdco. The Company
invests in SPVs through its investment in Holdco. The Company and
Holdco meet the definition of an investment entity as described by
IFRS 10. Under IFRS 10, investment entities measure subsidiaries at
fair value rather than being consolidated on a line-by-line basis,
meaning Holdco's cash, debt and working capital balances are
included in investments held at fair value rather than in the
Company's current assets. Holdco has one investor, which is the
Company. In substance, Holdco is investing the funds of the
investors in the Company on its behalf and is effectively
performing investment management services on behalf of such
unrelated beneficiary investors.
Characteristics of an investment entity
Under the definition of an investment entity, the Company should
satisfy all three of the following tests:
-- Company obtains funds from one or more investors for the
purpose of providing those investors with investment management
services;
-- Company commits to its investors that its business purpose is
to invest funds solely for returns from capital appreciation,
investment income, or both; and
-- Company measures and evaluates the performance of
substantially all of its investments on a fair value basis.
In assessing whether the Company meets the definition of an
investment entity set out in IFRS 10, the Directors note that:
-- the Company has multiple investors and obtains funds from a
diverse group of shareholders who would otherwise not have access
individually to investing in renewable energy and sustainable
infrastructure investments ("Renewable Assets") due to high
barriers to entry and capital requirements;
-- the Company intends to hold its Renewable Assets for the
remainder of their useful lives for the purpose of investment
income. The Renewable Assets are expected to generate renewable
energy output for 25 to 30 years from their relevant COD and the
Directors believe the Company is able to generate returns to
investors during that period; and
-- the Company measures and evaluates the performance of all of
its investments on a fair value basis which is the most relevant
for investors in the Company. Management uses fair value
information as a primary measurement to evaluate the performance of
all of the investments and in decision making.
The Directors are of the opinion that the Company meets all the
typical characteristics of an investment entity and therefore meets
the definition set out in IFRS 10. The Directors are satisfied that
investment entity accounting treatment appropriately reflects the
Company's activities as an investment trust.
Going concern
The Directors have adopted the going concern basis in preparing
the financial statements. The following is a summary of the
Directors' assessment of the going concern status of the Company,
which considered the adequacy of the Company's resources and the
impacts of the COVID-19 pandemic.
In reaching their conclusion, the Directors considered the
Company's cash flow forecasts, cash position, income and expense
flows. The Company's net assets at 31 December 2021 were $123.7
million. As at 31 December 2021, the Company held $5.4 million in
cash and had $60 million headroom on its RCF, and anticipates to
close on a tax equity arrangement in Q2-Q3 of 2022 which would
consist of financing towards the Echo Solar Portfolio. The Company
continues to meet its day-to-day liquidity needs through its cash
resources. The total expenses for the Period ended 31 December 2021
were $2.0 million, which represented approximately 1.6% of average
net assets during the Period. At the date of approval of this
Annual Report, based on the aggregate of investments and cash held,
the Company had substantial cover for its operating expenses.
The major cash outflows of the Company are the costs relating to
the acquisition of new investments and the payment of dividends.
The Directors review financing reporting at the quarterly Board
meeting, which includes reporting related to indebtedness,
compliance with borrowing covenants and fund investment limits. The
Directors are confident that the Company has sufficient cash
balances and access to equity markets, including pending tax equity
financing arrangements, in order to fund commitments to
acquisitions detailed in note 19 to the financial statements,
should they become payable.
In light of the COVID-19 pandemic and the macro-economic
situation brought about by the Russian invasion of Ukraine, the
Directors have fully considered each of the Company's investments.
The Directors do not foresee any immediate material risk to the
Company's investment portfolio and income from underlying SPVs. A
prolonged and deep market decline could lead to falling values in
the underlying investments or interruptions to cashflow, however
the Company currently has sufficient liquidity available to meet
its future obligations. The Directors are also satisfied that the
Company would continue to remain viable under downside scenarios,
including decreasing government regulated tax credits and a decline
in long term power price forecasts.
Underlying SPV revenues are derived primarily from the sale of
electricity by project companies through PPAs in place with large
and creditworthy utilities, municipalities, and corporations. Most
of these PPAs are contracted over a long period with a weighted
average remaining term as at 31 December 2021 of 16.7 years.
During the Period and up to the date of this report, there has
been no significant impact on revenue and cash flows of the SPVs.
The SPVs have contractual operating and maintenance agreements in
place with large service providers. Therefore, the Directors and
the Investment Manager do not anticipate a material threat to SPV
revenues.
The market and operational risks and financial impact as a
result of the ongoing COVID-19 pandemic, and measures introduced to
combat its spread, were discussed by the Board, with updates on
operational resilience received from the Investment Manager,
Administrator and other key service providers. The Investment
Manager actively monitors risks (including COVID-19 related) with
the potential to impact the Company's investments through its
recurring engagement with service providers including operators,
construction firms, and project asset managers. The Board was
satisfied that the Company's key service providers have the ability
to continue to operate.
The Company's ability to continue as a going concern has been
assessed by the Directors for a period of at least 12 months from
the date these financial statements were authorised for issue.
Critical 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 are, by their
nature, based on judgement and available information, hence actual
results may differ from these judgements, estimates and
assumptions. 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 4 to the financial
statements.
Key judgements
As disclosed above, the Directors have concluded that the
Company and Holdco meet the definition of an investment entity as
defined in IFRS 10. This conclusion involved a degree of judgement
and assessment as to whether the Company met the criteria outlined
in IFRS 10.
Key estimation and uncertainty: Investments at fair value
through profit or loss
The Company's investments in unquoted investments are valued by
reference to valuation techniques approved by the Directors and in
accordance with the International Private Equity and Venture
Capital Valuation (IPEV) Guidelines.
The Company used discounted cash flow ("DCF") models to
determine the fair value of the underlying assets in Holdco. The
value of Holdco includes any working capital not accounted for in
the DCF models (deferred tax liabilities, cash plus any receivables
or payables at the entity and not at the asset level). The fair
value of each asset is derived by projecting the future cash flows
of an asset, based on a range of operating assumptions for revenues
and expenses, and discounting those future cash flows to present
with a discount rate appropriately calibrated to the risk profile
of the asset and market dynamics. The key estimates and assumptions
used within the DCF include the discount rates, annual energy
production, curtailment, merchant power prices, useful life of the
assets, and various operating expenses and associated annual
escalation rates often tied to inflation, including operations and
maintenance, asset management, balance of plant, land leases,
insurance, property and other taxes and decommissioning bonds,
among other items. An increase/ (decrease) in the key valuation
assumptions would lead to a corresponding decrease/(increase) in
the fair value of the investments as described in note 4 to the
financial statements. The Company's investments at fair value are
not traded in active markets.
The estimates and assumptions are those used to determine the
fair value of the investments as disclosed in note 4 to the
financial statements.
Segmental reporting
The Chief Operating Decision Maker, which is the Board, is of
the opinion that the Company is engaged in a single segment of
business, being investment in renewable energy infrastructure
assets to generate investment returns whilst preserving capital.
The financial information used by the Chief Operating Decision
Maker to manage the Company presents the business as a single
segment.
All of the Company's income is generated within the U.S.
All of the Group's non-current assets are located in the
U.S.
New standards and amendments issued but not yet effective
The Company has adopted all the applicable and effective IFRS
since incorporation. The relevant new and amended standards and
interpretations that are issued, but not yet effective, up to the
date of issuance of the Company's financial statements are
disclosed below. These standards are not expected to have a
material impact on the entity in future reporting periods and on
foreseeable future transactions.
Amendments to IAS 1: Classification of Liabilities as Current or
Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to
76 of IAS 1 to specify the requirements for classifying liabilities
as current or non-current. The amendments are effective for annual
reporting periods beginning on or after 1 January 2023.
Reference to the Conceptual Framework - Amendments to IFRS 3
In May 2020, the IASB issued Amendments to IFRS 3 Business
Combinations - Reference to the Conceptual Framework. The
amendments are effective for annual reporting periods beginning on
or after 1 January 2022.
Definition of Accounting Estimates - Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which
it introduces a definition of 'accounting estimates'. The
amendments are effective for annual reporting periods beginning on
or after 1 January 2023.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS
Practice Statement 2 Making Materiality Judgements. The amendments
to IAS 1 are applicable for annual periods beginning on or after 1
January 2023.
3. Significant Accounting Policies
Financial Instruments
Financial assets
The Company's financial assets principally comprise an
investment held at FVTPL (investment in Holdco) and trade and other
receivables.
The Company's investment in Holdco , being classified as an
investment entity under IFRS 10, is held at FVTPL in accordance
with IFRS 9. Gains or losses resulting from the movements in fair
value are recognised in the Company's Statement of Comprehensive
Income at each valuation point.
Trade and other receivables are initially recognised at fair
value and subsequently measured at amortised cost using the
effective interest rate method.
Financial liabilities
The Company's financial liabilities include trade and other
payables and other short term monetary liabilities which are
initially recognised at fair value and subsequently measured at
amortised cost using the effective interest rate method.
Recognition, derecognition and measurement
Financial assets and financial liabilities are recognised in the
Company's Statement of Financial Position when the Company becomes
a party to the contractual provisions of the instrument. Financial
assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities at FVTPL)
are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at FVTPL
are recognised immediately in profit or loss.
Financial assets are derecognised when the rights to receive
cash flows from the investments have expired or the Company has
transferred substantially all risks and rewards of ownership.
A financial liability (in whole or in part) is derecognised when
the Company has extinguished its contractual obligations, it
expires or is cancelled.
Subsequent to initial recognition, financial assets at FVTPL are
measured at fair value. Gains and losses resulting from the
movement in fair value are recognised in the Statement of
Comprehensive Income.
Financial liabilities are subsequently measured at amortised
cost using the effective interest rate method.
Taxation
The following accounting policies for taxation and deferred tax
are in respect of UK tax and deferred taxation.
Investment trusts which have approval under Section 1158 of the
Corporation Tax Act 2010 are not liable for taxation on capital
gains. Shortly after listing the Company received approval as an
Investment Trust by HMRC. Current tax is the expected tax payable
on the taxable income for the Period, using tax rates that have
been enacted or substantively enacted at the date of the Statement
of Financial Position.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
statement of financial position liability method. Deferred tax
liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited to the Statement of
Comprehensive Income except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off tax assets against tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the Company intends to settle its current
tax assets and liabilities on a net basis.
Income
Income includes investment income from financial assets at FVTPL
and finance income.
Dividend income is recognised when received and is reflected in
the Statement of Comprehensive Income as Investment Income.
Bank deposit interest income is earned on bank deposits on an
accruals basis.
Expenses
All expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within
the Statement of Comprehensive Income, all expenses, including the
Investment Management fee, are presented in the revenue column of
the Statement of Comprehensive income as they are directly
attributable to the operations of the Company with the exception of
costs incurred in the acquisition of the seed assets, which have
been charged as a capital item in the Statement of Comprehensive
Income.
Details of the Company's fee payments to the Investment Manager
are disclosed in note 6 to the financial statements.
Foreign currency
Transactions denominated in foreign currencies are translated
into U.S. Dollars at actual exchange rates as at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies at the Period end are reported at the rates of exchange
prevailing at the Period end. Any gain or loss arising from a
change in exchange rates subsequent to the date of the transaction
is included as an exchange gain or loss to capital or revenue in
the Statement of Comprehensive Income as appropriate. Foreign
exchange movements on investments are included in the Statement of
Comprehensive Income within gains on investments.
Cash and cash equivalents
Cash and cash equivalents includes deposits held at call with
banks and other short-term deposits with original maturities of
three months or less.
Share capital and share premium
Shares are classified as equity. Costs directly attributable to
the issue of new shares (that would have been avoided if there had
not been an issue of new shares) are recognised against the value
of the Share premium account.
Repurchases of the Company's own Shares are recognised and
deducted directly in equity. No gain or loss is recognised in
profit or loss on the purchase, sale, issue or cancellation of the
Company's own equity instruments.
Nature and purpose of equity and reserves:
Share capital represents the nominal value (1 cent per share) of
the issued share capital.
The Share premium account arose from the net proceeds of new
Shares.
The Special distributable reserve was created following
shareholders' approval and confirmation of the Court, through the
cancellation and transfer of $121,250,000 in January 2021 from the
Share premium account, which can be utilised to fund distributions
to the Company's Shareholders.
The capital reserve reflects any:
-- gains or losses on the disposal of investments;
-- exchange movements of a capital nature;
-- the increases and decreases in the fair value of investments
which have been recognised in the capital column of the Statement
of Comprehensive Income; and
-- expenses which are capital in nature
The revenue reserve reflects all income and expenditure
recognised in the revenue column of the Statement of Comprehensive
Income and is distributable by way of dividend.
The Company's distributable reserves consists of the Special
distributable reserve, the Capital reserve attributable to realised
profits and the Revenue reserve.
Dividend payable
Dividends payable are recognised as distributions in the
financial statements when the Company's obligation to make payment
has been established.
4. Investment Held at Fair Value Through Profit or Loss
As at 31 December 2021, the Company had one investment, being
Holdco. The cost of the investment in Holdco is US$119,203,824.
Total
$'000
------------------------------------------------ -------
(a) Summary of valuation
Analysis of closing balance:
Investment at fair value through profit or loss 118,882
------------------------------------------------ -------
Total investment as at 31 December 2021 118,882
(b) Movements during the Period:
Opening balance of investment, at cost -
Additions, at cost 119,204
------------------------------------------------ -------
Cost of investment as at 31 December 2021 119,204
Revaluation of investment to fair value:
Unrealised movement in fair value of investment (322)
------------------------------------------------ -------
Fair value of investment as at 31 December 2021 118,882
(c) Losses on investment in the Period:
Unrealised movement in fair value of investment (322)
------------------------------------------------ -------
Losses on investment (322)
------------------------------------------------ -------
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.
31 December 2021
Level 1 Level 2 Level 3 Total
$'000 $'000 $'000 $'000
---------------------------------------- ------- -------- -------- -------
Investment at fair value through profit
or loss
Equity investment in Holdco - - 118,882 118,882
---------------------------------------- ------- -------- -------- -------
Total investment as at 31 December 2021 - - 118,882 118,882
---------------------------------------- ------- -------- -------- -------
Due to the nature of the underlying investments held by Holdco,
the Company's investment in Holdco is always expected to be
classified as Level 3. There have been no transfers between levels
during the Period.
The movement on the Level 3 unquoted investment during the
Period is shown below:
As at
31 December
2021
$'000
------------------------------ -----------
Opening balance -
Additions during the Period 119,204
Unrealised gain on investment (322)
------------------------------ -----------
Closing balance 118,882
------------------------------ -----------
Valuation methodology
The Company owns 100% of its subsidiary Holdco through which the
Company has acquired all its underlying investments in SPVs. As
discussed in Note 2, the Company meets the definition of an
investment entity as described by IFRS 10, and as such the
Company's investment in Holdco is valued at fair value. In
accordance with Company policy, the Investment Manager has engaged
an independent valuation firm, Marshall & Stevens to carry out
fair market valuations of the underlying investments as at 31
December 2021.
Fair value of operating assets is derived using a DCF
methodology, which follows International Private Equity Valuation
and Venture Capital Valuation Guidelines. DCF is deemed the most
appropriate methodology when a detailed projection of future cash
flows is possible. The fair value of each asset is derived by
projecting the future cash flows of an asset, based on a range of
operating assumptions for revenues and expenses, and discounting
those future cash flows to the present day with a pre-tax discount
rate appropriately calibrated to the risk profile of the asset and
market dynamics. Due to the asset class and available market data
over the forecast horizon, a DCF valuation is typically the basis
upon which renewable assets are traded in the market. Assets that
are not yet operational and still under construction at the time of
the valuation are held at cost as an estimate of fair value,
provided no significant changes to key underlying economic
considerations (such as major construction impediments or natural
disasters) have arisen.
The Company measures the total fair value of Holdco by its net
asset value, which is made up of cash, working capital balances and
the aforementioned fair value of the underlying investments as
derived from the DCF of each asset.
The Directors have satisfied themselves as to the methodology
used, the discount rates and key assumptions applied and the
valuation.
Valuation Sensitivities
A sensitivity analysis is produced to show the impact on NAV of
changes to key assumptions. For each of the sensitivities, it is
assumed that potential changes occur independently of each other
with no effect on any other key assumption, and that the number of
invest-ments in the portfolio remains static throughout the
modelled life. Accordingly, the NAV per share impacts are discussed
below.
(i) Discount rates
Pre-tax discount rates applied in the DCF valuations are
determined by Marshall & Stevens using a multitude of factors,
including pre-tax discount rates disclosed by the Company's global
peers and comparable infrastructure asset classes as well as the
internal rate of return inherent in the original purchase price
when underwriting the asset. The DCF valuations utilize two classes
of pre-tax discount rates: a) contracted discount rate applied to
the contracted cash flows of each asset and b) uncontracted
discount rate (higher) applied to the uncontracted (or "merchant")
cash flows of each investment which occur after the initial PPA
and/or other contract term.
The pre-tax discount rates used in the DCF valuation of the
investments are considered the most significant observable input
through which an increase or decrease would have a material impact
on the fair value of the investments at FVTPL. As of 31 December
2021, the blended pre-tax discount rates (i.e., the implied
discount rate of both the contracted and uncontracted discount
rates of each investment) applied to the portfolio ranged from 6.5%
to 7.8% with an overall weighted average of 7.2%.
An increase or decrease of 0.5% in the discount rates would have
the following impact on NAV:
Discount Rate + 50 bps - 50 bps
----------------------------------- -------- --------
Increase/(decrease) in NAV ($'000) (6,663) 7,174
NAV per Share 93.6c 104.7c
NAV per Share Change (5.3c) 5.7c
Change (5.4%) 5.8%
----------------------------------- -------- --------
(ii) Energy Production
Energy production, as measured in MWh per annum, assumed in the
DCF valuations is based on a P50 energy yield profile, representing
a 50% probability that the energy production estimate will be met
or exceeded over time. An independent engineer has derived this
energy yield estimate for each asset by taking into account a range
of irradiation, weather data, ground-based measurements and
design/site-specific loss factors including module performance,
module mismatch, inverter losses, and transformer losses, among
others. The P50 energy yield case includes a 0.5% annual
degradation for solar assets and 1.0% annual degradation for wind
assets through the entirety of the useful life. In addition, the
P50 energy yield case includes an assumption of availability, which
ranges from 98.5% to 99% for solar assets and 96.0% for wind
assets, as determined reasonable by an independent engineer at the
time of underwriting the asset.
Solar and wind assets are subject to variation in energy
production over time. An assumed "P75" level of energy yield (i.e.
a level of energy production that is below the "P50", with a 75%
probability of being exceeded) would cause a decrease in the total
portfolio valuation, while an assumed "P25" level of power output
(i.e. a level of energy production that is above the "P50", with a
25% probability of being achieved) would cause an increase in the
total portfolio valuation.
The application of a P75 and a P25 energy yield case would have
the following impact on NAV:
Energy Production P75 P25
----------------------------------- ------- ------
Increase/(decrease) in NAV ($'000) (8,384) 8,276
NAV per Share 92.2c 105.5c
NAV per Share Change (6.7c) 6.6c
Change (6.8%) 6.7%
----------------------------------- ------- ------
(iii) Curtailment
Curtailment is the deliberate reduction (by the transmission
operator) in energy output below what could have been produced in
order to balance energy supply and demand or due to transmission
constraints. Due to the contracted nature of energy production of
its renewable energy investments held by Holdco and with a
substantial share of the its solar assets being behind-the-meter
and directly connected to the energy consumer, the Company's NAV is
subject to a low overall level of curtailment, which has been
factored into NAV.
An increase or decrease of 50% from the assumed level of
curtailment would have the following impact on NAV:
Curtailment -50% +50%
----------------------------------- ------- ------
Increase/(decrease) in NAV ($'000) (5,308) 4,808
NAV per Share 94.7c 102.8c
NAV per Share Change (4.2c) 3.8c
Change (4.3%) 3.9%
----------------------------------- ------- ------
(iv) Merchant Power Prices
All of the Company's assets have long-term PPAs and incentive
contracts in place with creditworthy energy purchasers, and thus
PPA prices are not impacted by fluctuations in regional market
energy prices during the contract period. Future power price
forecasts used in the valuations are derived from regional market
forward prices provided by the EIA, with a 10-50% discount applied
based on the characteristics of the asset as reasonably determined
by the independent valuation firm. Inflationary pressures over the
long-term could present a circumstance of variability and increase
merchant power prices from previous forecasts.
An increase or decrease of 10% in future merchant power price
assumptions would have the following impact on NAV:
Merchant Power Prices -10.0% +10.0%
----------------------------------- ------- ------
Increase/(decrease) in NAV ($'000) (6,150) 6,152
NAV per Share 94.0c 103.9c
NAV per Share Change (4.9c) 4.9c
Change (5.0%) 5.0%
----------------------------------- ------- ------
(v) Operating Expenses
Operating expenses include operations & maintenance, balance
of plant, asset management, site leases and easements, insurance,
property taxes, equipment reserves, decommissioning bonds and other
costs. Most operating expenses for solar and wind assets are
contracted with annual escalation rates, which typically range from
2-3% to account for normalized inflation. As such, there is
typically little variation in annual operating expenses. However,
there may be incidents when certain expenses may be recontracted.
Inflationary pressures over the long-term could also affect future
operating expenses.
An increase or decrease of 10% in operating expenses would have
the following impact on NAV:
Operating Expenses +10.0% -10.0%
----------------------------------- ------- ------
Increase/(decrease) in NAV ($'000) (5,337) 5,339
NAV per Share 94.7c 103.2c
NAV per Share Change (4.3c) 4.3c
Change (4.3%) 4.3%
----------------------------------- ------- ------
5. Income
For the Period
ended 31
December 2021
$'000
----------------------- --------------
Income from investment
Dividends from Holdco 6,115
Deposit interest 15
----------------------- --------------
Total Income 6,130
----------------------- --------------
6. Investment Management Fees
For the Period ended 31 December 2021
Revenue Capital Total
$'000 $'000 $'000
--------------------------- -------------- -------------- ---------
Investment management fees 872 - 872
--------------------------- -------------- -------------- ---------
The Investment Management Agreement ("IMA") dated 11 November
2020 between the Company and Ecofin Advisors, LLC, appointed the
AIFM to act as the Company's Investment Manager for the purposes of
the AIFM Directive. Accordingly, the AIFM is responsible for
providing portfolio management and risk management services to the
Company.
Under the IMA, the Investment Manager receives a management fee
of 1.00% per annum of NAV up to and including $500 million; 0.90%
per annum of NAV in excess of $500 million up to and including $1
billion; and 0.80% per annum of NAV in excess of $1 billion,
invoiced quarterly in arrears. Until such time as 90% of the Net
Initial Proceeds of the Company's IPO was committed to investments,
the Investment Manager fee was only charged on the committed
capital of the Company. No performance fee or asset level fees are
payable to the AIFM under the IMA.
The Investment Manager reinvests 15% of its annual management
fee in Shares (the "Management Fee Shares"), subject to a rolling
lock-up of up to two years, subject to certain limited exceptions.
The Management Fee Shares are issued on a quarterly basis. Where
the Shares are trading at a premium to NAV, the Company will issue
new Shares to the Manager equivalent in value to the management fee
reinvested. Where the Shares are trading at a discount to NAV, the
Management Fee Shares will be purchased by the Company's Brokers at
the prevailing market price.
The calculation of the number of Management Fee Shares to be
issued is based upon the NAV as at the relevant quarter concerned.
The Investment Manager is also entitled to be reimbursed for
out-of-pocket expenses reasonably and properly incurred in respect
of the performance of its obligations under the IMA.
Unless otherwise agreed by the Company and the Investment
Manager, the IMA may be terminated by the Company or the Investment
Manager on not less than 12 months' notice to the other party, such
notice not to expire earlier than 36 months from the Effective Date
of the IMA (11 November 2020). The IMA may be terminated by the
Company with immediate effect from the time at which notice of
termination is given or, if later, the time at which such notice is
expressed to take effect in accordance with the conditions set out
in the IMA.
The Company has issued or the Company's Broker has purchased the
following Shares to settle investment management fees in respect of
the Period under review:
Investment
advisory fees Issue price Number of
Shares issued ($) (cents) Shares Date of issue
---------------------------------- ------------- ----------- --------- -------------
22 December 2020 to 31 March 2021 27,666 99.06 27,929 21 May 2021
1 April 2021 to 30 June 2021 25,177 98.47 25,568 6 August 2021
---------------------------------- ------------- ----------- --------- -------------
Investment
advisory fees Purchase price Number of Date of
Shares purchased ($) (cents) Shares purchase
----------------------------------- ------------- -------------- --------- ---------------
1 July 2021 to 30 September 2021 31,080 98.50 31,553 1 November 2021
1 October 2021 to 31 December 2021 47,608 99.90 47,655 28 January 2022
----------------------------------- ------------- -------------- --------- ---------------
7. Other Expenses
For the Period ended 31 December 2021
Revenue Capital Total
$'000 $'000 $'000
--------------------------------------------------------------------------- -------------- -------------- ---------
Secretary and Administrator fees 223 - 223
Directors' fees 257 - 257
Directors' other employment costs 31 - 31
Brokers' retainer 62 - 62
Auditor's fees
- Fees payable to the Company's auditor for audit services 123 - 123
- Fees payable to the Company's auditor for audit-related assurance
services 62 - 62
FCA and listing fees 168 - 168
Depository and custody fees 6 - 6
Registrar's fees 17 - 17
Marketing fees 10 - 10
Public relations fees 41 - 41
Printing and postage costs 27 - 27
Tax compliance 8 - 8
Other expenses 21 - 21
--------------------------------------------------------------------------- -------------- -------------- ---------
1,056 - 1,056
--------------------------------------------------------------------------- -------------- -------------- ---------
Expenses charged to capital
Seed asset acquisition costs - 103 103
--------------------------------------------------------------------------- -------------- -------------- ---------
Total expenses 1,056 103 1,159
--------------------------------------------------------------------------- -------------- -------------- ---------
The Auditor's fee for the statutory audit of the Period is
$123,000 (including VAT of $20,500). BDO also reviewed the
Company's initial accounts as at 28 February 2021 for a fee of
$61,900 (including VAT of $10,300). Further, during the Period, the
Company engaged BDO to perform reporting accountant services for a
fee of $135,000 (including VAT of $22,000) in relation to the
Company's admission of new Shares to trading on the LSE, which has
been treated as a capital expense and included in 'share issue
costs' disclosed in the Statement of Changes in Equity.
8. Earnings Per Share
Earnings per Share is based on the profit in the period from
incorporation on 12 August 2020 to 31 December 2021 of $3,443,000
attributable to the weighted average number of Shares in issue of
92,475,686 in the Period. Revenue and capital profit/(loss) are
$4,202,000 and ($759,000) respectively.
9. Taxation
(a) Analysis of charge in the Period
For the Period ended 31 December 2021
Revenue Capital Total
$'000 $'000 $'000
--------------- -------------- -------------- ---------
Corporation tax - - -
--------------- -------------- -------------- ---------
Taxation - - -
--------------- -------------- -------------- ---------
(b) Factors affecting total tax charge for the Period:
The effective UK corporation tax rate applicable to the Company
for the Period is 19.00%. The tax charge differs from the charge
resulting from applying the standard rate of UK corporation tax for
an investment trust company.
The differences are explained below:
Revenue Capital Total
$'000 $'000 $'000
----------------------------------------------------- ------- ------- -------
Profit on ordinary activities before taxation 4,202 (759) 3,443
----------------------------------------------------- ------- ------- -------
Corporation tax at 19% 798 (144) 654
----------------------------------------------------- ------- ------- -------
Effects of:
----------------------------------------------------- ------- ------- -------
Dividends received (not subject to tax) (1,165) - (1,165)
----------------------------------------------------- ------- ------- -------
Loss on investments held at fair value not allowable - 125 125
----------------------------------------------------- ------- ------- -------
Unutilised management expenses 367 19 386
----------------------------------------------------- ------- ------- -------
Total tax charge for the Period - - -
----------------------------------------------------- ------- ------- -------
Investment companies which have been approved by the HMRC under
section 1158 of the Corporation Tax Act 2010 are exempt from tax on
UK 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.
As at 31 December 2021, a deferred tax liability of $1,884,000
representing U.S. Federal income taxes deferred has been accrued
and reflected in the valuation of the Company's subsidiary,
Holdco.
The March 2021 Budget announced an increase to the main rate of
UK corporation tax to 25% effective from 1 April 2023. This
increase in the standard rate of corporation tax was enacted on 24
May 2021.
10. Trade and Other Receivables
As at 31
December
2021
$'000
------------------ --------
Other receivables 1
------------------ --------
Total 1
------------------ --------
11. Trade and Other Payables
As at 31
December
2021
$'000
----------------- --------
Accrued expenses 522
----------------- --------
Total 522
----------------- --------
12. Share Capital
Nominal value of Nominal value of
Shares Shares
No. of Shares GBP $
=================================================================== ============= ================ ================
Allotted, issued and fully paid:
Opening balance as at 12 August 2020 - - -
=================================================================== ============= ================ ================
Allotted upon incorporation
Shares of 1c each (Ordinary Shares) 1 - 0.01
Initial Redeemable Preference Shares paid up to one quarter of
their nominal value ('Initial
Redeemable Preference Shares') 50,000 12,500.00 -
Allotted/redeemed following admission to LSE
Shares issued 125,000,000 - 1,250,000.00
Initial Redeemable Preference Shares redeemed (50,000) (12,500.00) -
Shares issued for the management fee
Share issued 53,497 534.97
------------------------------------------------------------------- ------------- ---------------- ----------------
Closing balance as at 31 December 2021 125,053,498 - 1,250,534.98
------------------------------------------------------------------- ------------- ---------------- ----------------
The Shares have attached to them full voting, dividend and
capital distribution (including on winding-up) rights. They confer
rights of redemption. The Initial Redeemable Preference Shares did
not carry a right to receive notice of or attend or vote at any
general meeting of the Company unless no other shares were in issue
at that time. The Initial Redeemable Preference Shares were treated
as equity in accordance with the requirements of IFRS. The Initial
Redeemable Preference Shares did not confer the right to
participate in any surplus remaining following payment of such
amount.
In accordance with the Company's Prospectus, the Company has the
right to issue C Shares of nominal value 1 cent each pursuant to
any Subsequent Issue under the Share Issuance Programme. There were
no C Shares in issue during the Period to 31 December 2021.
On incorporation, the issued share capital of the Company was
$0.01 represented by one Share, which was subscribed for by Ecofin
Advisors, LLC. On 22 October 2020, the 50,000 Initial Redeemable
Preference Shares were allotted to Ecofin Advisors, LLC. The
Initial Redeemable Preference Shares were paid up as to one quarter
of their nominal value and were redeemed immediately following
Admission out of the proceeds of the Initial Issue.
On 22 December 2020, the Company was admitted to the premium
segment of the main market of the LSE and to the premium segment of
the Official List of the FCA ("Admission"). Pursuant to this,
125,000,000 Shares were issued at a price of $1.00 per Share.
During the Period, the Company issued 27,929 Shares with respect
to the first quarter and 25,568 Shares with respect to the second
quarter to the Company's Investment Manager, in relation to
investment management fees paid during the Period at issuance
prices of $0.9906 and $0.9847 respectively.
The Company's issued share capital at 31 December 2021 comprised
125,053,498 Shares and this is the total number of Shares with
voting rights in the Company.
13. Dividends
(a) Dividends paid in the Period
The Company paid the following interim dividends during the
Period:
For the Period ended 31 December 2021
Special
Cents per distributable Revenue
Share reserve reserve Total
$'000 $'000 $'000
-------------------------------- ---------- --------------- ------- -----
Quarter ended 31 March 2021 0.40c - 500 500
-------------------------------- ---------- --------------- ------- -----
Quarter ended 30 June 2021 0.60c - 750 750
-------------------------------- ---------- --------------- ------- -----
Quarter ended 30 September 2021 0.80c - 1,000 1,000
-------------------------------- ---------- --------------- ------- -----
Total 1.80c - 2,250 2,250
-------------------------------- ---------- --------------- ------- -----
(b) Dividends paid and payable in respect of the financial
period
The dividends paid and payable in respect of the financial
period are the basis on which the requirements of s1158-s1159 of
the Corporation Tax Act 2010 are considered.
For the Period ended 31 December 2021
Special
Cents per distributable Revenue
Share reserve reserve Total
$'000 $'000 $'000
-------------------------------- ---------- --------------- ------- -----
Quarter ended 31 March 2021 0.40c - 500 500
-------------------------------- ---------- --------------- ------- -----
Quarter ended 30 June 2021 0.60c - 750 750
-------------------------------- ---------- --------------- ------- -----
Quarter ended 30 September 2021 0.80c - 1,000 1,000
-------------------------------- ---------- --------------- ------- -----
Quarter ended 31 December 2021 1.40c - 1,751 1,751
-------------------------------- ---------- --------------- ------- -----
Total 3.20c - 4,001 4,001
-------------------------------- ---------- --------------- ------- -----
After the Period end, the Company declared an interim dividend
of 1.4 cents per Share for the period 1 October 2021 to 31 December
2021, which was paid on 11 March 2022 to Shareholders on the
register at 25 February 2022.
14. Special Distributable Reserve
As indicated in the Prospectus, following admission of the
Company's Shares to trading on the LSE, the Directors applied to
the Court and obtained a judgement on 29 January 2021 to cancel the
amount standing to the credit of the share premium account of the
Company. The amount of the share premium account cancelled and
credited to the Company's Special distributable reserve was
$121,250,000, which can be utilised to fund distributions to the
Company's Shareholders.
15. Net Assets Per Share
Net assets per share is based on $123,723,000 of net assets of
the Company as at 31 December 2021 attributable to the 125,053,498
Shares in issue as at the same date.
16. Related Party Transactions with the Investment Manager and
Directors
Investment Manager
Fees payable to the Investment Manager by the Company under the
IMA are shown in the Statement of Comprehensive Income. As at 31
December 2021, the fee outstanding but not yet paid to the
Investment Manager was $317,000.
As at 31 December 2021, the Investment Manager's total holding
of Shares in the Company was 8,606,995.
Directors
The Company is governed by a Board of Directors, all of whom are
non-executive, and it has no employees. Each of the Directors was
appointed on 22 October 2020.
Each of the Directors is entitled to receive a fee from the
Company at such rate as may be determined in accordance with the
Articles. Each Director currently receives a fee payable by the
Company at the rate of GBP40,000 per annum.
The Chair of the Board receives an additional GBP10,000 per
annum. The Chair of the Audit Committee, the Chair of the
Management Engagement Committee and the Chair of the Risk Committee
each receive an additional GBP6,000 per annum.
The Chair was entitled to an additional one-off payment of
GBP10,000 and the other Directors were entitled to an additional
one-off payment of GBP7,500 each in consideration of the work
undertaken in connection with the approval and publication of the
Prospectus, paid by the Company conditional on Admission.
The aggregate remuneration and benefits in kind of the Directors
in respect of the Company's accounting period ended 31 December
2021 which are payable out of the assets of the Company were
$301,500. The Directors are also entitled to out -- of -- pocket
expenses incurred in the proper performance of their duties.
The Directors had the following shareholdings in the Company,
all of which were beneficially owned.
Shares held
at 31 December
Director 2021
------------------- --------------
Patrick O'D Bourke 54,436
David Fletcher 41,165
Tammy Richards 25,000
Louisa Vincent 27,710
------------------- --------------
17. Financial Risk Management
The Investment Manager, AIFM and the Administrator report to the
Board on a quarterly basis and provide information to the Board
which allows it to monitor and manage financial risks relating to
the Company's operations. The Company's activities expose it to a
variety of financial risks: market risk (including price risk,
interest rate risk and foreign currency risk), credit risk and
liquidity risk. These risks are monitored by the AIFM. Each risk
and its management is summarised below.
(i) Currency Risk
Foreign currency risk is defined as the risk that the fair
values of future cash flows will fluctuate because of changes in
foreign exchange rates. A currency loss of $334,000 arose during
the Period, predominantly on the IPO proceeds that were received in
GBP and subsequently converted to U.S. Dollars. However based on
current operations, as the Company's financial assets and
liabilities are denominated in U.S. Dollars and substantially all
of its revenues and expenses are in U.S. Dollars, the Directors do
not expect frequent transactions in foreign currencies and
therefore currency risk is considered to be low and no sensitivity
to currency risk is presented.
(ii) Interest Rate Risk
The Company's interest rate risk on interest bearing financial
assets is limited to interest earned on money market cash
deposits.
The Company's interest and non-interest bearing assets and
liabilities as at 31 December 2021 are summarised below:
Non-interest
Interest bearing bearing Total
US$'000 US$'000 US$'000
------------------------------------------------ ---------------- ------------ -------
Assets
Cash and cash equivalents 5,361 1 5,362
Trade and other receivables - 1 1
Investment at fair value through profit or loss - 118,882 118,882
------------------------------------------------ ---------------- ------------ -------
Total assets 5,361 118,884 124,245
Liabilities
Trade and other payables - (522) (522)
------------------------------------------------ ---------------- ------------ -------
Total liabilities - (522) (522)
------------------------------------------------ ---------------- ------------ -------
The money market cash deposits and bank accounts included within
cash and cash equivalents bear interest at low or zero interest
rates and therefore movements in interest rates will not materially
affect the Company's income and as such a sensitivity analysis is
not necessary.
The Company's subsidiary, Holdco, has interest rate risk through
the RCF and through certain SPVs' project level loans which are
priced by reference to LIBOR plus a margin. The total exposure to
debt through Holdco at 31 December 2021 was $52.1 million. An
increase or decrease in interest rates of 0.5% would impact the net
asset value of Holdco and the Company by $260,000 negatively or
positively respectively.
(iii) Price Risk
Price risk is defined as the risk that the fair value of a
financial instrument held by the Company will fluctuate. As of 31
December 2021, the Company held one investment, being its
shareholding in Holdco, which is measured at fair value. The value
of the underlying renewable energy investments held by Holdco
varies according to a number of factors, including discount rate,
asset performance, solar irradiation, wind speeds, operating
expenses and forecast power prices. The sensitivity of the
investment valuation due to price risk is shown in note 4.
(iv) Credit Risk
Credit risk is the risk of loss due to the failure of a borrower
or counterparty to fulfil its contractual obligations. The Company
is exposed to credit risk in respect of trade and other receivables
and cash at bank.
The Company's maximum exposure to credit risk exposure as at 31
December 2021 is summarised below:
As at
31 December
2021
US$'000
---------------------------- -----------
Cash and cash equivalents 5,362
Trade and other receivables 1
---------------------------- -----------
Total 5,363
---------------------------- -----------
Cash and cash equivalents are held with U.S. Bank whose Standard
& Poor's credit rating is AA-. The Company's credit risk
exposure is minimised by dealing with financial institutions with
investment grade credit ratings. No balances are past due or
impaired.
Liquidity Risk
Liquidity risk is the risk that the Company may not be able to
meet a demand for cash or fund an obligation when due. The
Investment Manager and the Board continuously monitor forecast and
actual cashflows from operating, financing and investing activities
to consider payment of dividends, repayment of the Company's
shareholder loans or further investing activities.
The following tables detail the Company's expected maturity for
its financial assets (excluding equity investment in Holdco) and
liabilities together with the contractual undiscounted cash flow
amounts:
Less than 1 year 1-2 years 2-5 years Total
US$'000 US$'000 US$'000 US$'000
============================ ================ ========= ========= =======
Assets
Cash and cash equivalents 5,362 - - 5,362
Trade and other receivables 1 - - 1
Liabilities
Trade and other payables (522) - - (522)
---------------------------- ---------------- --------- --------- -------
Net financial assets 4,841 - - 4,841
---------------------------- ---------------- --------- --------- -------
Capital management
The Company considers its capital to comprise Share capital,
distributable reserves and retained earnings. The Company is not
subject to any externally imposed capital requirements. The
Company's share capital and reserves are shown in the Statement of
Financial Position at a total of $123,723,000.
The Company's primary capital management objectives are to
ensure the sustainability of its capital to support continuing
operations, meet its financial obligations and allow for growth
opportunities. Generally, acquisitions are anticipated to be funded
with a combination of current cash, borrowings and equity.
18. Unconsolidated Subsidiaries, Associates and Other Entity
The following table shows subsidiaries and associates of the
Company. As the Company is regarded as an Investment Entity as
referred to in note 2, these subsidiaries and associates have not
been consolidated in the preparation of the financial statements.
The ultimate parent undertaking is Ecofin U.S. Renewables
Infrastructure Trust PLC.
Ownership Country
of
Name Interest Investment Category incorporation Registered address
---------------------- --------- ----------------------------- ------------- ------------------------
RNEW Holdco, LLC 100% Holdco Subsidiary entity, United 1209 Orange Street,
owns RNEW Blocker, LLC States Wilmington, DE 19801
RNEW Blocker, 100% Holdco Subsidiary entity, United 1209 Orange Street,
LLC owns RNEW Capital, LLC States Wilmington, DE 19801
RNEW Capital, 100% Holdco Subsidiary entity, United 1209 Orange Street,
LLC owns underlying SPV Entities States Wilmington, DE 19801
TC Renewable Holdco 100% Holdco Subsidiary entity, United 1209 Orange Street,
I, LLC owns CD Global Solar CA States Wilmington, DE 19801
Beacon 2 Borrower, LLC and
CD Global Solar CA Beacon
5 Borrower, LLC
TC Renewable Holdco 100% Holdco Subsidiary entity, United 1209 Orange Street,
II, LLC owns TCA IBKR 2020 HoldCo, States Wilmington, DE 19801
LLC
TC Renewable Holdco 100% Holdco Subsidiary entity, United 1209 Orange Street,
III, LLC owns UCCT Solar Group, LLC, States Wilmington, DE 19801
Milford Industrial Solar,
LLC, SED Three, LLC, SED
Four, LLC, and Solar Energy
Partners 1, LLC
TC Renewable Holdco 100% Subsidiary entity, owns United 1209 Orange Street,
IV, LLC investment in Echo Solar States Wilmington, DE 19801
Portfolio
TC Renewable Holdco 100% Holdco Subsidiary entity, United 1209 Orange Street,
V, LLC owns ESNJ-BL-SKILLMAN, LLC States Wilmington, DE 19801
TC Renewable Holdco 100% Holdco Subsidiary entity, United 1209 Orange Street,
VI, LLC owns ESNJ-CB-DELRAN, LLC States Wilmington, DE 19801
TC Renewable Holdco 100% Holdco Subsidiary entity, United 1209 Orange Street,
VII, LLC owns Whirlwind Energy, LLC States Wilmington, DE 19801
TCA IBKR 2020 100%(1) Holdco Subsidiary entity, United 1209 Orange Street,
HoldCo, LLC owns Ellis Road Solar, LLC States Wilmington, DE 19801
and Oliver Solar 1, LLC
CD Global Solar 49.5%(1) Subsidiary entity, owns United 1209 Orange Street,
CA Beacon 2 Borrower, investment in Beacon 2 States Wilmington, DE 19801
LLC
CD Global Solar 49.5%(1) Subsidiary entity, owns United 1209 Orange Street,
CA Beacon 5 Borrower, investment in Beacon 5 States Wilmington, DE 19801
LLC
Ellis Road Solar, 100%(1) Subsidiary entity, owns United 1209 Orange Street,
LLC investment in Ellis Road States Wilmington, DE 19801
Solar
Oliver Solar 1, 100%(1) Subsidiary entity, owns United 1209 Orange Street,
LLC investment in Oliver Solar States Wilmington, DE 19801
UCCT Solar, LLC 100% Subsidiary entity, owns United 155 Federal Street,
investments in SED Solar States Suite 700, Boston,
Portfolio MA 02110
Milford Industrial 100% Subsidiary entity, owns United 155 Federal Street,
Solar, LLC investments in SED Solar States Suite 700, Boston,
Portfolio MA 02110
SED Three, LLC 100% Subsidiary entity, owns United 155 Federal Street,
investments in SED Solar States Suite 700, Boston,
Portfolio MA 02110
SED Four, LLC 100% Subsidiary entity, owns United 155 Federal St, Suite
investments in SED Solar States 700, Boston, MA 02110
Portfolio
Solar Energy Partners 100% Subsidiary entity, owns United 155 Federal Street,
1, LLC investments in SED Solar States Suite 700, Boston,
Portfolio MA 02110
ESNJ-BL-SKILLMAN, 100% Subsidiary entity, owns United 100 Charles Ewing
LLC investment in Skillman Solar States Blvd., Suite 160,
Ewing, NJ 08628
ESNJ-CB-DELRAN, 100% Subsidiary entity, owns United 100 Charles Ewing
LLC investment in Delran Solar States Blvd., Suite 160,
Ewing, NJ 08628
Whirlwind Energy 100% Subsidiary entity, owns United 615 South Dupont
LLC investment in Whirlwind States Highway, Dover Kentucky
19901
---------------------- --------- ----------------------------- ------------- ------------------------
1. Represents percentage ownership of class B membership
interest in the tax equity partnership.
19. Commitments and Contingencies
As at 31 December 2021 the Company had the following future
investment obligations;
The Company had a collective future unlevered net equity
commitment amount of $75.9 million in respect of $4.5 million of
pending future equity obligations on closed construction assets and
a committed pipeline of 10 solar assets in respect of the Echo
Solar Portfolio in Virginia/Delaware totalling $71.4 million in
unlevered equity value. These commitment figures are subject to
change based on the vendor's ability to deliver on certain
conditions to close, which may impact the price paid for certain
projects and in certain situations may cause projects to be removed
from the portfolio. These figures also do not include the
anticipated closure of a tax equity arrangement in Q2-Q3 of 2022,
which will be coordinated with project closings and would consist
of financing towards the Echo Solar Portfolio. Additionally, these
figures do not include any project-level leverage.
20. Post Balance Sheet Events
Other than those disclosed in this report, the following post
balance sheet event has occurred.
On 7 January 2022, the Company obtained a $15.9 million
non-recourse construction loan from Seminole Financial Services,
LLC, a U.S. specialist renewable lender, for the Echo Solar
Portfolio - Minnesota asset.
Alternative Performance Measures
In reporting financial information, the Company presents
alternative performance measures, ("APMs"), which are not defined
or specified under the requirements of IFRS. The Company believes
that these APMs, which are not considered to be a substitute for or
superior to IFRS measures, provide stakeholders with additional
helpful information on the performance of the Company. The APMs
presented in this report are shown below:
Premium/Discount
The amount, expressed as a percentage, by which the share price
is greater or less the NAV per Share.
As at
31 December
2021
---------------------- ------------- -----------
NAV per Share (cents) a 98.9
Share price (cents) b 99.0
---------------------- ------------- -----------
Premium (b÷a)-1 0.1%
---------------------- ------------- -----------
Total return
Total return is a measure of performance that includes both
income and capital returns. It takes into account capital gains and
the assumed reinvestment of dividends paid out by the Company into
its Shares on the ex-dividend date. The total return is shown
below, calculated on both a share price and NAV basis.
Share price
For the period from IPO to 31 December
2021 (cents) NAV (Cents)
--------------------------------------- ------------- ----------- -----------
Opening at IPO A 100.0 98.0
Closing at 31 December 2021 b 99.0 98.9
Dividends paid during the period c 1.80 1.80
Adjusted closing (d=b + c) d 100.8 100.7
--------------------------------------- ------------- ----------- -----------
Total return (d÷a)-1 0.8% 2.8%
--------------------------------------- ------------- ----------- -----------
Ongoing charges ratio
A measure, expressed as a percentage of average NAV, of the
regular, recurring annual costs of running an investment
company.
For the
period
from IPO
to
31 December
2021
----------------------------- ----------- -----------
Average NAV ($'000) a 123,744
Annualised expenses* ($'000) b 1,817
----------------------------- ----------- -----------
Ongoing charges (b÷a) 1.47%
----------------------------- ----------- -----------
* Annualised expenses from IPO on 22 December 2020 to 31
December 2021. Consisting of investment management fees and other
recurring expenses.
FINANCIAL INFORMATION
This announcement does not constitute the Company's statutory
accounts. The financial information for the Period to 31 December
2021 is derived from the statutory accounts for the Period, which
will be delivered to the Registrar of Companies. The statutory
accounts for the period from incorporation to 8 February 2021
('Initial Accounts') have been delivered to the Registrar of
Companies. The Auditor have reported on the Initial Accounts and
2021 accounts; their reports were unqualified and did not include a
statement under Section 498(2) or (3) of the Companies Act
2006.
The Annual Report for the Period ended 31 December 2021 was
approved on 14 April 2022. The full Annual Report can be accessed
via the Company's website at:
https://uk.ecofininvest.com/funds/ecofin-us-renewables-infrastructure-trust-plc/
The Annual Report will be submitted to the National Storage
Mechanism and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
This announcement contains regulated information under the
Disclosure Guidance and Transparency Rules of the FCA.
ANNUAL GENERAL MEETING ("AGM")
The AGM of Ecofin U.S. Renewables Infrastructure Trust plc will
be held at 6th Floor, 125 London Wall, London, EC2Y 5AS on 22 June
2022 at 3.00 p.m.
Even if shareholders intend to attend the AGM, all shareholders
are encouraged to cast their vote by proxy and to appoint the
"Chair of the Meeting" as their proxy. Details of how to vote,
either electronically, by proxy form or through CREST, can be found
in the Notes to the Notice of AGM in the Annual Report.
Shareholders are invited to send any questions for the Board or
the Investment Manager in advance by email to
rnewcosec@PraxisIFM.com by close of business on 15 June 2022.
19 April 2022
For further information contact:
Company Secretary and registered office:
Sanne Fund Services (UK) Limited
6th Floor, 125 London Wall, London, EC2Y 5AS
END
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