TIDMRNEW
RNS Number : 6620Z
Ecofin US Renewables Infrastr.Trust
16 September 2022
16 September 2022
LEI No: 2138004JUQUL9VKQWD21
ECOFIN U.S. RENEWABLES INFRASTRUCTURE TRUST PLC
(the "Company" or "RNEW")
Half-yearly report for the six months ended 30 June 2022
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 U.S. with prospects for modest capital appreciation over the
long term.
Why RNEW?
RNEW targets attractive risk-adjusted returns and a sustainable
dividend yield through a differentiated investment strategy focused
on the middle market of U.S. renewable energy:
l Fully invested portfolio: Diversified portfolio of U.S.
renewable energy assets with an attractive long-term income
stream;
l Stable income: Portfolio generating 100% contracted revenues
which together offer geographical diversification and opportunity
for both capital growth and inflation protection; and
l U.S. renewables market with promising growth outlook: $360
billion growth opportunity projected over the next decade with
historic unified government support to achieve the 2035 carbon-free
U.S. power sector goal.
Highlights
Financial
As at 30 June 2022
97.3 cents $134.3 million 103.5 cents
79.9 pence GBP110.3 million 85.0 pence
Net Asset Value ("NAV")
per share NAV Share price
1.2% (1) 7.4% (1) 2.8 cents
NAV total return for the Share price total return Dividends per share declared
Period for the Period for the Period
26.5% (2)
Leverage at project level
Operational
16.3 years (3) 62 32,900
Weighted average remaining Number of renewable energy Number of households
term of assets supplied since
revenue contracts 31 December 2021
162 MW (4) 106,800 tonnes (5) 374 GWh (4)
Portfolio generating of CO (2) e avoided since Clean electricity generated
capacity 31 December 2021 since IPO
177 GWh (4)
Clean electricity generated
since
31 December 2021
Figures reported either as at the referenced date or over the
six month period ended 30 June 2022 (the "Period"). All references
to cents and dollars ($) are to the currency of the U.S., unless
stated otherwise.
1. These are alternative performance measures. ("APMs").
Definitions of how these APMs and other performance measures used
by the Company have been calculated can be found at the last
section of this report.
2. Based on Gross Asset Value ("GAV").
3. Includes all construction-stage and committed assets.
4. Represents the Company's share of portfolio generating
capacity (including assets under construction).
5. 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.
Invested and committed assets
As of 30 June 2022, RNEW's diversified renewable energy
portfolio consisted of:
l 62 assets spread across seven states with a total capacity of
162 MW that generated 177 GWh of clean electricity in the Period
and included:
o 58 operating solar assets totalling 81 MWdc
o 3 construction stage solar assets totalling 21 MWdc
o 1 operating wind asset totalling 60 MWdc
l No major health and safety incidents occurred across the
portfolio during the Period. Asset generation and availability were
largely unaffected by the COVID-19 pandemic.
l In respect of the reporting period, the Company declared
dividends of 2.8 cents per Share. The Company is targeting a
dividend of 5.25 cents to 5.75 cents for FY 2022, of which 2.8
cents has already been paid and/or declared (6) .
l The Company's NAV was $134.3 million or 97.3 cents per Share
at 30 June 2022. The NAV total return over the Period was 1.2%.
l The Company's U.S. subsidiaries at a project level had $46.3
million (7) of long-term, non-recourse debt representing
approximately 25.3% of GAV (8) and $2.1 million of short-term,
non-recourse debt representing approximately 1.2% of GAV.
As at or period to
Financial information 30 June 2022
Net assets (million) $134.3
Shares in issue (million) 138.0
NAV per share (cents) 97.3
Share price (cents) 103.5
Share price premium to NAV 6.4%
Dividends declared per share (cents) (9) 2.8
NAV total return per share (10) 1.2%
Share price total return (11) 7.4%
Cash (million) $3.9
Leverage (million) $48.4
6. The target dividends set out above are targets only and are
not profit forecasts. There can be no assurance that these targets
can or will be met and they should not be seen as an indication of
the Company's expected or actual results or returns. The Company's
ability to distribute dividends will be determined by the existence
of sufficient distributable reserves, legislative requirements and
available cash reserves.
7. Represents the Company's proportionate share of total debt at
the asset special purpose vehicle ("SPV") level across its existing
investments as at 30 June 2022.
8. GAV is the sum of the Company's NAV and proportionate share of debt.
9. Dividends declared relating to the Period.
10. Opening NAV as at 31 December 2021 of 98.9 cents per Share.
11. Total return is based on the Share price in U.S. Dollars and
assumes dividends paid for the Period are immediately
reinvested.
Chair's Statement
On behalf of the Board, I am pleased to present the Company's
half-yearly report for the six months ended 30 June 2022 (the
"Half-yearly Report"). Your Company continues to grow, having
raised $13.1 million (before costs) in new equity capital in May at
a share price of 101.5 cents per share through a placing and a
retail offer. The net proceeds have been deployed into new
investments and paying down debt drawn on the Company's revolving
credit facility.
During the first half of the year, authorities in both the U.S.
and the UK lifted most of the remaining COVID-19 restrictions. The
Company and its advisers have coped well with the effects of the
pandemic and there were no material impacts on asset operations or
the investment portfolio.
Investment Manager
On 19 July 2022, the Company announced that portfolio managers
Jerry Polacek, Matthew Ordway and Prashanth Prakash had resigned
from their roles at Ecofin to pursue a new venture. The Board was
very disappointed by these resignations. In an ideal world, we
would have had more notice, and, working together with Ecofin,
would have been able to effect a smooth transition to a new team.
However, this was not possible principally because notice periods
in the U.S. are typically much shorter than in the UK.
Since the announcement, the Board's priorities have been to
ensure that Ecofin concentrates on:
(i) management of the existing asset portfolio, the ongoing
performance of which enabled the Company to declare a dividend for
the second quarter of 1.4 cents per share on 28 July 2022,
consistent with the dividend yield target for the year ending 31
December 2022 of 5.25 cents - 5.75 cents as set out in the November
2020 IPO prospectus; and
(ii) recruitment of a new leadership team. The Board has
stressed to Ecofin's senior management that this needs to happen
without delay and has been assured that it is an absolute priority.
The Board has been receiving regular updates from Ecofin.
In our view, focusing on these priorities is the best way to
protect value for RNEW's shareholders. However, as a Board, we are
very conscious of our duties to shareholders and, while we are
strong believers in the U.S. renewable energy story and the
Company's investment strategy, we are open to exploring all options
for the future of RNEW consistent with good governance.
It should be noted that Ecofin has confirmed to the Board that
the ongoing management of the existing portfolio is unaffected by
the resignations, and the Board will continue to work with Ecofin
to ensure that this remains the case going forward. Ed Russell,
Senior Managing Director of Ecofin, continues to be responsible for
overall leadership of the Ecofin team and the origination group
continues to be managed by Jason Benson, Director of Private
Renewable Energy. Earlier in the year and prior to the departure of
the investment team, Ecofin recruited two new resources dedicated
to asset management and project controllership with over 17 years'
experience in the energy industry.
Portfolio overview
RNEW's shareholders benefit from a high-quality portfolio of 62
solar and wind assets with a combined capacity of 162 MW across
seven states: California, Connecticut, Massachusetts, Minnesota,
New Jersey, Texas and Virginia. Since 30 June 2022, the portfolio
has expanded further with the closing of three additional assets
within the Echo Solar Portfolio at sites in Delaware and Virginia.
The new assets are ground mounted solar projects and benefit from
long term contracted revenues with investment grade electric
utilities. The overall weighted average remaining contract term of
the overall portfolio is 16.3 years.
As at 30 June 2022, 90% of the portfolio NAV was represented by
operating assets. Further, as at 30 June 2022, 59 assets were in
operation and three assets were under construction. Total
generation from the Company's assets during the period to 30 June
2022 was 177 GWh, 2% below budget, as strong solar and wind
resource during Q2 was offset by low wind resource relative to
budget during Q1.
Details of each asset and its performance are set out in the
Investment Manager's Report.
Results
NAV as at 30 June 2022 was 97.3 cents per share compared to 97.6
cents per share as at 31 March 2022 and 98.9 cents per share at 31
December 2021. During the first half of 2022, NAV per share
decreased by 1.6% as described further in the Portfolio Valuation
section of the Investment Manager's Report, largely due to
dividends paid of $3.7 million or 2.8 cents per share.
The valuation of the portfolio at 30 June 2022 is supported by
an independent valuation firm, Marshall & Stevens, and is based
on an underlying blended weighted average pre-tax discount rate of
7.5%. This reflects a small increase in discount rates as at 30
June 2022 due to expectations of interest rate increases and rising
bond yields.
RNEW's profit before tax for the six months to 30 June 2022 was
$1.5 million and earnings per share, based on revenue received by
way of dividends from the Company's unconsolidated subsidiary, RNEW
Holdco LLC ("Holdco") (which indirectly holds RNEW's investments
through underlying subsidiaries), were 1.2 cents per share.
Dividends
During the period, the Board declared two quarterly interim
dividends of 1.4 cents per share each, in respect of the quarters
ended 31 March 2022 and 31 December 2021. These dividends were
consistent with the Company's IPO target dividend range of 5.25% to
5.75% per ordinary share referred to above and, on 28 July 2022,
after the period end, the Board declared a further interim dividend
of 1.4 cents per share for the quarter ended 30 June 2022.
Dividend cover for the twelve months ended 30 June 2022 was 1.0
times. We expect the stability of trailing twelve month dividend
cover to be supported by the fact that income generated from the
portfolio has historically been and is expected to continue to be
higher in Q3 and Q4 due to energy production and cash collection
seasonality; in addition, several assets within the portfolio are
expected to move from the construction phase to the operational
phase.
Share price
As at 31 December 2021, the share price was 99 cents per share,
a very slight 0.1% premium to NAV of 98.9 cents per share at the
same date. As stated in the 2021 Annual Report, both the Board and
the Investment Manager believe that the strong fundamentals of the
Company, its portfolio, and the depth of the middle market U.S.
renewable energy market opportunity justify the basis for the share
price to trade at a premium to NAV. This was the case throughout
much of the first half and at 30 June 2022, the share price was
103.5 cents per share, a 6.4% premium to NAV. Since announcement of
the Ecofin management resignations referred to above, the share
price had declined to 90 cents per share as at 9 September 2022.
This is a 7.5% discount to the NAV of 97.3 cents as at 30 June
2022. The share price in sterling (RNEP - 78p as at 9 September
2022) represents a 7.0% discount to NAV (based on an exchange rate
of US $1.16 = GBP1.) Notwithstanding the recent decline in share
price, RNEW's portfolio of predominantly operating assets with cash
flows supported by long-term revenue contracts with investment
grade quality counterparties continues to perform in line with
expectations.
Board
The Board continues to work well together and with Ecofin. The
Investment Management team and one of the Directors are based in
the U.S. and as a result Board meetings include video conferencing
as a matter of course, but, within applicable COVID-19 guidelines,
Board members and advisers based in the UK meet in person.
Outlook
As addressed in detail in the Investment Manager's report, the
U.S. renewable energy sector continues to offer strong prospects
for ongoing investment and growth, even while facing near-term
challenges of supply chain constraints, inflation, and potential
trade policy risks on certain imported solar components. In the
first half of 2022, the American Clean Power ("ACP") association
reported that 9.8 GW of wind, utility-scale solar and battery
storage capacity had been installed in the U.S., representing more
than $10.0 billion in capital investment. Looking to the near
future, the ACP reports that the U.S. renewable energy pipeline
totalled 128.9 GW as of 30 June 2022, providing a robust
opportunity set for future investment. The passage of the Inflation
Reduction Act ("IRA") in August represents an unprecedented long
term policy boost for U.S. renewable energy with approximately $369
billion allocated towards climate infrastructure and energy
security. The IRA includes provisions for extending tax credits for
solar and wind through 2035 and introduces a new tax credit for
standalone battery storage, which provides strong alignment with
RNEW's investment strategy.
While the pipeline remains strong, given the announced personnel
departures, in the near term, Ecofin is focused on diligently
managing RNEW's portfolio and closing additional assets comprising
the Echo Solar Portfolio. Since 30 June 2022, the portfolio
expanded with the closing of three assets within the Echo Solar
Portfolio at sites in Delaware and Virginia.
I would like to thank my fellow Directors, the Ecofin team and
all our advisers for their input during the first half and for the
Company's performance to date.
Patrick O'D Bourke
Chair
15 September 2022
Investment Manager's Report
Six months ended 30 June 2022
Investment activity
8 investments - full deployment of proceeds
Since the IPO on 22 December 2020, the Company has closed and
funded eight investments adding 62 assets totalling 162 MWdc across
seven U.S. states. The initial three investments in 55 assets ("SED
Solar Portfolio", "Ellis Road Solar", and "Oliver Solar") totalled
$36.3 million and closed by 31 December 2020.
2022 Year To Date ("YTD")
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 construction of
the Echo Solar - MN project.
On 28 January 2022, the Company closed a tax equity partnership
for the Skillman Solar project.
On 23 March 2022, the Company finalized a negotiation for a
buyout wherein the Company sold one 41 kWdc asset within the SED
Solar Portfolio, as per the terms of the Power Purchase Agreement
("PPA"), reducing the total number of assets remaining in said
portfolio to 52 (11.3 MWdc) and the Company's total assets to
60.
On 25 March 2022, the Company declared mechanical completion of
the Skillman Solar project and completed a major milestone tax
equity funding. The project declared commercial operation as of 15
August 2022.
On 28 June 2022, the Company closed on the acquisition of two
ground mount solar projects in Virginia ("VA") at construction
stage in the Echo Solar Portfolio, comprising the 2.7 MWdc Monroe
Solar Partners, LLC project (i.e., Echo Solar - VA 1) and the 4.2
MWdc Randolf Solar Partners, LLC project (i.e., Echo Solar - VA 2)
with an aggregate closing value of $2.6 million bringing the
Company's total assets to 62.
As of 30 June 2022, the Company had approximately $11.2 1
million of outstanding net commitments on closed assets and
approximately $34.0 2 million of outstanding net commitments on
assets it has committed to buy but has not yet closed.
2021
On 2 February 2021, the Company completed its fourth investment
(56th and 57th assets) to acquire a 49.5% equity interest in Beacon
Solar 2 & 5, two operating utility scale solar photovoltaic
("solar PV") assets in California, collectively totalling $24.8
million.
On 4 May 2021, the Company announced its fifth investment (58th
asset), 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 closed on 30 September 2021.
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 had no impact on
the economics of the remaining Echo Solar Portfolio.
On 17 September 2021, the Company closed the acquisition of its
59th asset, Westside Solar Partners, LLC (i.e., "Echo Solar - MN"),
a 13.7 MW solar asset in Minnesota. Construction is underway and
the project is expected to begin operations in Q4 2022.
On 12 October 2021, the Company completed its seventh investment
(60th 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
(61st 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).
Events following the Period end
On 29 July 2022, the Company declared mechanical completion of
the Echo Solar - MN project, and future funding will coincide with
draws on the non-recourse construction loan in the near-term, with
tax equity financing and the Company's Revolving Credit Facility
("RCF") able to support the repayment of the construction loan at
its term.
On 22 August 2022, the Company closed on the acquisitions of
three additional ground mount solar projects at construction stage
in the Echo Solar Portfolio, comprising the 6.5 MWdc Hemings Solar
Partners, LLC project in Virginia (Echo Solar - VA 3), the 2.9 MWdc
Small Mouth Bass Solar Partners, LLC project in Virginia (i.e.,
Echo Solar - VA 4), and the 5.9 MWdc Heimlich Solar Partners, LLC
project in Delaware ("DE") (Echo Solar - DE 1) and with an
aggregate asset value of approximately $5.5 million. This deployed
the balance of the $12.9 million net proceeds from the secondary
equity offering completed in May 2022.
1. Figure is shown net of anticipated tax equity financing of $10.5 million.
2. Figure is shown net of anticipated tax equity financing of $17.2 million.
Cumulative Invested Capital and Commitments at Each Period Since
IPO (millions)
Q4 Q1 Q2 Q3 Q4 Q1
2020 2021 2021 2021 2021 2022
Closed/ Funding in Construction
Assets $11 $4 - $9 - $5
Closed/ Funding in Operating
Assets $21 $25 - - $52 -
Closed/ Funded in Prior
Periods - $32 $61 $61 $69 $121
Closed/ Remaining Commitments $4 - - $12 $5 $1
Signed/ Future Commitments - - $5 $40 $40 $40
$36 $61 $66 $122 $166.0 $167.0
Details of each asset held or committed to as at 30 June 2022
are set out in the table below:
Remaining
revenue
Number contract
Investment Capacity of term
Name Sector (MW)(1) assets State Ownership(2) Phase Status (years)(3)
SED Solar Commercial
Portfolio Solar 11.3 52 Massachusetts, 100% Operational Closed 14.1
Connecticut
Ellis Road Commercial
Solar Solar 7.1 1 Massachusetts 100% Operational Closed 19.0
Commercial
Oliver Solar Solar 4.8 1 California 100% Operational Closed 13.4
Utility-Scale
Beacon 2 Solar 29.5 1 California 49.5% Operational Closed 20.5
Utility-Scale
Beacon 5 Solar 23.9 1 California 49.5% Operational Closed 20.5
Skillman Commercial
Solar Solar 2.6 1 New Jersey 100% Operational Closed 15.0
Commercial
Delran Solar Solar 2.0 1 New Jersey 100% Operational Closed 13.0
Whirlwind Wind 59.8 1 Texas 100% Operational Closed 5.5
Echo Solar Commercial
- MN Solar 13.7 1 Minnesota 100% Construction Closed 25.0
Echo Solar Commercial
- VA 1 Solar 2.7 1 Virginia 100% Construction Closed 25.0
Echo Solar Commercial
- VA 2 Solar 4.2 1 Virginia 100% Construction Closed 25.0
Subtotal (Closed) 161.6 62 14.2(3)
Echo Solar Commercial
- VA 3 Solar 6.5 1 Virginia 100% Construction Committed 25.0
Echo Solar Commercial
- VA 4 Solar 2.9 1 Virginia 100% Construction Committed 25.0
Echo Solar Commercial
- DE 1 Solar 5.9 1 Delaware 100% Construction Committed 25.0
Echo Solar
Portfolio - Commercial Virginia,
VA/DE Solar 25.4 5 Delaware 100% Construction Committed 25.0
Total (Closed
and Committed) 202.3 70 16.3(3)
1. Capacity reflects RNEW's proportionate ownership interest in the assets.
2. Cash equity ownership.
3. Average remaining revenue contract term (years).
Ecofin update
On 19 July 2022 Ecofin announced that portfolio managers Jerry
Polacek, Matthew Ordway, and Prashanth Prakash had resigned from
their roles at Ecofin to pursue a new venture. The three managers
subsequently departed Ecofin on 19 August 2022 and, while we are
disappointed with their departure, they left RNEW fully invested in
high quality wind and solar assets.
Ecofin has started the process of securing replacements for the
departing members of the origination team and early-stage
discussions with candidates are underway. We are confident that new
leadership team members can be found in a reasonable time
frame.
Meanwhile, Jason Benson, Director of Private Renewable Energy,
who has been heavily involved with RNEW's portfolio management and
deal origination since IPO, is managing the construction and
funding the six projects across Minnesota, Virginia, and Delaware
totalling 35.9 MW that comprise the currently closed Echo Solar
Portfolio. Our funding strategy for the Echo Solar Portfolio
includes drawing upon the RCF during the construction period. We
are also working with an experienced investor to complete a tax
equity funding for the Echo Solar Portfolio. In parallel, we are
actively engaged with project lenders to put in place a long-term
term loan facility for the Echo Solar Portfolio in the coming
months as the underlying projects achieve commercial operation.
When completed, the Echo Solar Portfolio is expected to contribute
additional geographic and revenue contract diversity through its
PPAs with two separate investment grade electric utility
purchasers.
The asset management and project controllership group has over
17 years of combined experience in the energy industry.
Additionally, prior to the end of the third quarter, an offer was
extended to an additional resource that will bring another 15 years
of energy experience to the company.
Working very closely with the origination team to onboard new
assets seamlessly, the asset management and project controllership
team strives to attain operational excellence for each of the
renewable energy assets in order to maximize profitability for
shareholders. The team interfaces with engineers and plant
operators to ensure plant optimization. Strong relationships and
constant communication with our outsourced, top-tier asset
management and O&M service providers are key to smooth
operations, and have remained unchanged since the IPO. Continuous
process improvement is at the forefront for the team to steadily
advance the effectiveness of data analytics. Additionally, the
asset management and project controllership team is focussed on
keeping current with new accounting guidance and reporting
requirements that impact the portfolio.
Further, while the status of the near-term new project pipeline
remains strong, until recruitment is completed, Ecofin will
maintain its focus on managing RNEW's existing assets and near-term
funding obligations.
Ecofin's leadership is committed to providing the RNEW Board and
shareholders with timely updates on the progress in recruiting new
personnel. We believe RNEW is positioned to take advantage of a
robust U.S. market that has been further strengthened by the
passing of the Inflation Reduction Act, which provides billions of
dollars for U.S. wind and solar investments.
Portfolio overview
As at 30 June 2022, the portfolio was heavily weighted towards
operating assets with 90% of NAV invested in operating assets held
at fair market value ("FMV") (68% of total invested and committed
net equity capital (1) ), reflecting the completion of construction
at Ellis Road Solar, Oliver Solar and Skillman Solar and the
operating asset acquisitions of Delran Solar and Whirlwind. The
portfolio benefits from geographic diversification spanning seven
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 (57%), and wind (28%) to mitigate resource,
regulatory, technology and market risks.
Portfolio summary charts (1) :
Asset Name
Asset Name Portfolio %
Beacon 2&5 15%
------------
SED Solar Portfolio 11%
------------
Oliver Solar 5%
------------
Ellis Road Solar 5%
------------
Skillman Solar 3%
------------
Delran Solar 2%
------------
Whirlwind 28%
------------
Echo Solar - MN 9%
------------
Echo Solar - VA/DE 22%
------------
Sector FMV
Sector Portfolio %
Utility Scale Solar 15%
------------
Commercial Solar 57%
------------
Wind 28%
------------
Asset Status
Operating 69%
Construction 31%
-----
(1) Includes closed and committed assets based on equity
exposure at FMV
Operating performance for six months ended 30 June 2022:
During the six months ended 30 June 2022, the portfolio
generated 177.6 GWh of clean energy, 1.9% below budget. Of the
total, solar assets generated 78.3 GWh, 0.6% above budget (see
project variances and explanations below) and wind assets generated
99.3 GWh, 3.9% below budget (principally due to low wind resource
in Q1 2022 relative to budget).
The performance of the underlying operating portfolio combined
with its 100% contracted revenue structure generated revenues of
$4.5 million for the Company. Cash flows were below budget
partially due to lower than expected cash distributions from Beacon
2 & 5 due to higher than expected operating expenses in the
Period, combined with delays in operations from Skillman Solar.
This was partially offset by higher than expected cash flow from
the SED Solar Portfolio as a result of higher than expected energy
production during Q2 2022, combined with higher than expected cash
flow from Whirlwind as a result of strong wind resource during Q2
2022 and favourable operating expenses relative to budget.
Net Production Variance vs. Budget (GWh)
Actual Budget
Q1 2022 72.6 81.7
------- -------
Q2 2022 105.0 99.4
------- -------
H1 2022 177.6 181.1
------- -------
% Above
Actual Budget GWh Above (Below)
Investment
Name Sector State (GWh) (GWh) (Below) Budget Budget
Utility-Scale
Beacon 2 Solar California 34.4 (1) 34.1 (1) 0.3 0.9% (a)
Utility-Scale
Beacon 5 Solar California 27.4 (1) 26.3 (1) 1.1 4.2% (b)
Commercial Massachusetts,
SED Solar Portfolio Solar Connecticut 6.9 6.4 0.5 7.8% (c)
Commercial
Ellis Road Solar Solar Massachusetts 4.4 4.4 - -
Commercial
Oliver Solar Solar California 3.9 (2) 3.9 (2) - -
Commercial
Delran Solar Solar New Jersey 1.3 1.3 - -
Commercial
Skillman Solar Solar New Jersey - 1.4 (1.4) (100%)
Solar Subtotal 78.3 77.8 0.5 0.6%
Whirlwind Wind Texas 99.3 103.3 (4.0) (3.9%) (d)
Wind Subtotal 99.3 103.3 (4.0) (3.9%)
Total 177.6 181.1 (3.5) (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 its Commercial Operation Date ("COD") on
29 November 2021 and has been earning PPA revenue from the offtaker
based on P50 modelled production since that date. However, due to
some commissioning and testing delays with its offtaker, a global
commerce company, the system was not yet energised as at 30 June
2022.
Production variance summary:
a Flat performance primarily due to the need for fuseholder
replacements in combiner boxes, which have been delayed in receipt
due to supply chain constraints.
b Overperformance primarily due to near 100% availability and higher insolation.
c Overperformance primarily due to lower insolation caused by
greater than anticipated snowfall in the greater Boston area during
January/February which was more than offset by outperformance in
March-June due to higher insolation.
d Underperformance primarily due to force majeure weather event
in Q1 partially offset by stronger wind resource in Q2.
Revenues
As at 30 June 2022, RNEW's portfolio had 100% of its revenue
contracted with a weighted average remaining term of 16.3 years;
this includes all construction and committed assets. Approximately
99% of the portfolio benefits from fixed-price revenues, many with
annual escalators of 1-2%, through PPAs, contracted solar renewable
energy credits ("SREC"), and fixed rents under leases. These fixed
price contracts mitigate market price risk for the term of the
contracts. Less than 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,
it also offers the potential to hedge inflation risk as utility
rates in Massachusetts have appreciated 3.0% on average per annum
from 1990-2022.
The revenue profile reported below represents a snapshot of
RNEW's existing revenue contracts as at 30 June 2022 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.
Portfolio revenue breakdown (1)(2)
Contracted
Contracted Contracted - Fixed Price
- Fixed Price - Variable Incentive Uncontracted
Year Revenue Price Revenue Revenue - Market Revenue
2021 76.2 0.7 23.1 -
--------------- --------------- --------------- ------------------
2022 85.8 0.4 13.8 -
--------------- --------------- --------------- ------------------
2023 88.6 0.9 10.5 -
--------------- --------------- --------------- ------------------
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
--------------- --------------- --------------- ------------------
2042 78.9 - - 21.1
--------------- --------------- --------------- ------------------
(1) The increase in uncontracted market revenue from 2028
onwards is due to the maturity of the Whirlwind PPA.
(2) The decrease in uncontracted market revenue from 2038
onwards is due to Whirlwind reaching the conclusion of its
technical useful life.
Active management
Ecofin maintains an active approach to managing RNEW's
portfolio. For operating assets, our process involves actively
monitoring production through direct, real-time system access,
review of monthly O&M and asset management reports, and meeting
at least monthly with project operators and asset managers to
review and enhance performance. For construction stage assets, the
process is appropriately structured for more frequent engagement
with the relevant engineering, procurement and construction ("EPC")
contractor to review project milestones, troubleshoot issues, and
review and approve payments in accordance with contracts.
Financing
As at 30 June 2022, the Company's U.S. subsidiaries at a project
level had debt balances of $48.4 million, with no funds drawn down
under the RCF. This total debt balance corresponds to approximately
26.5% of GAV, and 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 has proactively and successfully put in place both a RCF
and non-recourse construction loan at its U.S. subsidiaries as
described below:
l On 19 October 2021, RNEW Capital, LLC, entered into a $65.0
million secured RCF with KeyBank, one of the premier lenders to the
U.S. renewable energy industry. The RCF comprises a $50.0 million,
two-year tranche priced at LIBOR plus 1.75% and a $15.0 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 $20.0
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. As at 30 June
2022, this RCF was undrawn.
l On 7 January 2022, a wholly-owned U.S. subsidiary of RNEW,
Westside Solar Partners, LLC (i.e. "Echo Solar - MN"), entered into
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. As of 30 June 2022, $2.1 million was drawn on
the facility.
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 $46.3 million, as referred to above.
On 30 June 2022, the Company had GAV of $182.7 million, and
total recourse and non-recourse debt of $48.4 million, resulting in
total leverage of 26.5% as described above.
The borrowing facilities available to the Company and its
subsidiaries at 30 June 2022 were as set out in the table
below:
Facility Amount
amount drawn Applicable
Loan type Provider Borrower ($m) ($m) Maturity rate
--------------------- --------- --------------- -------- ------ -------- -----------
$50.0 $NIL Oct-23 LIBOR+1.75%
Revolving credit RNEW Capital,
facility KeyBank LLC $15.0 $NIL Oct-24 LIBOR+2.00%
Project construction Westside Solar
loan Seminole Partners, LLC $15.9 $2.1 Nov-22 5.0%
Beacon Solar
Term loan KeyBank 2 $25.6 $25.6 May-26 LIBOR+1.25%
Beacon Solar
Term loan KeyBank 5 $20.7 $20.7 May-26 LIBOR+1.25%
--------------------- --------- --------------- -------- ------ -------- -----------
Total Debt $127.2 $48.4
------------------------------------------------- -------- ------ -------- -----------
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 a third-party 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 O&M, 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. Subsequently, on 10
May 2022, the Company announced a placing and retail offer of new
ordinary shares ("New Ordinary Shares") of $0.01 each in the
capital of the Company at an issue price of $1.015 per New Ordinary
Share. The Company raised $13.1 million (before costs) by issuing a
total of 12,927,617 New Ordinary Shares. Admission of these New
Ordinary Shares to the London Stock Exchange became effective on 24
May 2022.
Portfolio NAV Bridge for the six month period
NAV 31 Dec 2021 $123.7
Capital Raised $12.9
-------
Change in ProjectCo DCF - DCF Depreciation ($0.2)
-------
Change in ProjectCo DCF - discount
rates ($3.5)
-------
Change in ProjectCo DCF - Merchant
Curves $3.8
-------
Distributions from ProjectCos to
RNEW $4.5
-------
Dividend to Shareholders ($3.7)
-------
Expenses Paid ($1.4)
-------
Change in Financial Assets ($1.5)
-------
Change in Deferred Tax ($0.3)
-------
NAV 30 June 2022 $134.3
-------
Capital raised: Represents proceeds raised from the May 2022
placing and retail offer net of commissions retained by brokers,
fees to intermediaries, REX fees, and other transaction
expenses.
Change in projectCo DCF: Represents the impact on RNEW NAV from
changes to DCF depreciation and quarterly cashflow roll-forward and
change in project-level debt outstanding balances, including
principal amortization.
Change in projectCo DCF Discount Rates: Represents the impact on
RNEW NAV from changes to the discount rates applied to the DCF
models of each ProjectCo. As at 30 June 2022, the weighted average
pre-tax discount rate was 7.5%, an increase from 7.2% at 31
December 2021 principally related to the rise in inflation and
interest rates.
Change in projectCo DCF merchant curves: Represents the impact
on RNEW NAV from changes to the forward merchant price curves used
in the DCF models of each ProjectCo. The increase was principally
due to the update of the DCF models with the most recently
published regional market forward prices by the U.S. Energy
Information Administration ("EIA").
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.
Dividends to shareholders: Dividends for Q4 2021 and Q1 2022 of
$3.7 million (2.8 cents per share) were paid during the Period.
After the Period end, the Company declared a further dividend of
1.4 cents per share in respect of the quarter ended 30 June 2022.
Over the twelve-month period ended 30 June 2022, the portfolio
generated net revenue sufficient to cover the dividend
approximately 1.0 times.
Expenses paid: Represents the impact on RNEW NAV due to
management fees and expenses paid during the Period.
Change in financial assets: Represents the impact on RNEW NAV
due to increases or decreases in cash, receivables, payables and
other net working capital account balances.
Deferred tax liability: Represents the impact on RNEW NAV due to
accruals arising from operations in the Period and from a project
level prior period adjustment at RNEW Holdco, LLC, the Company's
wholly-owned U.S. subsidiary, which is subject to U.S. income
taxes.
Portfolio valuation sensitivities
The figure below shows the impact on the portfolio valuation of
changes to the key input valuation assumptions ("sensitivities")
with the horizontal x-axis reflecting the impact on NAV per Share.
The valuation sensitivities are based on the portfolio of assets as
at 30 June 2022. 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
16.3 years as at 30 June 2022. 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 (6.4%) to 6.3%
------------------
Discount Rates +/- 50bps (5.0%) to 5.4%
------------------
Merchant power prices +/-10% (4.9%) to 4.9%
------------------
Operating Expenses +/-10% (4.1%) to 4.1%
------------------
Curtailment (Wind) +/- 50% (3.8%) to 3.5%
------------------
Market outlook
During the first half of 2022, the U.S. renewable energy market
continued to grow despite several challenges most notably including
trade policy, supply chain issues, and inflation. U.S. renewable
energy, comprising wind, solar, and battery storage, had
installations of 9.8 GW in the first half of this year, which is
estimated to represent over $10 billion of capital investments.
With these additions, there is now 211.1 GW of operating U.S.
renewable energy assets covering all 50 states, enough to power 58
million American homes.
Operating U.S. Renewable Energy (in MW) as of 30 June 2022
Onshore Wind 139,143 MW 66%
Offshore Wind 42 MW 0%
------------ ----
Utility Solar 65,479 MW 31%
------------ ----
Battery Storage 6,471 MW 3%
------------ ----
The U.S. renewable energy pipeline of projects in construction
and advanced development totals a further 128.9 GW (as of 30 June
2022), which represents year-to-date growth of approximately 4%
compared to 12% in 2021 and represents a $360 billion growth
opportunity over the next decade. International trade policy and
supply chain constraints have dampened the near-term growth
prospects of U.S. renewable energy with more than 32 GW of capacity
delayed from achieving commercial operations. While these near-term
challenges persist, the underlying resiliency of the U.S. renewable
energy industry continues to be driven by strong corporate demand
with 14.8 GW of new PPAs from corporates and utilities announced in
the first half of 2022.
U.S. Renewable Energy Pipeline (in MW) as of 30 June 2022
Onshore Wind 23,185 MW 18%
Offshore Wind 17,502 MW 14%
----------- ----
Utility Solar 73,703 MW 57%
----------- ----
Battery Storage 14,499 MW 11%
----------- ----
In a historic development, Senators Chuck Schumer and Joe
Manchin reached agreement in July 2022 on a $430 billion bill
covering climate, healthcare, and taxes called the Inflation
Reduction Act ("IRA"). With $369 billion allocated towards climate
infrastructure and energy security it represents the largest ever
government investment in U.S. renewable energy. The IRA passed the
U.S. Senate in August and it was approved by Congress and signed by
President Biden on 16 August 2022. The IRA provides an
unprecedented level of long-term policy certainty to directly
benefit the growth of the U.S. renewable energy industry. Notably,
it extends the term for claiming investment tax credits ("ITC") and
production tax credits ("PTC") for solar, wind and certain other
renewable energy projects for facilities that begin construction
before 1 January 2035. It also qualifies interconnection costs for
projects less than 5 MWac as ITC-eligible, even if the
interconnection facilities are owned by the utility, so long as
they were paid for by the taxpayer. The tax credits are designed to
stimulate growth of U.S. manufacturing and related industries
through increased credit values for projects using domestic content
and paying prevailing wages.
The IRA offers a new tax credit for standalone battery storage.
Additionally, the IRA provides various tax credits for new and used
electric vehicles ("EVs") which are expected to stimulate demand
for EVs and their supportive infrastructure, and lead to a
resulting increase in electricity demand. As a result of the IRA,
we believe that the growth of the U.S. renewable energy industry is
going to continue for many years to come and this will provide a
robust set of opportunities for RNEW on a long-term basis.
Solar
The U.S. solar industry had more than 5.5 GW of installations
during the first half of 2022 . Utility scale solar installations
in the second quarter of 2022 totalled 1.6 GW, which was down
materially from prior periods principally due to the uncertainty
caused by the U.S. Commerce Department's initiation in late March
2022 of an antidumping and countervailing duty investigation
relating to solar cells and modules imported from Vietnam,
Cambodia, Thailand and Malaysia. These four countries combined
account for approximately 80% of U.S. imported solar modules. On 6
July 2022, the Biden administration initiated an executive action
that directs the Commerce Secretary to implement regulations that
would preclude imposing any new tariffs on imported solar cells and
modules from those four countries for 24 months. If the Commerce
Department determines that tariffs on imported solar products from
those four countries are warranted, no duties will be due over the
24 month period covered in the executive action. While a legal
challenge cannot be ruled out, President Biden's executive action
is widely being viewed as providing a safe harbour to U.S. solar
installers and developers to procure modules from a reliable source
and resume sustained industry growth.
Another trade policy development impacting the U.S. solar
industry is the Uyghur Forced Labor Prevention Act ("UFLPA"), which
took effect on 21 June 2022. The UFLPA requires the U.S. government
to rapidly develop a new enforcement strategy to strengthen the
prohibition of imported goods made through forced labour into the
U.S. Specifically, it creates a rebuttable presumption that any
goods mined, produced, or manufactured wholly or in part in the
Xinjiang Uyghur Autonomous Region (XUAR) of China, are produced
with forced labour and therefore prohibited from importation.
Importers and U.S. solar industry participants will be adapting
their procurement practices to mitigate risks associated with the
UFLPA.
Looking ahead, the U.S. solar pipeline remains robust with 22.8
GW under construction and 50.9 GW in advanced development as of 30
June 2022. Ecofin observes that the vast majority of solar projects
stalled by the Commerce Department investigation will take several
months to resume as contracts are renegotiated and construction
crews are mobilised. These delays can be expected to have a
dampening effect on asset level acquisitions of construction ready
projects through at least the third quarter of 2022.
Notwithstanding the policy and supply chain related impacts on the
first half of 2022 U.S. solar industry investment activity, we
believe the underlying growth potential of addressable U.S. solar
projects for RNEW to invest remains substantial for years to
come.
Wind
U.S. wind represents the largest source of operating U.S.
renewable energy generating capacity totalling 139.2 GW as of 30
June 2022. In the first half of 2022, 3.5 GW of wind power was
installed. Year to date installations declined relative to 2021 due
to the expiration of the PTC and supply chain related delays.
Despite the decline in installations, the outlook for U.S. wind
power remains bright with 23.2 GW of onshore wind and 17.5 GW of
offshore wind in either construction or advanced development.
Texas, where RNEW's Whirlwind project is located, continues to
see growing demand for electricity driven by its business-friendly
environment attracting people and businesses to relocate from other
states. Texas also hosts the most wind capacity in development,
with 3,478 MW in advanced development and 3,655 MW under
construction. Texas had the largest amount of land-based wind
capacity enter the pipeline in Q2 at 531 MW. Wyoming has the second
most land-based wind capacity in the pipeline at 3,000 MW, followed
by Illinois (2,247 MW), and New York (1,538 MW). Additionally,
power prices in Texas are heavily influenced by the cost of natural
gas given that natural gas power plants comprise 44% of power
generating capacity. Since January 2020, prices of natural gas have
more than quadrupled, rising from $2.12 per million British thermal
units (MMBtu) to $8.70 per MMBtu as of 1 June 2022. Not only are
the market fundamentals contributing to rising prices, climate
change is contributing to record summer heat which triggered the
Texas power market regulator in July 2022 to issue a request for
consumers to conserve energy amid record energy demand. We believe
that these factors should place Whirlwind in a good position to
recontract its capacity on attractive terms in the coming
years.
In summary, we see a vastly improving growth outlook for the
U.S. renewable energy industry driven by the passage of the IRA and
broad based energy consumer demand for renewable energy. RNEW's
diversified portfolio of predominantly operating U.S. solar and
wind assets with long-term revenue contracts continues to provide
investors with direct access to the growing U.S. renewable energy
market and is capable of generating a stable source of dividends
during these uncertain times.
Ecofin Advisors, LLC
15 September 2022
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 offers 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 closed and committed investments spanning 70 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:
l Environmental factors affecting climate risk are reviewed to
determine an investment's impact and ability to reduce GHG
emissions, air pollution and water consumption.
l Analysis of environmental issues also considers the impact
that the investment will have on land use and considers mitigation
plans when issues are identified.
l 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.
l 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 O&M 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, in the six month period to 30 June 2022,
produced approximately 177 GWh of clean electricity, enough to
power approximately 32,900 homes, offsetting approximately 106,800
tonnes of CO(2) e and avoiding the consumption of approximately
22,300 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 measures CO (2)
e , going beyond measuring only CO (2) emissions avoided and
quantifying other GHG emissions, such as methane and nitrous oxide,
and also measuring 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 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 for the six months ended 30 June 2022
106,800 22,300M
Tonnes of CO(2) e Reduction Litres of water savings
= =
32.900 8,900
Households supplied Olympic size swimming pools
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
Assets subject to the following investment limitations which, other
than as specified below, shall be measured at the time of the
investment:
l once the Net Initial Proceeds are substantially fully
invested, a minimum of 20 per cent. of Gross Assets will be
invested in Solar Assets;
l once the Net Initial Proceeds are substantially fully
invested, a minimum of 20 per cent. of Gross Assets will be
invested in Wind Assets;
l a maximum of 10 per cent. of Gross Assets will be invested in
Renewable Assets that are not Wind Assets or Solar Assets;
l exposure to any single Renewable Asset will not exceed 25 per cent. of Gross Assets;
l exposure to any single Offtaker will not exceed 25 per cent. of Gross Assets;
l 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
ex-ceed 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;
l exposure to Renewable Assets that are in the development
(namely pre-construction) phase will not exceed 5 per cent. of
Gross Assets;
l exposure to any single developer in the development phase will
not exceed 2.5 per cent. of Gross Assets;
l 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;
l Future Commitments and Developer Liquidity Payments, when
aggregated with Forward Funding (if any), will not exceed 25 per
cent. of Gross Assets;
l 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
l 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:
l 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;
l currency risk in relation to any Sterling (or other non-U.S.
Dollar) denominated operational expenses of the Company;
l other project risks that can be cost-effectively managed
through derivatives (including, without limitation, weather risk);
and
l 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."
Interim Management Report
The Directors are required to provide an Interim Management
Report in accordance with the Financial Conduct Authority ("FCA")
Disclosure Guidance and Transparency Rules. They consider that the
Chair's Statement and the Investment Manager's Report in this
half-yearly report provide details of the important events which
have occurred during the Period and their impact on the financial
statements. The following statements on related party transactions,
going concern and the Directors' Responsibility Statement below,
together with the Chair's Statement and Investment Manager's
Report, constitute the Interim Management Report for the Company
for the six months ended 30 June 2022.
The Directors have identified the following as the Company's
principal risks and uncertainties. These are described in the
Company's Annual Report for the period ended 31 December 2021
(pages 36 - 38):
1. Cyber risk
2. Electricity price risk
3. Interest rate, currency and inflation risk
4. Investment performance risk
5. Investment valuation risk
6. Political and regulatory risk
7. Premium/discount risk
8. Service provider risk (including the Investment Manager)
9. COVID-19 risk
10. Counterparty risk
11. Climate and ESG risk
The Directors have identified as an emerging risk, Chinese solar
materials tied to forced labour.
Description
In June 2022, the White House announced the UFLPA which
addresses forced labour in the supply chain for solar panels in
China, including a ban on imports from several polysilicon
producers operating in Xinjiang. A significant portion of the
world's polysilicon, which is used to make solar panels, comes from
China.
Mitigation
l The Company 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 will actively monitor
developments on this issue to mitigate its impacts.
l The Investment Manager will make inquiries of vendors
regarding future procurement and their compliance with the
UFLPA.
The Annual Report contains more detail on the Company's
principal risks and uncertainties, including the Board's ongoing
process to identify, and where possible mitigate, emerging risks
(pages 36 to 38). The Annual Report can be found on the Company's
website.
The Board is of the opinion that these principal risks are
equally applicable to the remaining six months of the financial
year as they were to the six months being reported on.
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.
Related Party Transactions
The Company's Investment Manager, Ecofin, is considered a
related party under the Listing Rules. Details of the amounts paid
to the Company's Investment Manager and the Directors during the
Period are detailed in Note 10 to the Financial Statements.
Going Concern
The Directors have adopted the going concern basis in preparing
the interim financial statements. The following is a summary of the
Directors' assessment of the going concern status of the
Company.
The Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for at
least twelve months from the date of this report. In reaching their
conclusion, the Directors considered the Company's cash flow
forecasts, cash position, income and expense flows and available
borrowing facilities. The Company's net assets at 30 June 2022 were
$134,324,000 million. As at 30 June 2022, the Company held
$3,859,000 million in cash and was undrawn on its RCF. The Company
continues to meet its day-to-day liquidity needs through its cash
resources. The total expenses for the six months ended 30 June 2022
were $1,196,000 million, which represented approximately 0.94% of
average net assets during the Period. At the date of approval of
this half-yearly report, based on the aggregate of investments and
cash held, the Company had substantial cover for its operating
expenses.
The Directors also considered the impacts of both the secondary
effects of the COVID-19 pandemic and the Russian invasion of
Ukraine on the Company's portfolio of investments. The Directors do
not foresee any immediate material risk to the Company's portfolio
and the 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
creditworthy counterparties such as utilities, municipalities, and
corporations. Most of these PPAs are contracted over a long period
with a weighted average as at 30 June 2022 of 16.3 years.
During the Period and up to the date of this Report, there has
been no significant impact on the revenue and cash flows of the
SPVs outside normal operations. The SPVs have contractual O&M
agreements in place with service providers. Therefore, the
Directors and the Investment Manager do not anticipate a material
threat to SPV revenues.
Finally, the Board believes that the Company and its key third
party service providers have in place appropriate business
continuity plans to continue to maintain service levels throughout
any future pandemics or any other business interruptions.
Directors' Statement of Responsibility for the Half-Yearly
Report
The Directors confirm to the best of their knowledge that:
l The condensed set of financial statements contained within the
interim financial report has been prepared in accordance with FRS
104 Interim Financial Reporting; and
l The Interim Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's Disclosure
Guidance and Transparency Rules.
Patrick O'D Bourke
Chair
For and on behalf of the Board of Directors
15 September 2022
Financial Statements
Unaudited Condensed Statement of Comprehensive Income
For the six months ended 30 June 2022
Period from Incorporation
on
For the six months ended 12 August 2020
30 June 2022 to 30 June 2021
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
Notes $'000 $'000 $'000 $'000 $'000 $'000
---------------------------- ----- -------- -------- -------- ---------- --------- ------
Losses on investments 3 - (1,770) (1,770) - (8) (8)
Net foreign exchange
gains/(losses) - 4 4 - (333) (333)
Income 4 4,457 - 4,457 2,285 - 2,285
Investment management
fees 5 (638) - (638) (352) - (352)
Other expenses (558) - (558) (506) - (506)
---------------------------- ----- -------- -------- -------- ---------- --------- ------
Profit/(loss) on ordinary
activities before taxation 3,261 (1,766) 1,495 1,427 (341) 1,086
Taxation - - - - - -
---------------------------- ----- -------- -------- -------- ---------- --------- ------
Profit/(loss) on ordinary
activities after taxation 3,261 (1,766) 1,495 1,427 (341) 1,086
Earnings per Share (cents)
- basic and diluted 6 2.55c (1.38c) 1.17c 1.93c (0.46c) 1.47c
---------------------------- ----- -------- -------- -------- ---------- --------- ------
The total column of the Condensed Statement of Comprehensive
Income is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the six months to 30 June 2022 (the "Period").
Profit on ordinary activities after taxation is also the "Total
comprehensive profit for the Period".
The notes below form part of these interim financial
statements.
Unaudited Condensed Statement of Financial Position
As at 30 June 2022
As at As at
30 June 31 December
2022 2021
(Unaudited) (Audited)
Notes $'000 $'000
---------------------------------------------------- ----- ----------- -----------
Non-current assets
Investments at fair value through profit or loss 3 130,973 118,882
Current assets
Cash and cash equivalents 3,859 5,362
Trade and other receivables 36 1
---------------------------------------------------- ----- ----------- -----------
3,895 5,363
Current liabilities: amounts falling due within
one year
Trade and other payables (544) (522)
---------------------------------------------------- ----- ----------- -----------
Net current assets 3,351 4,841
---------------------------------------------------- ----- ----------- -----------
Net assets 134,324 123,723
---------------------------------------------------- ----- ----------- -----------
Capital and reserves: equity
Share capital 7 1,380 1,251
Share premium 12,689 29
Special distributable reserve 8 121,250 121,250
Capital reserve (2,525) (759)
Revenue reserve 1,530 1,952
---------------------------------------------------- ----- ----------- -----------
Shareholders' funds 134,324 123,723
Net assets per Share (cents) 9 97.3c 98.9c
Approved and authorised by the Board of directors
for issue on 15 September 2022.
Patrick O'D Bourke
Chair of the Board
The accompanying notes form part of these interim financial
statements.
Unaudited Condensed Statement of Changes in Equity
For the six months ended 30 June 2022
Six months ended 30 June 2022 (Unaudited)
Share Special
Share premium distributable Capital Revenue
capital account reserve reserve reserve Total
Notes $'000 $'000 $'000 $'000 $'000 $'000
---------------------- ----- ------- ------- ------------- ------- ------- -------
Opening equity
as at 1 January
2022 1,251 29 121,250 (759) 1,952 123,723
Transactions with
Shareholders
Shares issued in
Period 7 129 13,027 - - - 13,156
Shares issued to
Investment Manager - 44 - - - 44
Share issue costs - (411) - - - (411)
Dividend distribution - - - - (3,683) (3,683)
---------------------- ----- ------- ------- ------------- ------- ------- -------
Total transactions
with Shareholders 1,380 12,689 121,250 (759) (1,731) 132,829
Profit and total
comprehensive income
for the Period - - - (1,766) 3,261 1,495
---------------------- ----- ------- ------- ------------- ------- ------- -------
Closing equity
as at 30 June 2022 1,380 12,689 121,250 (2,525) 1,530 134,324
---------------------- ----- ------- ------- ------------- ------- ------- -------
Period from Incorporation on 12 August 2020 to 30 June 2021
(Unaudited)
Share Special
Share premium distributable Capital Revenue
capital account 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 7 1,250 123,750 - - - 125,000
Shares issued to
Investment Manager - 28 - - - 28
Share issue costs - (2,502) - - - (2,502)
Transfer to Special
distributable reserve 8 - (121,250) 121,250 - - -
Dividend distribution - - - - (499) (499)
----------------------- ----- ------- --------- ------------- ------- ------- -------
Total transactions
with Shareholders 1,250 26 121,250 - (499) 122,027
Profit and total
comprehensive income
for the Period - - - (341) 1,427 1,086
----------------------- ----- ------- --------- ------------- ------- ------- -------
Closing equity
as at 30 June 2021 1,250 26 121,250 (341) 928 123,113
----------------------- ----- ------- --------- ------------- ------- ------- -------
The Company's distributable reserves consist of the Special
distributable reserve, Capital reserve attributable to realised
gains and Revenue reserve.
The accompanying notes form part of these interim financial
statements.
Unaudited Condensed Statement of Cash Flows
For the six months ended 30 June 2022
Period from
Incorporation
Six months on 12 August
ended 30 June 2020 to
2022 30 June 2021
(Unaudited) (Unaudited)
Notes $'000 $'000
Operating activities
Profit on ordinary activities before taxation 1,495 1,086
Adjustment for unrealised losses/(gains)
on investments 1,770 (95)
Increase in trade and other receivables (35) (1,287)
Increase in trade and other payables 22 336
---------------------------------------------- ----- ------------- -------------
Net cash flow from operating activities 3,252 40
Investing activities
Purchase of investments 3 (13,861) (67,324)
---------------------------------------------- ----- ------------- -------------
Net cash flow used in investing activities (13,861) (67,324)
Financing activities
Proceeds of share issues 7 13,200 125,028
Share issue costs (411) (2,502)
Dividends paid (3,683) (499)
---------------------------------------------- ----- ------------- -------------
Net cash flow from financing activities 9,106 122,027
---------------------------------------------- ----- ------------- -------------
(Decrease)/Increase in cash (1,503) 54,743
---------------------------------------------- ----- ------------- -------------
Cash and cash equivalents at start of the
Period 5,362 -
---------------------------------------------- ----- ------------- -------------
Cash and cash equivalents at end of the
Period 3,859 54,743
---------------------------------------------- ----- ------------- -------------
As at 30 June As at 30 June
2022 2021
(Unaudited) (Unaudited)
$'000 $'000
---------------------------------------------- ----- ------------- -------------
Cash and cash equivalents
Cash at bank - 103
Money market cash deposits 3,859 54,640
---------------------------------------------- ----- ------------- -------------
Total cash and cash equivalents 3,859 54,743
---------------------------------------------- ----- ------------- -------------
The accompanying notes form part of these interim financial
statements.
Notes to the Interim Financial Statements
For the six months ended 30 June 2022
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 London Stock
Exchange. The Directors intend, at all times, to conduct the
affairs of the Company as to enable it to qualify as an investment
trust for the purposes of section 1158 of the Corporation Tax Act
2010, as amended.
The registered office and principal place of business of the
Company is 6th Floor, 125 London Wall, London, EC2Y 5AS.
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 Alternative Investment Fund Manager ("AIFM") and
Investment Manager is Ecofin Advisors, LLC.
Sanne Fund Services (UK) Limited provides administrative and
company secretarial services to the Company under the terms of an
administration agreement.
2. Basis of Preparation
The unaudited interim financial statements of the Company have
been prepared in accordance with IAS 34 "Interim Financial
Reporting". The accounting policies, critical accounting
judgements, estimates and assumptions are consistent with those
used in the latest audited financial statements to 31 December 2021
and should be read in conjunction with the Company's annual audited
financial statements for the period ended 31 December 2021. The
interim financial statements have been prepared in accordance with
UK-adopted international accounting standards. The interim
financial statements are prepared on the historical cost basis,
except for the revaluation of certain financial instruments at fair
value through profit or loss ("FVTPL").
The interim financial statements have also been prepared as far
as is relevant and applicable to the Company in accordance with the
Statement of Recommended Practice ("SORP") issued by the
Association of Investment Companies ("AIC") in July 2022.
These condensed interim financial statements do not include all
information and disclosures required in the annual financial
statements and should be read in conjunction with the Company's
annual financial statements as at 31 December 2021. The audited
annual accounts for the period ended 31 December 2021 have been
delivered to the Companies House. The audit report thereon was
unqualified.
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 interim financial statements are
presented in U.S. Dollars rounded to the nearest thousand
dollars.
Basis of consolidation
The Company has adopted the amendments to IFRS 10 which state
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.
Going concern
The Directors have adopted the going concern basis in preparing
the interim financial statements. Details of the Directors'
assessment of the going concern status of the Company, which
considered the adequacy of the Company's resources and the current
macro-economic climate, including the impact from the Russian
invasion of Ukraine and the secondary effects of the COVID-19
pandemic, are given in the Going Concern section further above.
Critical accounting judgements, estimates and assumptions
The preparation of 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 3 to the interim financial
statements.
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 uses 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 its future cash flows,
based on a range of operating assumptions for revenues and
expenses, and discounting those future cash flows to the balance
sheet date using a discount rate appropriately calibrated to the
risk profile of the asset and market dynamics. The key estimates
and assumptions used within the DCF models are consistent with
those used in the latest audited financial statements to 31
December 2021 and include 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. The Company's investments at fair value are not
traded in active markets.
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.
3. Investments Held at Fair Value through Profit or Loss
As at 30 June 2022, the Company had one investment, being
Holdco. The cost of the investment in Holdco is $133,065,052.
As at 30 As at 31
December
June 2022 2021
Total Total
$'000 $'000
------------------------------------------------- --------- --------
(a) Summary of valuation
Analysis of closing balance:
Investment at fair value through profit or loss 130,973 118,882
------------------------------------------------- --------- --------
Total investments 130,973 118,882
(b) Movements during the Period
Opening balance of investment, at cost 119,204 -
Additions, at cost 13,861 119,204
------------------------------------------------- --------- --------
Cost of investments at Period end 133,065 119,204
Revaluation of investments to fair value:
Unrealised losses in fair value of investment (2,092) (322)
------------------------------------------------- --------- --------
Fair value of investment at Period end 130,973 118,882
(c) Losses on investments during the Period
Unrealised movement in fair value of investments
during the Period (1,770) (322)
------------------------------------------------- --------- --------
Losses on investments (1,770) (322)
------------------------------------------------- --------- --------
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level.
The level of fair value hierarchy within 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 three 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.
As at 30 June 2022 As at 31 December 2021
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------------- ----- ----- ------- ------- ----- ----- ------- -------
Investments at fair
value through
profit or loss:
Investment in Holdco - - 130,973 130,973 - - 118,882 118,882
--------------------- ----- ----- ------- ------- ----- ----- ------- -------
Total investments - - 130,973 130,973 - - 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.
As at As at
30 June 31 December
2022 2021
$'000 $'000
--------------------------------- ------- -----------
Opening balance 118,882 -
Additions during the Period 13,861 119,204
Unrealised losses on investments (1,770) (322)
--------------------------------- ------- -----------
Closing balance 130,973 118,882
--------------------------------- ------- -----------
4. Income
Period from
Incorporation
Six months on 12 August
ended 30
June 2020 to
2022 30 June 2021
$'000 $'000
----------------------- ---------- -------------
Income from investment
Dividends from Holdco 4,450 2,275
Deposit interest 7 10
----------------------- ---------- -------------
Total income 4,457 2,285
----------------------- ---------- -------------
5. Investment Management Fee
Period from Incorporation
Six months ended 30 on 12 August 2020 to
June 2022 30 June 2021
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
-------------------------- ------- ------- ----- ---------- --------- ------
Investment Management Fee 638 - 638 352 - 352
-------------------------- ------- ------- ----- ---------- --------- ------
The Company and Ecofin entered into the Investment Management
Agreement ("IMA") on 11 November 2020, pursuant to which Ecofin was
appointed as the AIFM, as defined in the AIFM Directive, of the
Company.
Under the IMA, the Investment Manager receives a 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 Management 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 issues new
Shares to the Investment Manager equivalent in value to the
management fee reinvested. Where the Shares are trading at a
discount to NAV, the Management Fee Shares are 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 Brokers have purchased
the following Management Fee Shares in respect of the Period under
review:
Investment
Management
Fees Issue price Number of Date of
Shares issued $ (cents) Shares issue
-------------------------------- ----------- ----------- --------- ----------
1 January 2022 to 31 March 2022 44,559 97.64 45,636 3 May 2022
-------------------------------- ----------- ----------- --------- ----------
2 August
1 April 2022 to 30 June 2022 50,359 97.32 51,745 2022
-------------------------------- ----------- ----------- --------- ----------
6. Earnings per Share
Earnings per Share is based on the profit for the six months
ended 30 June 2022 of $1,495,000 (30 June 2021: $1,086,000)
attributable to the weighted average number of Shares in issue of
127,710,783 in the Period (30 June 2021: 73,920,041). Revenue
profit and capital losses were $3,261,000 and ($1,766,000)
respectively (30 June 2021: $1,427,000 and ($341,000)
respectively).
7. Share Capital
As at 30 June 2022 As at 31 December 2021
Nominal Nominal
Number Number
of value of value
Allotted, issued and
fully paid: shares GBP $ shares GBP $
------------------------------ ----------- --- ------------ ----------- ----------- ------------
Opening balance 125,053,498 - 1,250,534.98 - - -
------------------------------ ----------- --- ------------ ----------- ----------- ------------
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) -
Placing and retail offer
Shares issued 12,927,617 - 129,276.17 - - -
Management Fee Shares
issued
Shares issued 45,636 - 456.36 53,497 - 534.97
Closing balance 138,026,751 - 1,380,267.51 125,053,498 - 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 IPO 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.
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, 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 IPO.
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.
On 24 May 2022 the Company issued 12,927,617 Shares at an issue
price of $1.015 per Share pursuant to a placing and retail
offer.
During the Period, the Company also issued 45,636 Shares with
respect to the first quarter to the Company's Investment Manager,
in relation to investment management fees paid during the Period at
an issuance price of $0.9764. After the Period end, the Company
issued a further 51,745 Shares with respect to the second quarter
to the Company's Investment Manager, in relation to investment
management fees for the Period at an issuance price of $0.9732.
As at 30 June 2022, the Company's issued share capital comprised
138,026,751 Shares (30 June 2021: 125,027,930; 31 December 2021:
125,053,498) and this is the total number of Shares with voting
rights in the Company.
8. Special Distributable Reserve
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.
9. Net Assets per Share
Net assets per Share is based on $134,324,000 of net assets of
the Company as at 30 June 2022 (31 December 2021: $123,723,000)
attributable to the 138,026,751 Shares in issue as at the same date
(December 2021: 125,053,498).
10. Related Party Transactions with the Investment Manager and
the Directors
Investment Manager
Fees payable to the Investment Manager are shown in the
Statement of Comprehensive Income. As at 30 June 2022, the fee
owing to the Investment Manager was $336,000.
As at 30 June 2022, the Investment Manager's total holding of
Shares in the Company was 8,678,342 (31 December 2021:
8,606,995).
Directors
The Company is governed by a Board of Directors (the "Board"),
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 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 aggregate remuneration and benefits in kind of the Directors
in respect of the Company's accounting period ending on 31 December
2022 which will be payable out of the assets of the Company are not
expected to exceed GBP188,000. 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 at
Shares at 31 December
30 June
Director 2022 2021
------------------------- --------- -----------
Patrick O'Donnell Bourke 104,436 54,436
David Fletcher 57,669 41,165
Tammy Richards 25,000 25,000
Louisa Vincent 33,375 27,710
------------------------- --------- -----------
11. Commitments and Contingencies
As at 30 June 2022 the Company had the following future
investment obligations:
The Company had a collective future unlevered net equity
commitment amount of $72.9 million in respect of $21.7 million of
pending future equity obligations on closed construction assets and
a committed pipeline of eight solar assets in respect of the Echo
Solar Portfolio in Virginia/Delaware totalling $51.2 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 Echo Solar Portfolio. These figures also do not include
the anticipated closure of a tax equity arrangement in Q3-Q4 of
2022 estimated to be $27.7 million, which will be coordinated with
project closings and used towards the commitments in the Echo Solar
Portfolio. Additional funding required is expected to be
facilitated in the short-term through the RCF, and subsequently
through a term debt facility as the projects become
operational.
12. Post Balance Sheet Events
On 19 July 2022, the Company announced that portfolio managers
Jerry Polacek, Matthew Ordway and Prashanth Prakash had resigned
from their roles at Ecofin to pursue a new venture.
On 28 July 2022, the Company declared an interim dividend in
respect of the period from 1 April 2022 to 30 June 2022 of 1.4
cents per ordinary share, paid on 29 August 2022 to shareholders on
the register on 12 August 2022. The ex-dividend date was 11 August
2022.
On 2 August 2022, the Company issued 51,745 Management Fee
Shares to the Company's Investment Manager.
On 22 August 2022, the Company closed on the acquisitions of
three ground mount solar projects at construction stage in the Echo
Solar Portfolio with an aggregate asset value of approximately $5.5
million.
13. Status of this report
These interim financial statements are not the Company's
statutory accounts for the purposes of section 434 of the Companies
Act 2006. They are unaudited. The unaudited half-yearly report will
be made available to the public at the registered office of the
Company. The report will also be available in electronic format on
the Company's website, http://www.ecofininvest/rnew.
The financial information for the period ended 31 December 2021
has been extracted from the statutory accounts which have been
filed with the Registrar of Companies. The auditor's report on
those accounts was not qualified and did not contain statements
under sections 498 (2) or (3) of the Companies Act 2006.
This Half-yearly report was approved by the Board of Directors
on 15 September 2022.
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 than the NAV per Share.
As at
30 June
2022
---------------------- ------------- -------
NAV per Share (cents) a 97.3
Share price (cents) b 103.5
---------------------- ------------- -------
Premium (b÷a)-1 6.4%
---------------------- ------------- -------
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.
NAV per
Share price share
For the six months ended 30 June
2022 (cents) (cents)
--------------------------------- ------------- ----------- -------
Opening at 1 January 2022 a 99.0 98.9
Closing at 30 June 2022 b 103.5 97.3
Dividends paid during the Period c 2.8 2.8
Adjusted closing (d = b + c) d 106.3 100.1
--------------------------------- ------------- ----------- -------
Total return (d÷a)-1 7.4% 1.2%
--------------------------------- ------------- ----------- -------
Ongoing charges ratio
A measure, expressed as a percentage of average NAV, of the
regular, recurring annual costs of running an investment
company.
As at As at
30 June 31 December
2022 2021
---------------------------- ----------- ------- -----------
Average NAV ($'000) a 126,717 123,744
Annualised expenses ($'000) b 2,411 1,817
---------------------------- ----------- ------- -----------
Ongoing charges ratio (b÷a) 1.90% 1.47%
---------------------------- ----------- ------- -----------
Until such time as 90% of the Net Initial Proceeds of the
Company's IPO was committed to investments, the Investment
Management fee was only charged on the committed capital of the
Company. Since 1 October 2021, and throughout the six months to 30
June 2022, the Investment Management fee has been charged on the
full NAV of the Company.
For further information contact:
Secretary and registered office:
Sanne Fund Services (UK) Limited
6th Floor, 125 London Wall, London, EC2Y 5AS
The Half-yearly financial report will be submitted to the
National Storage Mechanism and will shortly be available for
inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
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END
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September 16, 2022 02:00 ET (06:00 GMT)
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