LEI: 2138004JUQUL9VKQWD21
29 April 2024
Ecofin U.S. Renewables
Infrastructure Trust PLC
Annual Financial Report for
the year ended 31 December 2023
Ecofin U.S. Renewables
Infrastructure Trust plc ("RNEW" or the "Company") is pleased to
announce its audited results for the year ended 31 December 2023
("Year").
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.
Highlights
Financial
|
As
at 31 December 2023
|
|
|
|
Net
Asset Value ("NAV") per share
|
NAV
|
Share price
|
|
85.2 cents
|
$117.7 million
|
56.5 cents²
|
|
66.8 pence¹
|
£92.2 million¹
|
44.3 pence²
|
|
|
|
|
|
Leverage
|
|
|
|
38.6%³
|
|
|
|
|
|
|
|
Year ended 31 December 2023 ("Year")
|
|
|
NAV
total return
|
Share price total return
|
Dividends per share declared
|
|
(5.5)%⁴
|
(28.0)%⁴
|
3.5
cents
|
|
|
|
|
|
Operational
|
|
|
|
Assets
|
Equivalent number of households
|
Portfolio generating capacity
|
|
|
supplied in 2023
|
|
|
65
|
~22,200
|
177
MW⁵
|
|
|
|
|
|
CO2e avoided in
2023
|
Clean energy generated in 2023
|
|
|
~141,800 tonnes⁶
|
248
GWh⁵
|
|
Figures reported either as at the
referenced date or over the year ended 31 December 2023. All
references to cents and dollars ($) are to the currency of the
U.S., unless stated otherwise.
1. 31
December 2023 exchange rate of £0.7835 = $1.00
2. RNEW
& RNEP LSE closing price as at 31 December 2023
3.
Calculated based on Gross Asset Value ("GAV") and aggregate
debt. Additional information can be found in the financing section
of the Investment Manager's Report.
4. 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 in the Alternative Performance
Measures section.
5.
Represents the Company's share of portfolio generating
capacity.
6.
CO2e based on the Company's proportionate
ownership interest in the assets. CO2e calculations are
derived using the U.S. Environmental Protection Agency's ("EPA")
Emissions & Generation Resources Integrated
Database.
Portfolio
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
revenue
|
|
|
|
Capacity
|
Number of
|
|
|
|
Acquisition
|
contract
term
|
|
Investment Name
|
Sector
|
(MW)1
|
assets
|
State
|
Ownership2
|
Phase
|
Status
|
(years)3
|
|
SED Solar Portfolio
|
Commercial
|
11.3
|
52
|
Massachusetts,
|
100%
|
Operational
|
Completed
|
12.6
|
|
|
Solar
|
|
|
Connecticut
|
|
|
Dec.
2020
|
|
|
Ellis Road Solar
|
Commercial
|
7.1
|
1
|
Massachusetts
|
100%
|
Operational
|
Completed
|
17.5
|
|
|
Solar
|
|
|
|
|
|
Dec.
2020
|
|
|
Oliver Solar
|
Commercial
|
4.8
|
1
|
California
|
100%
|
Operational
|
Completed
|
11.9
|
|
|
Solar
|
|
|
|
|
|
Dec.
2020
|
|
|
Beacon 2
|
Utility-Scale
|
29.5
|
1
|
California
|
49.5%
|
Operational
|
Completed
|
19.0
|
|
|
Solar
|
|
|
|
|
|
Feb.
2021
|
|
|
Beacon 5
|
Utility-Scale
|
23.9
|
1
|
California
|
49.5%
|
Operational
|
Completed
|
19.0
|
|
|
Solar
|
|
|
|
|
|
Feb.
2021
|
|
|
Skillman Solar
|
Commercial
|
2.6
|
1
|
New
Jersey
|
100%
|
Operational
|
Completed
|
13.6
|
|
|
Solar
|
|
|
|
|
|
Sept.
2021
|
|
|
Delran Solar
|
Commercial
|
2.0
|
1
|
New
Jersey
|
100%
|
Operational
|
Completed
|
11.5
|
|
|
Solar
|
|
|
|
|
|
Oct.
2021
|
|
|
Whirlwind
|
Wind
|
59.8
|
1
|
Texas
|
100%
|
Operational
|
Completed
|
4.0
|
|
|
|
|
|
|
|
|
Oct.
2021
|
|
|
Echo Solar - MN
|
Commercial
|
13.7
|
1
|
Minnesota
|
100%
|
Operational
|
Completed
|
24.0
|
|
|
Solar
|
|
|
|
|
|
Oct.
2021
|
|
|
Echo Solar - VA 1
|
Commercial
|
2.7
|
1
|
Virginia
|
100%
|
Operational
|
Completed
|
24.0
|
|
|
Solar
|
|
|
|
|
|
Jun.
2022
|
|
|
Echo Solar - VA 2
|
Commercial
|
4.2
|
1
|
Virginia
|
100%
|
Operational
|
Completed
|
25.0
|
|
|
Solar
|
|
|
|
|
|
Jun.
2022
|
|
|
Echo Solar - VA 3
|
Commercial
|
6.5
|
1
|
Virginia
|
100%
|
Operational
|
Completed
|
24.7
|
|
|
Solar
|
|
|
|
|
|
Aug.
2022
|
|
|
Echo Solar - VA 4
|
Commercial
|
2.9
|
1
|
Virginia
|
100%
|
Operational
|
Completed
|
25.0
|
|
|
Solar
|
|
|
|
|
|
Aug.
2022
|
|
|
Echo Solar - DE 1
|
Commercial
|
5.9
|
1
|
Delaware
|
100%
|
Operational
|
Completed
|
25.0
|
|
|
Solar
|
|
|
|
|
|
Aug.
2022
|
|
|
Total3
|
|
176.9
|
65
|
|
|
|
|
13.73
|
1.
Capacity reflects RNEW's proportionate ownership interest in
the assets.
2. Cash
equity ownership.
3.
Average remaining revenue contract term (years).
Our
Business Model
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 Renewable
Assets predominantly located in the U.S. with prospects for modest
capital appreciation over the long term.
Structure
The Company's business model follows
that of an externally managed investment trust. As such, the
Company does not have any employees and outsources its activities
to third party service providers, including the Investment Manager
and the Administrator who are the principal service providers. The
Company's structure, including management structure and key service
providers, is illustrated overleaf.
The Company makes its investments
through a wholly-owned U.S. holding company, RNEW Holdco LLC
("Holdco"), other intermediate holding companies and underlying
special purpose vehicles ("SPVs", organised as U.S. limited
liability companies or LLCs) that hold the Renewable Assets. The
Company has the ability to use short and long-term debt at the
Company, Holdco and SPV levels subject to limits defined in its
gearing policy.
The Company, through a wholly-owned
U.S. subsidiary, RNEW Capital, LLC, has a $65 million secured
Revolving Credit Facility ("RCF") with KeyBank, one of the premier
lenders to the U.S. renewable energy industry. The RCF comprises a
$50 million, two-year tranche priced at Secured Overnight Financing
Rate ("SOFR") plus 2.13% and a $15 million, three-year tranche
priced at SOFR plus 2.38%. Both tranches were extended by 12 months
in 2023 to October 2024 and October 2025, respectively.
The RCF also includes an accordion option for an
additional $20 million of capital which can be accessed subject to
certain conditions. The RCF is structured to provide RNEW with
operational flexibility and liquidity to advance its pipeline and
continue to grow.
Through the Company's acquisition of
a 49.5% stake in the Beacon 2 and 5 operating solar assets, it
assumed its share of non-recourse amortising project term loans
secured on those projects that totalled $44.7 million as at 31
December 2023. In addition, in October 2023, a wholly-owned U.S.
subsidiary of RNEW, TC Renewable Holdco V, LLC, entered into a $4.3
million amortising project term loan secured on Echo Solar
Portfolio projects.
The Company has a 31 December
financial year end and announces half-year results in September and
full-year results in April. The Company pays dividends
quarterly.
Management of the Company
The Company has an independent board
of four non-executive Directors (details of whom can be found in
the Directors' Experience and Contribution section of the Corporate
Governance Statement). The Board's role is to manage the governance
of the Company in the interests of Shareholders and other
stakeholders. In particular, the Board monitors adherence to
the Investment Policy and gearing policy limits, determines the
risk appetite, sets Company policies and monitors the performance
of the Investment Manager and other key service providers.
The Board meets a minimum of six times a year for regular
Board meetings, with additional ad hoc meetings taking place
dependent upon the requirements of the business. The Board reviews
the performance of all key service providers on an annual basis
through its Management Engagement Committee.
The Company has appointed Ecofin as
its AIFM and Investment Manager to provide portfolio and risk
management services to the Company. The Board takes advice from the
Investment Manager on matters concerning the market, the portfolio
and new investment opportunities.
Day-to-day management of the Company's portfolio is delegated to
the Investment Manager, with investment decisions in line with the
Company's Investment Policy delegated to an Investment Committee
consisting of senior members of the Investment Manager. Further
information on the Investment Manager is provided in the Investment
Manager's Report.
As an investment trust, the Company
does not have any employees and is reliant on third party service
providers for its operational requirements. Likewise, the SPVs
which hold the portfolio assets do not have any employees and
services are provided through third party providers. The Board has
delegated administration, fund accounting and company secretarial
services to Apex Listed Companies Services (UK). Each service
provider has an established track record and has in place suitable
policies and procedures to ensure it maintains high standards of
business conduct and corporate governance.
Investment Manager
·
Manages the portfolio of
Renewable Assets to achieve the Company's Investment
Objective
·
Sources, evaluates and
implements the pipeline of new investments
·
Monitors financial performance
against Company targets and forecasts
·
Advises the Board on
investment strategy and portfolio composition to achieve the
desired target returns within the agreed risk appetite
·
Manages the process and
analysis for semi-annual valuations (March/September) and
coordinates the process with the independent valuer
(June/December)
·
Ensures good financial and
cash management of the Company and its assets having regard to
accounting, tax and debt usage and covenants
·
Manages the Company's investor
reporting and investor relations activities
Chairman's Statement
Introduction
On
behalf of the Board, I am pleased to present the annual report for
Ecofin U.S. Renewables Infrastructure Trust PLC for the year ended
31 December 2023 (the "Annual Report").
This was a difficult year for your
fund. RNEW's share price has continued to trade at a discount to
Net Asset Value (NAV), in common with much of the UK investment
trust sector, as I noted in the Company's interim results to 30
June 2023. The sector has been out of favour with equity investors
against a background of high inflation and increased interest
rates, and it remains to be seen if market expectations of lower
interest rates during 2024 result in a rerating of share prices.
The Company has also had to address some challenging operational
issues as described further below.
Strategic review
At 31 December 2023, the share price
represented a 33.7% discount to NAV. As previously mentioned, the
Board is not content with this level of discount. During 2023, we
considered initiating a share buy-back programme but the Board and
its advisers did not believe such a programme would have a material
impact on the discount and were concerned about the consequent
reduction in liquidity in the Company's shares.
The last annual report noted that,
consistent with good governance, the Board was open to exploring
all options for the future of the Company. In line with this,
approaches were made to another listed closed-ended investment
company in the sector with a view to combining the Company and the
other vehicle through a scheme of reconstruction to create a larger
company with greater liquidity. However, the Company's proposal was
not successful. The Company subsequently received interest from a
different listed closed ended investment company within the wider
renewable energy sector regarding a
combination; however, the Board did not consider the proposal to be
in the best interests of Shareholders for a variety of
reasons.
The Company also interacted with
Shareholders during the year, both through the Investment Manager
and through the Board. As part of these interactions, and in
particular, meetings held in May 2023 following the annual results,
feedback was received from several major Shareholders that the
Company should consider a sale of its assets.
Against this background and given
the wide discount to NAV and the unfavourable short-term prospects
to raise new equity, on 8 September 2023 the Board announced a review of
the Company's strategy to maximise value for Shareholders. The
review would focus on a sale of the Company's assets. If
successful, and subject to the terms of such disposal, cash is
expected to be returned to Shareholders in connection with a
winding up of the Company or similar transaction and Marathon
Capital ("Marathon") was appointed accordingly.
The review is ongoing and has taken
longer than expected. As part of the review, Marathon has conducted
a comprehensive and wide-ranging exercise to identify potential
buyers', appetite for the Company's portfolio of assets. This
process has resulted in specific discussions and negotiations
taking place which, hopefully, will soon be drawing to a
conclusion.
Given the discount to NAV, it is
perhaps inevitable that, in arriving at their views on valuation of
the Company's portfolio as a whole, buyers would take account of
both RNEW's prevailing share price as well as its reported NAV, the
latter being derived on an asset by asset basis. Assuming a
satisfactory transaction can be agreed, the Board expects a
proposal to be set out in a circular and put to a general meeting,
at which Shareholders will have the opportunity to vote.
Portfolio management
As at 31 December 2023, RNEW's
portfolio comprised 65 solar and wind assets with a combined
capacity of 177MW across eight states: California, Connecticut,
Delaware, Massachusetts, Minnesota, New Jersey, Texas and Virginia.
As at the same date, 65 assets were in operation.
During 2023, the portfolio generated
248 GWh of clean electricity (2022: 335 GWh), equivalent to
powering 22,200 households, from a fully-contracted portfolio
of diversified solar and wind projects. The assets all benefit from
long term PPAs with investment-grade utility, municipal or
corporate off-takers with a weighted average PPA term remaining of
13.7 years (18.4 years excluding the Whirlwind windfarm). Total
generation during the year was below budget as described further in
the Portfolio Production Update section of the Investment Manager's
Report.
Toward the end of the first half of
2023, certain of the Company's assets suffered unforeseen
operational issues which had a negative impact on the overall
performance and valuation of the portfolio. Principal among these
were:
·
a tornado on 21 June in
Matador, Texas which destroyed the substation through which the
Company's Whirlwind windfarm asset (located
approximately 20 miles west-northwest of Matador) transmitted its
power;
·
damage to DC wiring at the
Ellis Road solar project caused by a rodent infestation which
forced 40% of the total system capacity to be de-energised;
and
·
voltage issues
on the electricity network where the Skillman
project is located causing the project to be automatically tripped
offline, an issue which was rectified and power restored on 7
July.
In December 2023, the Company
announced that an agreement had been reached with American Electric
Power ("AEP"), the owner of the Matador substation, to restore
generation from Whirlwind through a new transmission line to
Paducah, another substation owned by AEP. Re-energisation of
Whirlwind took place on 8 December 2023 and the windfarm has been
generating successfully, albeit at a reduced voltage. The first
payment on the Company's business interruption insurance in respect
of Whirlwind was received before year end and further payments are
scheduled to follow in the first half of 2024, substantially
mitigating lost revenue and expenses incurred because of the
outage. In the same announcement in December, the Company also
reported that the Ellis Road solar project was online.
During the year, progress continued
in completing construction and financing of the Echo Solar
Portfolio, a 36.0 MWdc commercial solar portfolio in Minnesota,
Virginia, and Delaware, including the completion of several tax
equity milestone funding and nearing completion on negotiation of a
back leverage debt facility. Currently, three projects have
achieved commercial operation, and the three remaining projects are
mechanically complete and being commissioned for commercial
operation.
Results
The NAV as at 31 December 2023 was
$85.2 cents per Share (31 December 2022: $94.3 cents per Share) or
$117.7 million (31 December 2022:
$130.2 million). During 2023, NAV per Share decreased by 9.7% as
described further in the Portfolio Valuation section of the
Investment Manager's Report.
The valuation of the portfolio as at
31 December 2023 is supported by an independent valuation firm,
Marshall & Stevens. The basis of valuation is discounted cash
flow, assuming a willing buyer and a willing seller on an asset by
asset basis, and using appropriate discount rates for each asset.
The valuation as at 31 December 2023 was based on an underlying
blended weighted average pre-tax discount rate of 7.4%. This
reflects a small decrease from 31 December 2022 due to the net
effect of a 0.25% increase in discount rates applied to the
majority of the assets more than offset by the impact of bringing
the Echo Solar Portfolio to a discounted cash flow fair valuation
from cost.
RNEW recorded a loss before tax for
the year ended 31 December 2023 of ($6.7) million (2022: $1.2
million profit) and earnings (loss) per Share was (4.9) cents
(2022: 0.89 cents per Share profit).
Financing and gearing
In June 2023, the Company completed
an amendment and extension to its $65 million RCF with KeyBank. The
RCF, which comprises two tranches, was extended by 12 months. The
$50 million tranche was extended to October 2024 and the $15
million tranche to October 2025.
The Company's total gearing at 31
December 2023 was 38.6% (31 December 2022: 33.3%) based on a Gross
Asset Value ("GAV") of $196.6 million and aggregate debt of $75.8
million. The Company had non-recourse debt at project level ($44.7
million secured on the two Beacon solar projects in California, and
$4.3 million secured on certain of the Echo Solar assets) and debt
at group level, consisting of $26.8 million drawn under the
RCF.
Dividends
The Board declared a quarterly
interim dividend of 1.4 cents per Share in respect of the quarter
ended 31 March 2023, and further interim dividends of 0.7 cents per
Share for each of the quarters ended 30 June 2023, 30 September
2023 and 31 December 2023. The reduction in dividend during the
year was explained in our announcement on 29 June 2023 and
reflected a decline in cash flows resulting from the operational
issues described above and certain one-off costs. The total
dividend for 2023 was 3.5 cents per Share.
Board
The Board continues to work well
together and with Ecofin. It comprises four
directors - two women and two men. Together we have a good balance
of sector, investment trust and wider financial investment
experience, including significant experience in the U.S. renewable energy sector. One of the directors is a
U.S. citizen and is resident in the U.S.
As previously mentioned, the Board
would like to appoint a further director to enhance its ethnic
diversity base, recognising the benefits of
having greater diversity on the Board. At present, given the
Company's size, cost base and the stage of its development, the
Directors do not feel it is appropriate to increase the size of the
Board.
Annual General Meeting
We look forward to welcoming
Shareholders at the Company's Annual General Meeting ("AGM) to be
held on 13 June 2024 at the offices of the Company Secretary
located at 6th
floor, 125 London Wall,
London EC2Y 5AS. For more information, please see the enclosed AGM
notice.
As set out above, it is hoped that
the strategic review announced on 8 September 2023 will soon be
drawing to a conclusion.
Patrick O'D Bourke
Chairman of the Board
26 April 2024
Investment Manager's Report
About Ecofin
Ecofin Investments, LLC, the parent
company of the Investment Manager, is a sustainable investment firm
with roots dating to the 1990s and an international footprint with
offices in the U.S. and UK. As at 31 December 2023, Ecofin
Investments, LLC had assets under management of $1.9 billion across
several listed U.S. and UK funds, private funds, and separately
managed accounts.
Eileen Fargis joined Ecofin as the
Group Lead for Ecofin's Private Equity Sustainable Infrastructure
team in October 2022 and was appointed as the Ecofin group lead and
portfolio manager for the Company. In her role, Eileen works
closely with Ecofin's team of experienced professionals,
originating and managing the firm's U.S. Renewable Assets. Eileen
has over 20 years' industry experience, most recently as Head of
Investments for InterEnergy Holdings (UK) Ltd, an independent
developer, owner, and operator of energy generation assets and a
utility in the Caribbean and Latin America.
The Finance and Asset Management
team has extensive experience in the energy industry. The team
works with Eileen to onboard new assets seamlessly and strives to
attain operational excellence for each of the Renewable Assets to
maximise profitability for Shareholders. The team interfaces with
engineers and plant operators to ensure plant optimisation. Strong
relationships and constant communication with our outsourced asset
management and O&M service providers are key to smooth
operations. Continuous process improvement is at the forefront for
the team to steadily advance the effectiveness of data analytics.
Additionally, the team is focused on keeping current with new
accounting guidance and reporting requirements that impact the
portfolio.
Ecofin is currently maintaining its
focus on managing RNEW's existing assets and near-term funding
obligations while assisting with the ongoing strategic
review.
Ecofin Group Lead and Portfolio Manager
Eileen Fargis
Eileen has over 20 years' industry
experience, most recently as Head of Investments for InterEnergy
Holdings (UK) Ltd, an independent developer, owner, and operator of
energy generation assets and a utility in the Caribbean and Latin
America. She is the former Co-Head of the $1 billion IFC African,
Latin American and Caribbean Fund LP, a private equity fund
investing alongside the International Finance Corporation on behalf
of the Fund's investors.
Eileen started her career in energy
and infrastructure with Skadden Arps and spent nine years at GE
Capital Markets, GE Energy Financial Services and GE Structured
Finance with a focus on global energy and infrastructure assets.
She has previously served on the boards of InterEnergy Holdings,
CityExpress Hotels and SURA Asset Management. Eileen is a graduate
of Hamilton College and the John Hopkins School of Advanced
International Studies.
Investments - Summary of the year
During the Year, the Investment
Manager continued to focus on maximising the operating activity of
the portfolio and dealing with unexpected operational issues,
including primarily the tornado which affected the substation
through which the Company's Whirlwind asset transmits electricity.
The portfolio delivered 247.98 GWh of clean electricity to its
offtakers. While this was 36.2% below budget, net cash flow
generated was able to cover $4.8 million of dividends, or 3.5 cents
per Share. Largely due to the aforementioned tornado, the Company
was unable to meet in 2023 its stated annual
target1 dividend range of 5.25% to 5.75%.
Significant funding activity took
place during the Year, relating primarily to construction projects
and tax equity financings.
The Investment Manager advanced on
the Echo tax equity partnership, providing financing for the Echo
Solar Portfolio. It is also in the final stages of completing the
Oliver Solar tax equity partnership. Coinciding with these
financings, the Investment Manager brought three new projects to
commercial operation, Echo Solar Westside, Monroe and
Hemings.
The Company successfully negotiated
to extend its RCF an additional year to October 2024 and October
2025 for each respective tranche. The Company expects to be able to
renew or extend on substantially similar terms in the second half
of 2024, depending on the outcome of the strategic
review.
Investment Activity
2023
4 April 2023 - the Company completed
the first tax equity funding on the 6.5 MWdc Hemings Solar
Partners, LLC in Virginia ("VA") (Echo Solar - VA 3) and the 5.9
MWdc Heimlich Solar Partners, LLC project in Delaware ("DE") (Echo
Solar - DE 1).
21 June 2023 - the Company's 59.8 MW
Whirlwind Energy wind farm, Whirlwind, in Floydada, Texas, ceased
operations due to a tornado which damaged five project-owned
transmission poles. Additionally, the American Electric Power
("AEP") owned substation in neighbouring Matador, through which
Whirlwind transmits electricity, was severely damaged during the
incident. The Company re-gained interconnection during the fourth
quarter of 2023 via an alternate route through a substation in
Paducah, Texas. This alternate transmission arrangement now allows
80% capacity throughput relative to full capacity
(50 MW versus the full capacity of 59.8 MW) on an
interim basis, with a corresponding reduction in forecasted cash
flows. AEP intends to build a new substation at Matador as quickly
as possible and return Whirlwind to full capacity, which is
estimated to take approximately 18 months, at which time Whirlwind
will return to its prior interconnection route and to full
capacity. The Company, its insurance broker, and a claims
consultant have worked together to file claims for business
interruption and necessary repairs to the damaged project-owned
transmission poles. Negotiation of claims and final loss amounts
with the insurers is ongoing; however, several interim payments
have been received. It is expected that the Company's insurance
policy ultimately will provide coverage for both the damaged
transmission poles and for 120 days of business interruption losses
that occur from outages (following a 45-day waiting
period).
26 June 2023 - the Company completed
an amendment to its RCF with KeyBank, extending the facility by
twelve months on competitive terms:
·
$50 million tranche extended
to October 2024 at SOFR +2.00% to 18 October 2023 and SOFR + 2.125%
thereafter
·
$15 million tranche extended
to October 2025 at SOFR + 2.25% to 18 October 2023 and SOFR +
2.375% thereafter
As at 31 December 2023, the Company
had $26.8 million drawn on the RCF and had approximately $14.2
million1 of outstanding net commitments (net receivables) from tax
equity investors on closed assets.
5 July 2023 - the Company completed
the first tax equity funding on the 2.9 MWdc Small Mouth Bass Solar
Partners, LLC project (Echo Solar - VA 4) and the final tax equity
funding on the 2.7 MWdc Monroe Solar Partners, LLC project (Echo
Solar - VA 1).
4 August 2023 - the Company
completed the first tax equity funding on the 4.2 MWdc Randolf
Solar Partners, LLC project (Echo Solar - VA 2).
1 September 2023 - the Company
completed the final tax equity funding on the 13.7 Echo Solar - MN
project, allowing for a partial repayment on the RCF which had an
outstanding balance of $28.8 million as at 1 September
2023.
12 October 2023 - the Company
completed the final tax equity funding on the 6.5 MWdc Hemings
Solar Partners, LLC in Virginia ("VA") (Echo Solar - VA 3) which
reached commercial operation on 15 September 2023.
8 December 2023 - Whirlwind repairs
were completed and the plant was re-energised.
31 December 2023 - the last three of
the six Echo portfolio assets were granted conditional permission
to operate and were placed in service. Commercial operation should
be reached and the completion of the tax equity fundings should
wrap up in the first half of 2024.
As
at 31 December 2023, the portfolio was heavily weighted towards
operating assets with 93% of NAV invested in operating assets held
at fair market value ("FMV"). The portfolio benefits from
geographic diversification spanning eight U.S. states to provide
risk mitigation against regulatory and resource exposures.
Furthermore, RNEW's portfolio reflects diversification across three
renewable energy sectors: utility scale solar (18%) commercial
solar (50%) and wind (32%), to mitigate resource, regulatory,
technology and market risks. As at 31 December 2023, all assets in
the portfolio had been placed in service, although not all have
declared their Commercial Operation Date ("COD").
Portfolio Summary1
FMV
by asset name
|
Asset name
|
Portfolio %
|
|
Beacon 2&5
|
18%
|
|
SED Solar Portfolio
|
13%
|
|
Oliver Solar
|
5%
|
|
Ellis Road Solar
|
6%
|
|
Skillman Solar
|
3%
|
|
Delran Solar
|
2%
|
|
Whirlwind
|
32%
|
|
Echo Solar - MN
|
14%
|
|
Echo Solar - VA/DE
|
7%
|
FMV
by sector
|
Sector
|
Portfolio %
|
|
Utility scale solar
|
18%
|
|
Commercial solar
|
50%
|
|
Wind
|
32%
|
1.
Includes closed
and committed assets based on equity exposure at FMV.
Summary of Investments
1.
SED Solar Portfolio
The SED Solar Portfolio consists of
51 predominantly rooftop commercial solar projects in Massachusetts
and 1 rooftop commercial solar project in Connecticut,
totalling 11.3 MW. The projects' output is fully contracted to
a variety of investment grade quality
schools, universities, municipalities and corporations under long
term fixed price PPAs. The transaction came about through a
bilateral negotiation with a vendor which was considering
monetising its interest in the portfolio which it had successfully
developed and operated for several years. The Investment Manager
represented an acquirer with the expertise to reliably execute an
acquisition spanning 52 assets and dozens of counterparties. Ecofin
closed the acquisition just days after completing RNEW's IPO in
December 2020, after which Ecofin secured a fixed price revenue
contract with an investment grade rated electric power company to
hedge the price risk for 100% of SED Solar Portfolio's Solar
Renewable Energy Credit ("SREC").
2.
Ellis Road Solar
Ellis Road Solar is a 7.1 MW ground
mount solar project in Massachusetts that commenced operations in
2021. This project sells 100% of its output to an investment
grade utility on a fixed price basis for 20 years through the state
of Massachusetts's renewable incentive program, Solar Massachusetts
Renewable Target (SMART). Ellis Road was initially sourced
bilaterally by Ecofin through its relationship with a commercial
solar developer focused on Northeastern U.S. markets and became one
of the four seed assets identified as part of RNEW's IPO. Following
the closing of the acquisition in December 2020, Ecofin actively
monitored the remaining construction process through to its
successful completion and secured a tax equity investment on
customary terms from a large U.S. corporate with which Ecofin has
previously transacted.
3.
Oliver Solar
Oliver Solar is a 4.8 MW commercial
solar project in San Joaquin County, California that commenced
operations in 2021. The project is strategically located on a major
logistics and distribution centre owned by the world's largest
global e-commerce company that also serves as the power purchaser
under a long-term fixed price PPA. The project experienced
construction delays due to Covid-19 related impacts and inspection
delays. Shortly after energisation, the offtake/ building owner
requested that the project be de-energised for further testing/
recommissioning, after they had experienced an arc event (small
explosions due to disruptions on high voltage lines or equipment)
and fire on another one of their facilities, leading to heightened
scrutiny of their entire fleet of rooftop projects, including
Oliver Solar. Re‑energisation was delayed until further inspections
could be completed. Since closing the acquisition, Ecofin has
secured a tax equity investment on customary terms from a large
U.S. corporate with which it has previously transacted. Despite
delays, Ecofin has continued with billing and collecting revenue
from the offtaker on modelled P50 production as agreed under the
contract. Oliver Solar was finally re-energised on 15 November
2023.
4.
Beacon Solar 2
Beacon Solar 2 is a 59.6 MW utility
scale solar project in Kern County, California that has been
operating since December 2017. The project's location in the Mojave
desert of Southern California contributes to its strong solar
resource. In addition, the project has in place a fixed price PPA
with an investment grade rated utility for 100% of its output on an
as-generated basis to provide long-term stable revenues. RNEW
obtained a 49.5% ownership interest to align with the structuring
objectives of the vendor. An equivalent 49.5% ownership interest
was sold to an international infrastructure company. Since closing
in December 2020, Ecofin has established a strong operating
relationship with its partner through monthly operations meetings
and quarterly Board meetings. Both parties share a mutual objective
of optimising operations and cash flow. Of note, we have expanded
the use of NextTracker's TrueCapture technology designed to
increase project output through real-time tracker adjustments to
reduce row-to-row shading that occurs at different points of the
day. We have also collaborated with the operator to assess the
level of equipment spares and procure an increased level of solar
module spares to reduce downtime.
5.
Beacon Solar 5
Beacon Solar 5 is a 48.2 MW utility
scale solar project in Kern County, California that has been
operating since December 2017. The project was developed in
parallel with Beacon Solar 2 and shares an almost identical project
ownership structure, with the same partner, and contractual
structure, including a PPA with the same offtaker. The project is
located in close proximity to Beacon Solar 2 which provides
operating and maintenance synergies. For additional information,
see the summary above on Beacon Solar 2.
6.
Skillman Solar
Skillman Solar is a 2.6 MW
commercial solar project in New Jersey that completed construction
in Q1 2022 and achieved COD on 25 March 2022. The project provides
power under a long-term fixed-price PPA to a corporate campus of a
privately held financial, software, data, and media corporation
that is a global leader in its respective segments. The project
also generates substantial revenues through the state of New
Jersey's fixed-price feed-in-tariff style renewable incentive
program for a 15-year period. This project was originated
bilaterally through a longstanding relationship with a commercial
solar developer with which Ecofin has transacted in the past. While
this project did experience some construction delays, Ecofin
actively managed the process with the construction firm through its
contractual rights to ensure RNEW was not adversely
impacted.
7.
Echo Solar Portfolio
As at 31 December 2022, the Company
had closed on six solar projects in Minnesota, Virginia and
Delaware totalling 35.9 MW within the Echo Solar Portfolio. As at
31 December 2023, three of these projects had declared commercial
operation. The remaining three projects are expected to complete
capacity testing and begin operations in the first half of 2024.
The Echo Solar Portfolio sells 100% of its output to two investment
grade rated utilities under long term fixed price PPAs.
8.
Delran Solar
Delran Solar is a 2.0 MW commercial
rooftop solar project in New Jersey that commenced operations in
2020. The project provides power under a long-term fixed-price
PPA to a logistics centre owned by a large publicly traded U.S.
media corporation. The project also generates substantial revenues
through the state of New Jersey's fixed-price feed-in-tariff style
renewable incentive program for a remaining 12.5-year period. This
project was originated bilaterally through a longstanding
relationship with a commercial solar developer with whom Ecofin had
transacted in the past.
9.
Whirlwind
Whirlwind is an operating wind
asset, placed in service in December 2007, using 26 Siemens 2.3 MW
wind turbine generators operated and maintained by Siemens Gamesa
under a long-term O&M agreement. It benefits from a fixed-price
PPA with an investment grade electric utility, providing
predictable cash flow. Whirlwind is located in Texas, which is
experiencing sustained growth in electricity demand due to
population growth and corporations migrating to this
business-friendly state. Whirlwind demonstrates Ecofin's sourcing
network breadth beyond solar and was originated bilaterally with
the vendor. As part of our portfolio management strategy, Ecofin
continues to evaluate the potential to repower and recontract this
asset at the appropriate time and/or develop co-located battery
storage as battery costs decline and/or tax credits are expanded
for batteries.
Portfolio Production Update
During the twelve months ended 31
December 2023, the portfolio generated 247.8 GWh of clean energy,
36.2% below budget. Of the total, solar assets generated 163.9 GWh,
14.6% below budget (see project variances and explanations below)
and the wind asset generated 83.9 GWh, 57.3% below budget
principally due to the aforementioned tornado in Texas.
The performance of the underlying
operating portfolio combined with its 100% contracted revenue
structure generated revenues of $7.3 million for the Company.
Overall, cash flows were below budget by 40.4%.
Even before the June 2023 tornado,
Whirlwind experienced lower than expected energy production in H1
2023 principally due to historically low wind resource during the
quarter at Whirlwind, a phenomenon that was experienced across the
U.S.
While Echo Solar - MN and Echo Solar
- VA 11 achieved commercial operation in Q4 2022, Echo Solar - DE
achieved commercial operation in Q3 2023 as the portfolio continued
to experienced construction delays. Hemings ("Echo - VA3")
overperformed versus budget by 7.8% for its first quarter in
operation. Heimlich ("Echo - DE1"), Randolf ("Echo - VA2") and
Small Mouth ("Echo - VA4") were all placed in service on
29 December 2023 and continue to work through
final ("punchlist" or "snaglist") items with the developer in order
to declare COD.
Ellis Road experienced a rodent
infestation in the first quarter of 2023 which forced ~40% of the
total system capacity to be de-energised. As a result, the
project's DC wiring needed to be replaced and reinsulated in H2
2023.
Voltage issues at the office
building on which the Skillman project is located causing the
project to be tripped offline from the end of April to June 2023;
this was rectified, and power restored on 7 July 2023.
The SED Portfolio performed well
versus budget largely due to higher than expected insolation
throughout 2023.
Net
Production Variance vs. Budget (GWh)
|
Investment Name2
|
Sector
|
State
|
Actual
(GWh)
|
Budget
(GWh)
|
GWh Above
(Below) Budget
|
% Above
(Below) Budget
|
|
Beacon 21
|
Utility-Scale Solar
|
California
|
59.3
|
65.5
|
(6.2)
|
(9.5%)a
|
|
Beacon 51
|
Utility-Scale Solar
|
California
|
48.1
|
50.9
|
(2.8)
|
(5.5%)b
|
|
SED Solar Portfolio
|
Commercial Solar
|
Massachusetts,
Connecticut
|
11.7
|
12.3
|
(0.6)
|
(4.9%)c
|
|
Ellis Road Solar
|
Commercial Solar
|
Massachusetts
|
5.2
|
8.6
|
(3.4)
|
(39.5%)d
|
|
Oliver Solar2
|
Commercial Solar
|
California
|
7.2
|
7.5
|
(0.3)
|
(4.0%)
|
|
Delran Solar
|
Commercial Solar
|
New Jersey
|
2.4
|
2.4
|
-
|
-
|
|
Skillman Solar
|
Commercial Solar
|
New Jersey
|
2.5
|
3.4
|
(0.9)
|
(26.5%)e
|
|
Echo Solar - MN
|
Commercial Solar
|
Minnesota
|
17.4
|
21.8
|
(4.4)
|
(20.2%)f
|
|
Echo Solar - VA
11
|
Commercial Solar
|
Virginia
|
10
|
14.7
|
(4.7)
|
(32.0%)%f
|
|
Echo Solar - DE
|
Commercial Solar
|
Delaware
|
0.1
|
4.9
|
(4.8)
|
(98.0%)f
|
|
Solar Subtotal
|
|
|
163.9
|
192
|
(28.1)
|
(14.6%)
|
|
Whirlwind
|
Wind
|
Texas
|
83.9
|
196.4
|
(112.5)
|
(57.3%)g
|
|
Wind Subtotal
|
|
|
83.9
|
196.4
|
(112.5)
|
(57.3%)
|
|
Total
|
|
|
247.8
|
388.4
|
(140.6)
|
(36.2%)
|
Values and totals have been rounded
to the nearest decimal.
1.
Reflects RNEW's pro forma share of production based on
ownership.
2. Oliver
Solar reached COD on 29 November 2021 and had been accruing PPA
revenue based on P50 modelled production since that date. Following
some commissioning and testing delays initiated by the offtaker,
the system was energised again on 15 November 2023.
Production variance summary:
a, b Underperformance
due to overheating fuse holders. Corrective action
taken.
c
Underperformance primarily due to lower than expected
insolation.
d
Underperformance due to rodent infestation that caused the site to
need rewiring and new insulation.
e
Underperformance primarily due to utility outages that caused
breaker trips.
f
Variances due to construction delays and timing of obtaining
commercial operation.
g
Underperformance due to the tornado that struck the Matador
substation on 21 June 2023. Site was offline until 8 December
2023.
Revenues
As at 31 December 2023, RNEW's
portfolio had 100% of its revenue contracted with a weighted
average remaining term of 13.7 years. Approximately 99% of the
portfolio benefits from fixed-price revenues, many with annual
escalators of 1-2%, through PPAs, contracted 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
discount to a defined Massachusetts utility electricity 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.
The anticipated revenue profile
below1,2 represents a projection of RNEW's existing revenue contracts
as at 31 December 2023 and does not assume any replacement
revenue contracts following the expiry of these contracts. With
increased adoption of renewable energy in the US, Ecofin is
confident that RNEW's prospects for re-contracting individual assets at the end of revenue
contract terms are positive.
Active Management
Ecofin maintains an active approach
to managing RNEW's portfolio and is in the process of bringing
certain previously outsourced asset management functions in-house.
For operating assets, Ecofin's 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 EPC contractor to review project milestones and
troubleshooting issues, review and approve payments in accordance
with contracts.
RNEW Portfolio Revenue Breakdown
|
Year
|
Contracted - Fixed Price Revenue
|
Contracted - Variable Price Revenue
|
Contracted - Fixed Price Incentive Revenue
|
Uncontracted - Market Revenue
|
|
2023
|
86.7%
|
1.0%
|
12.3%
|
0.0%
|
|
2024
|
89.0%
|
1.0%
|
10.0%
|
0.0%
|
|
2025
|
89.2%
|
2.2%
|
8.6%
|
0.0%
|
|
2026
|
88.9%
|
2.2%
|
8.9%
|
0.0%
|
|
2027
|
91.1%
|
2.3%
|
6.6%
|
0.0%
|
|
2028
|
51.6%
|
2.1%
|
3.1%
|
43.2%
|
|
2029
|
52.0%
|
2.1%
|
2.7%
|
43.2%
|
|
2030
|
50.7%
|
2.1%
|
2.6%
|
44.6%
|
|
2031
|
50.1%
|
2.1%
|
2.6%
|
45.2%
|
|
2032
|
50.8%
|
2.2%
|
2.6%
|
44.4%
|
|
2033
|
49.4%
|
2.2%
|
2.6%
|
45.8%
|
|
2034
|
48.3%
|
2.2%
|
2.5%
|
47.0%
|
|
2035
|
47.7%
|
2.1%
|
1.9%
|
48.3%
|
|
2036
|
44.4%
|
2.0%
|
1.2%
|
52.4%
|
|
2037
|
43.3%
|
1.9%
|
0.9%
|
53.9%
|
|
2038
|
82.9%
|
3.4%
|
0.0%
|
13.7%
|
|
2039
|
83.1%
|
0.3%
|
0.0%
|
16.6%
|
|
2040
|
83.1%
|
0.0%
|
0.0%
|
16.9%
|
|
2041
|
78.9%
|
0.0%
|
0.0%
|
21.1%
|
|
2042
|
76.6%
|
0.0%
|
0.0%
|
23.4%
|
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.
Financing
As at 31 December 2023, the
Company's U.S. subsidiaries at a project level had debt balances of
$49.0 million, with an additional $26.8 million drawn down under
the RCF. This total debt balance corresponds to approximately 38.6%
of GAV, well below 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 an RCF and
non-recourse construction loans at its U.S. subsidiaries as
described below:
·
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 comprised a $50.0 million, two-year tranche and a
$15.0 million, three-year tranche. Both tranches were extended by
12 months in 2023, wherein the two‑year tranche was priced at SOFR
+2.13% and the three-year tranche was priced at SOFR +2.38%. 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. Ecofin expects
to be able to renew or extend on substantially similar terms in the
second half of 2024, if necessary to do so considering the
aforementioned strategic review focussing on a sale of the
Company's assets.
·
Through the 49.5% acquisition
of the Beacon 2 and 5 operating solar assets, the Company assumed
its share of amortising project term loans secured on those
projects that totalled $44.7 million as at 31 December
2023.
·
In addition, on 31 October
2023, a wholly-owned U.S. subsidiary of RNEW. TC Renewable Holdco
V, LLC, entered into a $4.3 million amortising project term loan
secured on certain Echo Solar projects.
On 31 December 2023, the Company had
GAV of $196.6 million, and total recourse and non-recourse debt of
$75.8 million, resulting in total leverage of 38.6%. The
borrowing facilities available to the Company and its subsidiaries
at 31 December 2023 are as set out in the table below:
|
Loan type
|
Provider
|
Borrower
|
Facility
amount
($m)
|
Amount
drawn
($m)
|
Maturity
|
Applicable
rate
(%)
|
|
Revolving credit facility
|
KeyBank
|
RNEW Capital, LLC
|
$50.0
|
$26.8
|
Oct-24
|
SOFR
+2.13
|
|
Revolving credit facility
|
KeyBank
|
RNEW Capital, LLC
|
$15.0
|
$0.0
|
Oct-25
|
SOFR
+2.38
|
|
Term loan
|
Fifth Third
|
TC Renewable Holdco V,
LLC
|
$4.3
|
$4.3
|
July-31
|
SOFR
+2.15
|
|
Term loan
|
KeyBank
|
Beacon Solar 2
|
$24.7
|
$24.7
|
May-26
|
SOFR
+1.25
|
|
Term loan
|
KeyBank
|
Beacon Solar 5
|
$20.0
|
$20.0
|
May-26
|
SOFR
+1.25
|
|
Total Debt
|
|
|
$114.0
|
$75.8
|
|
|
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 operating Renewable Assets. The valuation is
performed by Ecofin at 31 March and 30 September, and by an
independent 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,
and 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 at an issue price of
$1.015 per New Ordinary Share. The Company raised
$13.1 million (before costs) by issuing a total of 12,927,617
New Ordinary Shares. Admission of these New Ordinary Shares to the
LSE became effective on 24 May 2022.
2023 NAV Bridge ($MM)
|
NAV
31 Dec 2022
|
$130.2
|
|
Change in ProjectCo DCF Roll
Forward
|
($2.4)
|
|
Change in ProjectCo DCF - Discount
Rates
|
($5.7)
|
|
Change in ProjectCo DCF -
Assumptions
|
$4.2
|
|
Distributions from ProjectCos to
RNEW
|
$6.2
|
|
Dividends to Shareholders
|
($5.8)
|
|
Expenses Paid
|
($2.2)
|
|
Changes in Financial
Assets
|
($7.1)
|
|
Changes in Deferred Tax
|
$0.3
|
|
NAV
31 Dec 2023
|
$117.7
|
Change in project company DCF: Represents the impact on NAV from changes to DCF depreciation
and quarterly cashflow roll-forward and change in project-level
debt outstanding balances, including principal
amortisation.
Change in project company DCF Discount Rates:
Represents the impact on NAV from changes to the
discount rates applied to the DCF models of each project company.
As at 31 December 2023, the weighted average unlevered pre-tax
discount rate was 7.4% (31 December 2022: 7.5%), which reflects a
small decrease from 31 December 2022 due to the effect of a 0.25%
increase in discount rates applied to the majority of the assets
more than offset by the impact of bringing the Echo Solar Portfolio
to a discounted cash flow fair valuation from cost.
Change in project company DCF assumptions:
Represents the impact on RNEW NAV from changes to
the forward merchant price curves used in the DCF models of each
project company. The increase was principally due to the update to
convert the merchant curves used in the DCF models from the U.S.
Energy Information Administration ("EIA") to an independent third
party provider, Leidos.
Distributions from project companies to RNEW:
Represents cash generated by project companies,
which was distributed up to RNEW during the Year.
Dividends to Shareholders: Dividends for Q4 2022, Q1 2023, Q2 2023, and Q3 2023 of $5.8
million (4.2 cents per Share) were paid during the Year. After the
Year end, the Company declared a further dividend of 0.7 cents per
Share in respect of the quarter ended 31 December 2023.
Expenses paid: Represents the
impact on RNEW NAV due to management fees and expenses paid during
the Year.
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 Year 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 31 December 2023. 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 13.7 years as at 31 December 2023.
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
|
(7.4%) to 8.5%
|
|
Merchant Power Prices +/-
10.0%
|
(7.1%) to 8.2%
|
|
Discount Rates +/- 50 bps
|
(6.6%) to 8.3%
|
|
Operating Expenses +/-
10.0%
|
(5.4%) to 6.5%
|
|
Curtailment +/- 50%
|
(6.1%) to 5.5%
|
Impact Report
ESG
Integration and Impact
The
Company's and Ecofin's strategy is to allocate capital using an ESG
integrated investment process to build and operate a diversified
portfolio of Renewable Assets that achieves RNEW's investment
objective.
RNEW is focused on allocating
capital using an investment process which integrates ESG
considerations and analysis to build and operate a diversified
portfolio of Renewable Assets consistent with RNEW's investment
objective.
Ecofin is a signatory to the
Principles for Responsible Investment (PRI) and incorporates ESG
analysis into its investment and reporting process. Ecofin's
investment strategies related to 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
·
7 Affordable and
clean energy
·
8 Decent work and
economic growth
·
9 Industry,
innovation and infrastructure
·
11 Sustainable
cities and communities
·
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 was established to offer
investors direct exposure to renewable energy and sustainable
infrastructure assets including solar, wind, and battery storage
that reduce greenhouse gas ("GHG") emissions and promote a positive
environmental impact. The Investment Manager integrates analysis of
ESG issues throughout the lifecycle of its investment activities
spanning due diligence, investment approval, and ongoing portfolio
management. Environmental criteria analysis considers how an
investment performs as a steward of nature; social criteria
analysis examines its impact and relationships with employees,
suppliers, customers and the communities in which it operates; and
governance criteria 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 65
assets was analysed using Ecofin's ESG Risk Assessment prior to
investment commitment. Ecofin believes this approach to assessing
ESG issues serves to mitigate risk and enhance RNEW's impact.
Environmental factors affecting climate risk are reviewed to
determine an investment's impact and ability to reduce GHG
emissions, air pollution and water consumption.
Analysis of environmental issues may
also consider the impact that the investment will have on land use
and considers mitigation plans when issues are identified. Analysis
of social issues may encompass an investment's impact on the local
community and consider health and safety together with the
counterparties to be engaged to construct and operate the assets.
Governance is reviewed in partnership with qualified third-party
legal counsel to ensure compliance with all laws and regulations,
strong ongoing corporate governance through strict reporting
protocols with qualified operators, 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 then reported in a transparent manner so that investors
and key stakeholders can measure their impact.
Impact
RNEW's portfolio produced
approximately 248 GWh of clean electricity during 2023, enough to
power approximately 22,200 homes, offsetting approximately 141,800
tonnes of CO2e and avoiding the consumption of
approximately 29,700 million litres of water. RNEW focuses on
investments that have a positive environmental impact by reducing
GHG emissions, air pollution and water consumption. Ecofin seeks to
analyse and report on ESG factors on a consistent basis to maximise
the impact of its investment activities. To assess environmental
impact, Ecofin goes beyond measuring CO2 emissions
avoided and quantifies other GHG emissions, such as methane and
nitrous oxide, and also measures the contribution that investments
make to save water consumption. Water is consumed by thermoelectric
(i.e. coal and gas) power plants in the cooling process associated
with steam turbine generators. Water savings occur in the same way
that renewable energy generation offsets CO2 emissions
from thermoelectric generators. Ecofin calculates estimated water
savings by reference to the EIA thermoelectric cooling water data
by location and applies 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
|
|
|
~141,800
|
~29,700M
|
|
Tonnes of CO2e Reduction
|
Litres of water savings
|
|
~22,200
|
~11,900
|
|
Households supplied
|
Olympic size swimming
pools
|
Task Force on Climate-related Financial
Disclosures
Investment in renewables is
considered an important component of climate change mitigation as
replacing fossil fuel-based forms of electrical generation is key
in helping the global energy sector transition to a lower carbon
economy. While investment in renewables helps mitigate the effects
of climate change, renewable investments are not exempt from the
potential impacts of climate change. RNEW routinely identifies
climate-related risks and opportunities that may have a material
financial impact on the performance of its investments.
The Task Force on Climate-Related
Financial Disclosures ("TCFD") was established to develop
voluntary, consistent climate-related financial risk disclosures
for use by companies in providing information to investors,
lenders, insurers, and other stakeholders. The TCFD recommended
that all organisations provide climate-related disclosures in their
annual reports and accounts, providing a framework to help
companies assess the risks and opportunities associated with
climate change. However, concurrent with the release of its 2023
status report on 12 October 2023, the TCFD has fulfilled its remit
and disbanded.
The Financial Conduct Authority
("FCA") issued a proposal at the start of 2020 that required all
premium listed commercial companies with a financial year end from
December 2021 to align their reporting to the TCFD framework. While
RNEW, as a UK Investment Trust, is currently exempt from this
reporting requirement, RNEW has decided to make specific
disclosures on opportunities and risks the Company faces relating
to climate change.
RNEW still plans to include
TCFD-recommended disclosures and will evaluate the appropriate
standards going forward. An outline of RNEW's current approach to
the recommendations suggested by TCFD is included below.
|
TCFD Recommendation
|
RNEW Disclosure
|
|
Governance
|
|
|
Disclose the organisation's
governance around climate-related risks and opportunities.
|
The Company has an independent board
of four non-executive directors. The Board's role is to
oversee the governance of the Company in the
interests of Shareholders and other stakeholders.
In particular, the Board monitors adherence to the
Investment Policy, determines the risk appetite,
sets Company policies and monitors the performance
of the Investment Manager and other key service providers. The Board is responsible for the ongoing
identification, evaluation and management
of the principal risks (including climate-related risks and
opportunities) faced by the Company and the
Board has established a process for the regular review of these
risks and their mitigation. The Board meets
a minimum of four times a year for scheduled Board meetings,
with additional ad hoc meetings taking
place dependent upon the requirements of the business. The
Board reviews the performance of all key service
providers on an annual basis through its Management Engagement Committee. Under their ongoing
supervision, the Directors have delegated
responsibility for managing the assets in the RNEW portfolio to
Ecofin.
In managing the RNEW portfolio to
achieve its investment objective, Ecofin employs an
institutional level investment process to identify
and mitigate risk (including climate-rated risks)
covering sourcing, underwriting, due diligence and
portfolio management.
|
|
Strategy
|
|
|
Disclose the actual and potential
impacts of climate-related risks and opportunities on the
organisation's businesses, strategy, and financial planning where
such information is material.
|
Consideration of climate-related
opportunities and risks is embedded throughout RNEW's business and
investment strategies, as implemented by Ecofin. Examples of areas
considered include:
●
Consideration of changing weather conditions
that may positively or negatively impact renewable energy
generation or cause issues related to the physical placement of
assets.
●
Political conditions that may or may not make a
2.0-degree centigrade rise in temperature more likely through
increasing / impairing the value and pace of investment in
Renewable Assets.
●
Changes in technology or the cost of technology
that could make a 2.0-degree centigrade rise in global temperature
more or less likely and positively / negatively impact the value of
existing and future Renewable Assets investments.
●
How the deployment of renewable energy and
future technology may impact commodity prices including the future
price of electricity and have a positive or negative impact on
existing and future Renewable Assets investments.
As these and other material or
potentially material risks and opportunities are identified, Ecofin
seeks to incorporate structuring mitigation (i.e. obtain insurance
for those risks) and/or perform sensitivities on power price
forecasts and adjust required returns on investment.
|
|
Risk Management
|
|
|
Disclose how the organisation
identifies, assesses, and manages climate-related risks.
|
The Directors and Ecofin understand
that climate change could impact RNEW's strategy and underlying
assets and include the consideration of climate change
opportunities and risks throughout the investment process. When
conducting due diligence on new investment opportunities, Ecofin
uses its ESG Risk Assessment framework to evaluate the impact of
CO2 and other GHG emissions / pollutants, assess the
impact on the site (through review of a Phase I Environmental Site
Assessment), and compliance with permits and regulations.
Environmental factors are considered during both the initial
screening process as well as during the project-focused due
diligence stage in concert with specialist environmental
consultants and legal advisors, as needed. These environmental
factors and risks are documented in Ecofin's investment memoranda
that are reviewed by its Investment Committee prior to investments
being approved.
When a new asset is added to the
portfolio, Ecofin establishes a monitoring plan that is aligned
with mitigating the key risks and achieving RNEW's investment
objective. Environmental factors are included in the ongoing
analysis and reporting process for each asset in the
portfolio.
|
|
Metrics and Targets
|
|
|
Disclose the metrics and targets
used to assess and manage relevant climate-related risks and
opportunities where such information is material.
|
Due to the nature of the Renewable
Assets in the portfolio, the Scope 1 & 2 emissions for RNEW are
de minimis. The power generated from the Renewable Assets displaces
electricity generated from marginal fossil fuel emitting sources.
As part of the investment diligence and monitoring, Ecofin attempts
to quantify the negative environmental factors avoided from the
actual or anticipated generation of its assets.
Ecofin analyses and considers
several environmental factors including GHG emissions from
CO2, methane (CH4) and nitrous oxide
(N2O), air pollutants such as sulphur dioxide
(SO2) and nitrogen oxides (NOX) as well as the project's
water consumption to provide a broad view of environmental impact.
For calculating the emission reductions from Ecofin investments in
Renewable Assets, non-baseload fossil fuel generation emission
rates are appropriate. Non-baseload fossil fuel generation
represents the generation most likely to be reduced or replaced by
energy efficiency projects or renewable energy projects. Ecofin
aggregates and evaluates data according to the EPA's eGrid
sub-regions in the U.S. These sub-regions are defined by the EPA to
establish an aggregated area where emission rates are anticipated
to most accurately represent the generation and emissions from the
power plants operating within that region. This allows the
environmental impact from an Ecofin investment in Renewable Assets
to be more accurately quantified from the asset's
operation.
For reporting purposes,
non-CO2 GHG emissions are often converted to
CO2 equivalent and reported in aggregate as
CO2e.
|
Investment Objective and Investment Policy
The Company's investment objective
and investment policy (including defined terms) below are as set
out in its 2020 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:
●
once the Net Initial Proceeds are substantially
fully invested, a minimum of 20 per cent. of Gross Assets will be
invested in Solar Assets;
●
once the Net Initial Proceeds are substantially
fully invested, a minimum of 20 per cent. of Gross Assets will be
invested in Wind Assets;
●
a maximum of 10 per cent. of Gross Assets will
be invested in Renewable Assets that are not Wind Assets or Solar
Assets;
●
exposure to any single Renewable Asset will not
exceed 25 per cent. of Gross Assets;
●
exposure to any single Offtaker will not exceed
25 per cent. of Gross Assets;
●
once the Net Initial Proceeds are substantially
fully invested, investment in Renewable Assets that are in the
construction phase will not exceed 50 per cent. of Gross Assets,
but prior to such time investment in such Renewable Assets will not
exceed 75 per cent. of Gross Assets. The Company expects that
construction will be primarily focused on Solar Assets in the
shorter term until the Portfolio is more substantially invested and
may thereafter include Wind Assets in the construction
phase;
●
exposure to Renewable Assets that are in the
development (namely pre-construction) phase will not exceed 5 per
cent. of Gross Assets;
●
exposure to any single developer in the
development phase will not exceed 2.5 per cent. of Gross
Assets;
●
the Company will not typically provide Forward
Funding for development projects. Such Forward Funding will, in any
event, not exceed 5 per cent. of Gross Assets in aggregate and 2.5
per cent. of Gross Assets per development project and would only be
undertaken when supported by customary security;
●
Future Commitments and Developer Liquidity
Payments, when aggregated with Forward Funding (if any), will not
exceed 25 per cent. of Gross Assets;
●
once the Net Initial Proceeds are substantially
fully invested, Renewable Assets in the United States will
represent at least 85 per cent. of Gross
Assets; and
●
any Renewable Assets that are located outside
of the United States will only be located in other OECD countries.
Such Renewable Assets will represent not more than 15 per cent. of
Gross Assets.
References in the investment
restrictions detailed above to "investments in" or "exposure to"
shall relate to the Company's interests held through its Investment
Interests.
For the purposes of the 2020 IPO
Prospectus, the Net Initial Proceeds will be deemed to have been
substantially fully invested when at least 75 per cent. of the Net
Initial Proceeds have been invested in (or have been committed in
accordance with binding agreements to investments in) Renewable
Assets.
The Company will not be required to
dispose of any investment or to rebalance the Portfolio as a result
of a change in the respective valuations of its assets. The
investment limits detailed above will apply to the Group as a whole
on a look-through basis, namely, where assets are held through a
Project SPV or other intermediate holding entities or special
purpose vehicles, and the Company will look through the holding
vehicle to the underlying assets when applying the investment
limits.
Gearing policy
The Group primarily intends to use
long-term debt to provide leverage for investment in Renewable
Assets and may utilise short-term debt, including, but not limited
to, a revolving credit facility, to assist with the acquisition of
investments.
Long-term debt shall not exceed 50
per cent. of Gross Assets and short-term debt shall not exceed 25
per cent. of Gross Assets, provided that total debt of the Group
shall not exceed 65 per cent. of Gross Assets, in each case,
measured at the point of entry into or acquiring such
debt.
The Company may employ gearing
either at the level of the relevant Project SPV or at the level of
any intermediate subsidiary of the Company. Gearing may also be
employed at the Company level, and any limits set out in this
Prospectus shall apply on a consolidated basis across the Company,
the Project SPVs and any such intermediate holding entities (but
will not count any intra-Group debt). The Company expects debt to
be denominated primarily in U.S. dollars.
For the avoidance of doubt,
financing provided by tax equity investors and any investments by
the Company in its Project SPVs or intermediate holding companies
which are structured as debt are not considered gearing for this
purpose and are not subject to the restrictions in the Company's
gearing policy.
Currency and hedging policy
The Group may use derivatives for
the purposes of hedging, partially or fully:
●
electricity price risk relating to any
electricity or other benefit including renewable energy credits or
incentives, generated from Renewable Assets not sold under a PPA,
as further described below;
●
currency
risk in relation to any Sterling (or other
non-U.S. Dollar) denominated operational expenses of the
Company;
●
other
project risks that can be cost-effectively managed
through derivatives (including, without limitation, weather risk);
and
●
interest
rate risk associated with the Company's debt
facilities.
In order to hedge electricity price
risk, the Company may enter into specialised derivatives, such as
contracts for difference or other hedging arrangements, which may
be part of a tripartite or other PPA arrangement in certain
wholesale markets where such arrangements are required to provide
an effective fixed price under the PPA.
Members of the Group will only enter
into hedging or other derivative contracts when they reasonably
expect to have an exposure to a price or rate risk that is the
subject of the hedge.
Cash management policy
Until the Company is fully invested
the Company will invest in cash, cash equivalents, near cash
instruments and money market instruments and treasury notes ("Near
Cash Instruments"). Pending re-investment or distribution of cash
receipts, the Company may also invest in Near Cash Instruments as
well as Investment Grade Bonds and exchange traded funds or similar
("Liquid Securities"), provided that the Company's aggregate
holding in Liquid Securities shall not exceed 10 per cent. of Gross
Assets measured at the point of time of acquiring such
securities.
Amendments to the investment objective, policy and investment
restrictions
If the Board considers it
appropriate to amend materially the investment objective,
investment policy or investment restrictions of the Company,
Shareholder approval to any such amendment will be sought by way of
an ordinary resolution proposed at an annual or other general
meeting of the Company.
Risk Management
Principal Risks
The Board is responsible for the
ongoing identification, evaluation and management of the principal
risks faced by the Company. On behalf of the Board, the Risk
Committee has established a process for the regular review of these
risks and their mitigation. This process principally involves a
semi-annual review of the Company's risk matrix and accords with
the UK Corporate Governance Code 2018 (the "UK Code") and the
Financial Reporting Council's ("FRC") Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting. The
Directors have carried out a robust assessment of the principal
risks facing the Company, including those that would threaten its
business model, future performance, solvency and liquidity. The
following sections detail the risks the Board considers to be the
most significant to the Company:
|
Risk
|
Possible Consequences
|
Change in risk assessment during the
year
|
Risk Mitigation and
Controls
|
Current Year Risk Scores
|
|
Electricity Price
|
Lower electricity prices in the U.S.
could negatively impact the Company's returns and/or the value of
its investments.
|
No change
|
The Company's policy is to reduce
its exposure to electricity price risk by investing in Renewable
Assets which sell their output under long term offtake arrangements
with credit worthy counterparties. As at 31 December 2023, the
portfolio benefited from a weighted average revenue contract term
of 13.7 years. In its asset valuations, the Company uses long-term
electricity price forecasts prepared by an independent
third party.
|
Medium
|
|
Interest Rate, Currency and
Inflation
|
The Company may be adversely
affected by changes in interest, currency exchange and inflation
rates. Rising interest rates may lead to higher discount
rates.
|
No change
|
Interest, currency and inflation
rates are monitored regularly by the Company. The Company may
implement interest and currency rate hedging by fixing a portion of
the Company's exposure to any floating rate obligation using
interest or currency rate swaps or other means.
Where possible, the Company enters
into medium to long term contracts to fix costs. Inflation risk can
also be partly mitigated where projects' revenue offtake
arrangements are subject to indexation.
Discount rates are reviewed
regularly by the Investment Manager, and on a semi-annual basis by
the independent valuer.
|
Medium
|
|
Investment Performance
|
The Company may not achieve its
investment objective;
The Company may fail to deliver its
dividend target;
The Company may not be able to
acquire suitable Renewable Assets consistent with its investment
policy; and
The Company's revenue can vary due
to variations in the amount of power that can be generated and
sold.
*The increased risk assessment
reflects the Company's negative NAV and Share price returns, and
level of discount during the year.
|
Increased*
|
Ecofin has a well-defined investment
strategy and processes in place which are regularly reviewed and
monitored by the Board. Ecofin has significant experience
originating, underwriting, and managing Renewable Assets and
applies its experience to mitigate risks and achieve the Company's
investment objective. The Board reviews the portfolio quarterly and
discusses new investments, the investment rationale, and the
performance of the Company at each Board meeting.
By their nature, solar irradiation
and wind speed are outside the Company's control, albeit some
projects' returns are neither wholly nor directly linked to the
volume of power produced.
|
Medium
|
|
Operational Performance
|
Renewable Assets may encounter
operational difficulties that cause them to perform at lower levels
than expected.
|
New
|
All major operating assumptions
underpinning the valuation are reviewed by an independent
engineer.
Ecofin appoints experienced O&M
contractors and monitors their ongoing performance. Ecofin also
provides in-house asset management for each asset.
Insurance programmes are in place
for each asset.
|
Medium
|
|
Investment Valuation
|
The valuation of assets is
inherently subjective and uncertain.
Projections are based on the
independent valuer's and the Investment Manager's assessment at the
date of valuation and are only estimates of future results. Actual
results may vary significantly from projected amounts.
|
No change
|
Ecofin has significant experience in
the valuation of Renewable Assets and through its investment
activities is continually exposed to the prices paid for Renewable
Assets in the U.S. market. The Board and Ecofin review asset
valuations quarterly. An independent valuer conducts a valuation of
the Company's assets, including a review of discount rates, on a
semi-annual basis.
|
Medium
|
|
Political and Regulatory
|
Future investment opportunities
and/or the value of existing investments may be impacted by changes
in government policy (e.g. increased property taxes, lower tax
credits), in government policy incentives or in U.S. tax
laws.
|
No change
|
Both the current U.S. Administration
and individual states are supportive of renewable energy. Ecofin
has significant experience investing in Renewable Assets and
undertakes due diligence at purchase with support from its legal
advisers and performs ongoing monitoring of political and
regulatory risks. When incentive programs are changed, the changes
typically affect projects that have yet to be built. Existing
projects are usually grandfathered and retain the benefits
associated with the incentive scheme in place when they were
constructed. Ecofin seeks to reduce exposure to political and
regulatory risk by entering into long term contracts to fix both
revenue streams associated with incentives and costs (e.g. property
taxes). Ecofin also actively monitors potential changes in policy
that could affect RNEW's portfolio.
|
Low
|
|
Discount Management
|
The Shares have been trading at a
discount to NAV, which may make it more difficult for the Company
to raise new equity for future investments.
|
Increased
|
The Company's Broker monitors the
market for the Company's Shares and reports at quarterly Board
meetings. The Board regularly reviews the relative level of
discount against the sector. The Board has authority to buy back
Shares.
In September 2023, the Company
announced a strategy review in order to maximise value for
Shareholders.
|
Medium
|
|
Cyber
|
Ecofin's information and technology
systems and those of other service providers to the Company may be
vulnerable to cyber security breaches and identity theft which
could adversely impact the Company's ability to continue to operate
without interruption.
|
No change
|
The Company relies on the systems of
its service providers. Cyber security policies and procedures are
maintained by key service providers and are reported to the Board
periodically. Ecofin, the Administrator and the Board include cyber
risk in their reviews of counterparties.
|
Medium
|
|
Service Provider Reliance
|
The Company has no employees and is
reliant on the performance of third-party service providers.
Service Providers may be unable to complete their role or may not
perform well, which could leave to a deterioration in shareholder
value.
|
Increased
|
The Board meets with Ecofin and the
Administrator on a quarterly basis to review their work and monitor
their performance. Following the announcement of the strategic
review the Board is paying close attention to service providers to
ensure that they are adequately resourced and performing in
accordance with the Board's expectations and
requirements.
Through its Management Engagement
Committee, the Board conducts a formal assessment of each key
service provider's performance once a year. To assist its ability
to properly oversee the Company's service providers, the Board
requires them to notify it as soon as reasonably practicable
following any material breach of their contracts with the
Company.
|
Medium
|
|
Counterparty
|
There is the potential for losses to
be incurred due to default by an offtaker or other
counterparty.
|
No change
|
A fundamental part of the Investment
Manager's due diligence process involves reviewing the most recent
credit rating of the offtaker provided by a third party credit
rating agency or performing an independent credit review of the
offtaker's credit status.
The credit status of other
counterparties (e.g.banks) is also assessed and
monitored.
|
Medium
|
|
Climate
|
The Company is exposed to the
impacts of climate change i.e. risks relating to weather conditions
and performance of equipment.
|
No change
|
When conducting due diligence on
potential investments, the Investment Manager considers the
potential impact the weather may have on electricity production.
Ecofin also considers the impact of storms and other weather
conditions when determining the appropriate level of insurance
coverage for an asset. Investing in diverse projects spread across
the U.S. mitigates the impact of any localised, potentially
unfavourable weather conditions.
|
Medium
|
|
ESG
|
Risks such as health and safety,
respect for human rights, bribery, corruption, environmental
management practices, duty of care and compliance with relevant
laws and regulations, may also arise.
|
No change
|
ESG is embedded in Ecofin's
investment process via a formal ESG rating matrix. The Company
monitors the portfolio and quantifies the ESG impact of its
investments.
Each service provider has, and is
responsible for, its own health and safety policies and
procedures.
|
Medium
|
|
Financing
|
The Company may be unable to obtain
debt financing on acceptable terms, either at a project or at a
holding company level.
|
No change
|
The Company has access to a wide
range of debt providers and has to date successfully raised debt
finance both for asset construction and for general
purposes.
The Investment Manager monitors the
Company's finance requirements on a regular basis.
Portfolio allocations and debt
limits are monitored by Ecofin and reviewed by the
Board.
|
Medium
|
Risks are managed and mitigated by
the Board through continual review, policy setting, and regular
reviews of the Company's risk matrix by the Risk Committee to
ensure that procedures are in place with the intention of
minimising the impact of the above-mentioned risks.
Members of the Risk Committee bring
a diversity of external knowledge, including of the renewable
energy and investment trust (and financial services generally)
marketplaces, trends, threats etc. as well as macro/strategic
insight. The Risk Committee carries out a formal risk assessment at
each of its meetings (minimum twice a year).
The Investment Manager advises the
Board at quarterly Board meetings on industry trends, providing
insight on the political and regulatory environment in which the
Company's assets operate, and future challenges in these markets.
The Company's Broker regularly reports to the Board on markets, the
investment company sector and the Company's peer group. The
Investment Manager works with reputable EPC firms to reduce the
risk that any materials sourced from vendors employing the use of
forced labour end up in the Company's projects and actively
monitors developments on this issue. The Company is not aware of
any such materials having been used in the Company's
projects.
The Company Secretary briefs the
Board on forthcoming legislation/regulatory change in the UK that
might impact the Company. The Auditor also provides an annual
update on regulatory changes relevant to the Company.
The Company is a member of the
Association of Investment Companies ("AIC"), which provides regular
technical updates as well as drawing members' attention to
forthcoming industry/ regulatory issues and advising on compliance
obligations.
When required, experts are employed
to provide information and technical advice, including legal and
tax.
Key
Performance Indicators
The Company's Board of Directors
meets regularly and at each meeting reviews performance against a
number of key performance indicators which include the
following:
·
Performance;
·
Dividends;
·
Premium/discount of share
price to NAV per Share; and
·
Ongoing charges
ratio.
Performance
As the Company's objective is to
seek to provide Shareholders with an attractive level of
distributions with prospects of modest capital growth over the long
term, performance is best measured in terms of total return. The
Company's NAV and share price total returns
for the Year were (5.5)% and (28.0)% respectively, these are APMs
found in the Alternative Performance Measures section.
There is no single index against which the Company's
performance may be meaningfully assessed. Therefore, the Board
refers to a variety of relevant data and this is reflected in both
the Chairman's Statement and the Investment Manager's
Report.
As explained in the Chairman's
Statement, the Board launched a strategy review in September
2023.
The Company's NAV per Share is shown
on the Statement of Financial Position.
Dividends
Dividends form a key component of
the Company's investment objective. The Company declared four
interim dividends in respect of the Year (total of 3.5 cents per
Share), in line with the Company's revised dividend target of
3.5 cents per Share for the Year.
The Board's Dividend Payment Policy
is to pay dividends on a quarterly basis in May, August, November
and February in respect of each accounting year. The timing of
these regular three-monthly payments means that Shareholders do not
have an opportunity to vote on a final dividend. Recognising the
importance of shareholder engagement, although not required by any
regulation, Shareholders will be given an opportunity to vote on
this policy at the forthcoming AGM.
Premium/discount of share
price to NAV per Share
The Board monitors the price of the
Company's Shares in relation to NAV and the premium/discount at
which the Shares trade. The Company has Shareholder authority to
issue and buy back Shares, which could assist short term management
of premium and discount respectively. However, the level of
discount or premium is mostly a function of investor sentiment
and associated demand for the Shares, over which the Board may have
limited influence. The share price stood at a 38.1% discount
to NAV as at 31 December 2023. Further details are provided in the
Chairman's Statement. Ongoing charges
ratio
The expenses of managing the Company
are carefully monitored by the Board. The standard performance
measure of these is the ongoing charges ratio ("OCR"), which is
calculated by dividing the sum of such expenses over the course of
the year, including those charged to capital, by the average NAV
over the year. This ratio provides a guide
to the effect on performance of annual operating costs. The
Company's OCR for the year to 31 December 2023 was 1.78% (year
ended 31 December 2022: 1.80%).
Business Review
The Strategic Report in the Annual
Financial Report has been prepared to provide information to
Shareholders to assess how the Directors have performed their duty
to promote the success of the Company.
The Strategic Report contains
certain forward-looking statements. These statements are made by
the Directors in good faith based on the information available to
them up to the time of their approval of this report and such
statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information.
The Company is an alternative
investment fund ("AIF") under the European Union's alternative
investment fund managers' directive ("AIFMD") and has appointed
Ecofin Advisors, LLC as its AIFM.
The Directors are responsible for
managing the business affairs of the Company in accordance with the
Articles and have overall responsibility for the Company's
activities including the review of investment activity and
performance and the overall supervision of the Company. The
Directors may delegate certain functions to other parties such as
the Investment Manager, the Administrator and the Registrar. In
particular, the Directors have delegated responsibility for
managing the portfolio to the Investment Manager.
All the Directors are non-executive.
All the Directors were considered by the Board to be independent of
the Investment Manager upon and since appointment.
A description of the role of the
Board can be found in the Corporate Governance
Statement.
Statement of Directors' Responsibilities in Respect of the
Financial Statements
Directors' responsibilities
The Directors are responsible for
preparing the Annual Report and the financial statements in
accordance with international accounting standards in conformity
with the requirements of the Act and applicable law and
regulations.
Company law requires the Directors
to prepare financial statements for each financial year and the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss for the Company
for that period. The Directors are also required to prepare
financial statements in accordance with UK adopted international
accounting standards.
In preparing these financial
statements, the Directors are required to:
·
select suitable accounting
policies and then apply them consistently;
·
make judgements and accounting
estimates that are reasonable and prudent;
·
state whether they have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Act, subject to any
material departures disclosed and explained in the financial
statements;
·
state whether they have been
prepared in accordance with UK adopted international accounting
standards, subject to any material departures disclosed and
explained in the financial statements;
·
prepare the financial
statements on the going concern basis unless it is inappropriate to
presume that the Company will continue in business; and
·
prepare a Directors' Report, a
Strategic Report and Directors' Remuneration Report which comply
with the requirements of the Act.
The Directors are responsible for
keeping adequate accounting records that are sufficient to show and
explain the Company's transactions and disclose with reasonable
accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the
Act and, as regards the financial statements, Article 4 of the IAS
Regulation.
They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities. The Directors are responsible for ensuring
that the Annual Report and financial statements, taken as a whole,
are fair, balanced, and understandable and provide the information
necessary for Shareholders to assess the Company's performance,
business model and strategy.
Website publication
The Directors are responsible for
ensuring the Annual Report and the financial statements are made
available on a website. Financial statements are published on the
Company's website in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company's website is the
responsibility of the Investment Manager and the Directors. The
Directors' responsibility also extends to the ongoing integrity of
the financial statements contained therein.
Directors' responsibilities pursuant to DTR4
The Directors confirm to the best of
their knowledge:
·
The financial statements have
been prepared in accordance with the applicable set of accounting
standards and Article 4 of the IAS Regulation and give a true and
fair view of the assets, liabilities, financial position and profit
and loss of the Company; and
·
The Annual Report includes a
fair review of the development and performance of the business and
the financial position of the Company, together with a description
of the principal risks and uncertainties that it faces.
Patrick O'D Bourke
Chairman of the Board
26 April
2024
Financial Statements
Statement of Comprehensive Income
Year ended 31 December 2023
|
|
|
Year ended 31 December
2023
|
Year ended 31 December
2022
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
Notes
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Losses on investments
|
4
|
-
|
(10,577)
|
(10,577)
|
-
|
(6,368)
|
(6,368)
|
|
Net foreign exchange
(losses)/gains
|
|
-
|
(5)
|
(5)
|
-
|
4
|
4
|
|
Income
|
5
|
6,284
|
-
|
6,284
|
9,878
|
-
|
9,878
|
|
Investment management
fees
|
6
|
(1,246)
|
-
|
(1,246)
|
(1,300)
|
-
|
(1,300)
|
|
Other expenses
|
7
|
(1,184)
|
-
|
(1,184)
|
(1,033)
|
-
|
(1,033)
|
|
Profit/(loss) on ordinary activities before
|
|
|
|
|
|
|
|
|
taxation
|
|
3,854
|
(10,582)
|
(6,728)
|
7,545
|
(6,364)
|
1,181
|
|
Taxation
|
9
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Profit/(loss) on ordinary activities after
|
|
|
|
|
|
|
|
|
taxation
|
|
3,854
|
(10,582)
|
(6,728)
|
7,545
|
(6,364)
|
1,181
|
|
Earnings/(losses) per Share - basic
and diluted
|
8
|
2.79c
|
(7.66c)
|
(4.87c)
|
5.68c
|
(4.79c)
|
0.89c
|
The total column of the Statement of
Comprehensive Income is the profit and loss account of the
Company.
All revenue and capital items in the
above statement derive from continuing operations. No operations
were acquired or discontinued during the Year.
Profit/(loss) on ordinary activities
after taxation is also the total comprehensive Profit/(loss) for
the Year.
The notes form part of these
financial statements.
Statement of Financial Position
As
at 31 December 2023
|
|
|
As at
|
As at
|
|
|
|
31 December
|
31 December
|
|
|
|
2023
|
2022
|
|
|
Notes
|
$'000
|
$'000
|
|
Non-current assets
|
|
|
|
|
Investments at fair value through
profit or loss
|
4
|
116,798
|
127,375
|
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
|
1,648
|
3,394
|
|
Trade and other
receivables
|
10
|
8
|
11
|
|
|
|
1,656
|
3,405
|
|
Current liabilities: amounts falling due within one
year
|
|
|
|
|
Trade and other payables
|
11
|
(795)
|
(593)
|
|
Net
current assets
|
|
861
|
2,812
|
|
Net
assets
|
|
117,659
|
130,187
|
|
Capital and reserves: equity
|
|
|
|
|
Share capital
|
12
|
1,381
|
1,381
|
|
Share premium
|
|
12,732
|
12,732
|
|
Special distributable
reserve
|
14
|
121,250
|
121,250
|
|
Capital reserve
|
|
(17,705)
|
(7,123)
|
|
Revenue reserve
|
|
1
|
1,947
|
|
Total Shareholders' funds
|
|
117,659
|
130,187
|
|
Net assets per Share
(cents)
|
15
|
85.2c
|
94.3c
|
Approved and authorised by the Board
of directors for issue on 26 April 2024.
Patrick O'D Bourke
Chairman
of the Board
The notes form part of these
financial statements.
Ecofin U.S. Renewables
Infrastructure Trust PLC is incorporated in England and Wales with
registered number 12809472.
Statement of Changes in Equity
Year ended 31 December 2023
|
|
|
|
|
Special
|
|
|
|
|
|
|
Share
|
Share
|
distributable
|
Capital
|
Revenue
|
|
|
|
|
capital
|
premium
|
reserve
|
reserve
|
reserve
|
Total
|
|
|
Notes
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Opening equity as at
1 January 2023
|
|
1,381
|
12,732
|
121,250
|
(7,123)
|
1,947
|
130,187
|
|
Transactions with Shareholders
|
|
|
|
|
|
|
|
|
Dividend distribution
|
13
|
-
|
-
|
-
|
-
|
(5,800)
|
(5,800)
|
|
Total transactions with Shareholders
|
|
-
|
-
|
-
|
-
|
(5,800)
|
(5,800)
|
|
Profit/(loss) and total
comprehensive income for the Year
|
|
-
|
-
|
-
|
(10,582)
|
3,854
|
(6,728)
|
|
Closing equity as at 31 December 2023
|
|
1,381
|
12,732
|
121,250
|
(17,705)
|
1
|
117,659
|
Year ended 31 December 2022
|
|
|
|
|
Special
|
|
|
|
|
|
|
Share
|
Share
|
distributable
|
Capital
|
Revenue
|
|
|
|
|
capital
|
premium
|
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 during the
Year
|
12
|
129
|
13,027
|
-
|
-
|
-
|
13,156
|
|
Shares issued to Investment
Manager
|
12
|
1
|
94
|
|
|
|
95
|
|
Share issue costs
|
|
-
|
(418)
|
-
|
-
|
-
|
(418)
|
|
Dividend distribution
|
13
|
-
|
-
|
-
|
-
|
(7,550)
|
(7,550)
|
|
Total transactions with Shareholders
|
|
130
|
12,703
|
-
|
-
|
(7,550)
|
5,283
|
|
Profit/(loss) and total
comprehensive income for the Year
|
|
-
|
-
|
-
|
(6,364)
|
7,545
|
1,181
|
|
Closing equity as at 31 December 2022
|
|
1,381
|
12,732
|
121,250
|
(7,123)
|
1,947
|
130,187
|
The notes form part of these
financial statements.
Statement of Cash Flows
Year ended 31 December 2023
|
|
|
Year ended
|
Year ended
|
|
|
|
31 December
2023
|
31 December
2022
|
|
|
Notes
|
$'000
|
$'000
|
|
Operating activities
|
|
|
|
|
(Loss)/profit on ordinary activities
before taxation
|
|
(6,728)
|
1,181
|
|
Adjustment for unrealised losses on
investments
|
|
10,577
|
6,368
|
|
Adjustment for non-cash investment
management fee
|
|
-
|
95
|
|
Decrease/(increase) in trade and
other receivables
|
|
3
|
(10)
|
|
Increase in trade and other
payables
|
|
202
|
71
|
|
Net
cash flow from operating activities
|
|
4,054
|
7,705
|
|
Investing activities
|
|
|
|
|
Purchase of investments
|
4
|
-
|
(14,861)
|
|
Net
cash flow used in investing activities
|
|
-
|
(14,861)
|
|
Financing activities
|
|
|
|
|
Proceeds of share issues
|
12
|
-
|
12,897
|
|
Share issue costs
|
|
-
|
(159)
|
|
Dividends paid
|
13
|
(5,800)
|
(7,550)
|
|
Net
cash flow (used in)/from financing activities
|
|
(5,800)
|
5,188
|
|
Decrease in cash
|
|
(1,746)
|
(1,968)
|
|
Cash and cash equivalents at start of the
Year
|
|
3,394
|
5,362
|
|
Cash and cash equivalents at end of the Year
|
|
1,648
|
3,394
|
|
|
|
|
|
|
|
|
As at
|
As at
|
|
|
|
31 December
2023
|
31 December
2022
|
|
|
|
$'000
|
$'000
|
|
Cash and cash equivalents
|
|
|
|
|
Money market cash
deposits
|
|
1,648
|
3,394
|
|
Total cash and cash equivalents at end of the
Year
|
|
1,648
|
3,394
|
The notes form part of these
financial statements.
Notes to the Financial Statements
For
the year ended 31 December 2023
1.
General Information
Ecofin U.S. Renewables
Infrastructure Trust PLC ("RNEW" or the "Company") is a public
company limited by shares incorporated in England and Wales on 12
August 2020 with registered number 12809472. The Company is a
closed‑ended investment company with an indefinite life. The
Company commenced operations on 22 December 2020 when its Shares
were admitted to trading on the LSE. The Directors intend, at all
times, to conduct the affairs of the Company so as to enable it to
qualify as an investment trust for the purposes of section 1158 of
the Corporation Tax Act 2010, as amended.
The registered office and principal
place of business of the Company is 6th Floor, 125 London Wall,
London, EC2Y 5AS.
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
("FVTPL") as detailed in the key accounting policies
below.
The Company's AIFM and Investment
Manager is Ecofin Advisors, LLC.
Apex Listed Companies Services (UK)
Limited, provides administrative and company secretarial services
to the Company under the terms of an administration agreement
between the Company and the Administrator.
2.
Basis of Preparation
The financial statements have been
prepared in accordance with applicable law and UK-adopted
international accounting standards. The financial statements have
been prepared on the historical cost basis, as modified for the
measurement of certain financial instruments at FVTPL.
The financial statements have also
been prepared as far as is relevant and applicable to the Company
in accordance with the Statement of Recommended Practice ("SORP")
issued by the AIC in July 2022.
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 in Holdco is
denominated in U.S. dollars and a substantial majority of its
income is receivable, and of its expenses is payable, in U.S.
dollars. Also, a majority of the Company's cash and cash equivalent
balances is retained in U.S. dollars. Accordingly, the financial
statements are presented in U.S. dollars rounded to the nearest
thousand dollars.
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 and 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 consolidate them 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 and liabilities. Holdco
has one investor, which is the Company. In substance, Holdco is
investing the funds of the investors in the Company on its behalf
and is effectively performing investment management services on
behalf of such unrelated beneficiary investors.
Characteristics of an investment entity
Under the definition of an
investment entity, the Company should satisfy all three of the
following tests:
● Company
obtains funds from one or more investors for the purpose of
providing those investors with investment management
services;
●
Company commits to its investors that its
business purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
●
Company measures and evaluates the performance
of substantially all of its investments on a fair value
basis.
In assessing whether the Company
meets the definition of an investment entity set out in IFRS 10,
the Directors note that:
●
the Company has multiple investors and obtains
funds from a diverse group of Shareholders who would otherwise not
have access individually to investing in renewable energy and
sustainable infrastructure investments ("Renewable Assets") due to
high barriers to entry and capital requirements;
●
the Company intends to hold its Renewable
Assets for the remainder of their useful lives for the purpose of
investment income. The Renewable Assets are expected to generate
renewable energy output for 25 to 30 years from their relevant COD
and the Directors believe the Company is able to generate returns
to investors during that period; and
●
the Company measures and evaluates the
performance of all of its investments on a fair value basis which
is the most relevant for investors in the Company. Management uses
fair value information as a primary measurement to evaluate the
performance of all of the Company's investments and in decision
making.
The Directors are of the opinion
that the Company meets all the characteristics of an investment
entity and therefore meets the definition set out in IFRS 10. The
Directors are satisfied that investment entity accounting treatment
appropriately reflects the Company's activities as an investment
trust.
Going concern
The Directors have adopted the going
concern basis in preparing the financial statements. In reaching
their conclusion, the Directors considered the Company's cash flow
forecasts, cash and net debt position, and the financial covenants
in its borrowing facilities. The Company's net assets as at 31
December 2023 were $117.7 million (31 December 2022: $130.2
million). As at 31 December 2023, the Company held $1.6 million in
cash (31 December 2022: $3.4 million) and had borrowings of $75.8
million (31 December 2022: $64.4 million) and $38 million headroom
on its RCF (31 December 2022: $46 million). Both tranches of the
Company's RCF were extended by 12 months during the second half of
2023 to October 2024 and October 2025, respectively.
The Company assumes the ability to
renew or extend the RCF on substantially similar terms in the
second half of 2024, if necessary to do so considering the
aforementioned strategic review mentioned in the Chairman's
statement focussing on a sale of the Company's assets.
The Directors have a reasonable expectation that
the RCF would be extended as required (or that alternative lenders
would be obtained), until such facilities are formally renewed
there can be no certainty that the required funding will be in
place within the required time frame.
The Company's holds 100% of the
share capital of Holdco which in turn holds investments in
renewable energy project companies through SPVs. Underlying SPV
revenues are derived from the sale of electricity by project
companies under PPAs in place with creditworthy utilities,
municipalities, and corporations. Most of these PPAs are contracted
over a long period with a weighted average remaining life as at 31
December 2023 of 13.7 years (31 December 2022: 14.6
years).
The Company continues to meet its
day-to-day liquidity needs through its cash resources. Total
expenses for the year ended 31 December 2023 were $2.4 million (31
December 2022: $2.3 million), which represented approximately 1.9%
of average net assets during the Year (31 December 2022: 1.8%). At
the date of approval of this Annual Report, based on the ability of
its investments to generate cash, cash held and the headroom on its
RCF, the Company had substantial cover for its operating
expenses.
The major cash outflows of the
Company are the acquisition of new investments and the payment of
dividends. The Directors review financial reporting and forecasts
at each quarterly Audit Committee meeting, which includes reporting
related to indebtedness, compliance with borrowing covenants and
fund investment limits. The Directors are confident that the
Company has sufficient cash balances, borrowing headroom and
anticipated tax equity arrangements to fund the commitments
detailed in note xx to the financial statements, should they become
payable.
The Directors have fully considered
each of the Company's investments against the backdrop of the
current macro‑economic situation. The Directors do not foresee any
immediate material risk to the Company's investment portfolio
and/or the income it receives 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 U.S. government regulated tax credits and a decline in
long term power price forecasts.
As announced on 8 September 2023,
the Board is undertaking a strategic review of the Company centred
on a sale of the Company's assets. Marathon Capital was appointed
to advise the Company, and the review is ongoing.
If the disposal is successful and adheres to its
terms, it is anticipated that cash will be distributed to
Shareholders during the Company's dissolution or a similar
event.
Accordingly, the Directors recognise
that the strategic review, and the need to renew or extend a
portion of the RCF in October 2024 if a sale does not occur,
indicate the existence of material uncertainty which may cast
significant doubt about the Company's ability to continue as a
going concern. As a result, the Company might face challenges in
realising its assets and settling its liabilities in the usual
course of business. Based on the assessment and considerations
above, the Directors have concluded that the financial statements
should be prepared on a going concern basis. The financial
statements do not include any adjustments which would result if the
Company was unable to continue on a going concern basis.
Critical accounting judgements, estimates and
assumptions
Preparation of the financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amount of assets, liabilities, income and expenses.
Estimates are, by their nature, based on judgement and available
information, hence actual results may differ from these judgements,
estimates and assumptions. The estimates and assumptions that have
a significant risk of causing a material adjustment to the carrying
value of assets and liabilities are those used to determine the
fair value of the investments as disclosed in note 4 to the
financial statement.
Key
judgements
As disclosed above, the Directors
have concluded that both the Company and Holdco meet the definition
of an investment entity as defined in IFRS 10. This conclusion
involved a degree of judgement and assessment.
Key
estimation and uncertainty: Investments at fair value through
profit or loss
The Company's investments in
unquoted investments are valued by reference to valuation
techniques approved by the Directors and in accordance with the
International Private Equity and Venture Capital Valuation (IPEV)
Guidelines.
The Company uses discounted cash
flow ("DCF") models and considers any other relevant information 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 present
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 valuations 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 O&M, asset
management, balance of plant, land leases, insurance, property and
other taxes and decommissioning bonds, among other items. An increase/(decrease) in the key valuation
assumptions would lead to a corresponding decrease/(increase) in
the fair value of the investments as described in note 4 to the
financial statements. The Company's investments at fair value
are not traded in active markets.
The estimates and assumptions used
to determine the fair value of investments are disclosed in note 4
to the financial statements.
Segmental reporting
The Chief Operating Decision Maker,
which is the Board, is of the opinion that the Company is engaged
in a single segment of business, being investment in renewable
energy infrastructure assets to generate investment returns whilst
preserving capital. The financial information used by the Chief
Operating Decision Maker to manage the Company presents the
business as a single segment.
All of the Company's income is
generated within the U.S. All of the Group's non-current assets are
located in the U.S.
Adoption of new IFRS standards from 1 January
2023
A number of new standards,
amendments to standards are effective for annual periods beginning
after 1 January 2023. None of these have had a significant effect
on the measurement of the amounts recognised in the financial
statements of the Company.
New
Standards and Amendments issued but not yet
effective
The relevant new and amended
standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Company's financial
statements are disclosed below. These standards are not expected to
have a material impact on the entity in future reporting periods
and on foreseeable future transactions.
Amendments to IAS 1 Presentation of Financial Statements -
Classification of Liabilities as Current or
Non-current
The amendments to IAS 1 clarify that
the classification of liabilities as current or non-current is
based on rights that are in existence at the end of the reporting
period, specify that classification is unaffected by expectations
about whether an entity will exercise its right to defer settlement
of a liability, explain that rights are in existence if covenants
are complied with at the end of the reporting period, and introduce
a definition of 'settlement' to make clear that settlement refers
to the transfer to the counterparty of cash, equity instruments,
other assets or services. The amendments are applied
retrospectively for annual periods beginning on or after 1 January
2024, with early application permitted.
Amendments to IAS 1 Presentation of Financial Statements -
Non‑current Liabilities with Covenants
The amendments specify that only
covenants that an entity is required to comply with on or before
the end of the reporting period affect the entity's right to defer
settlement of a liability for at least twelve months after the
reporting date (and therefore must be considered in assessing the
classification of the liability as current or non-current). Such
covenants affect whether the right exists at the end of the
reporting period, even if compliance with the covenant is assessed
only after the reporting date (e.g. a covenant based on the
entity's financial position at the reporting date that is assessed
for compliance only after the reporting date). The amendments are
applied retrospectively for annual reporting periods beginning on
or after 1 January 2024. Earlier application of the amendments
is permitted.
Amendments to IAS 7 Statement of Cash Flows and IFRS 7
Financial Instruments: Disclosures - Supplier Finance
Arrangements
The amendments add a disclosure
objective to IAS 7 stating that an entity is required to disclose
information about its supplier finance arrangements that enables
users of financial statements to assess the effects of those
arrangements on the entity's liabilities and cash flows. In
addition, IFRS 7 has been amended to add supplier finance
arrangements as an example within the requirements to disclose
information about an entity's exposure to concentration of
liquidity risk. The amendments, which contain specific transition
reliefs for the first annual reporting period in which an entity
applies the amendments, are applicable for annual reporting periods
beginning on or after 1 January 2024. Earlier application is
permitted.
3.
Material Accounting Policies
Financial Instruments
Financial assets
The Company's financial assets
principally comprise an investment held at FVTPL (investment in
Holdco) and trade and other receivables.
The Company's investment in Holdco,
being classified as an investment entity under IFRS 10, is held at
FVTPL in accordance with IFRS 9. Gains or losses resulting from
movements in fair value are recognised in the Company's Statement
of Comprehensive Income at each valuation point.
Trade and other receivables are
initially recognised at fair value and subsequently measured at
amortised cost using the effective interest rate method.
Financial liabilities
The Company's financial liabilities
include trade and other payables and other short term monetary
liabilities which are initially recognised at fair value and
subsequently measured at amortised cost using the effective
interest rate method.
Recognition, derecognition and measurement
Financial assets and financial
liabilities are recognised in the Company's Statement of Financial
Position when the Company becomes a party to the contractual
provisions of the instrument. Financial assets and financial
liabilities are initially measured at fair value.
Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at FVTPL) are added to or deducted from the fair value
of the financial assets or financial liabilities, as appropriate,
on initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at
FVTPL are recognised immediately in profit or loss.
Financial assets are derecognised
when the rights to receive cash flows from the investments have
expired or the Company has transferred substantially all risks and
rewards of ownership.
A financial liability (in whole or
in part) is derecognised when the Company has extinguished its
contractual obligations, or when it expires or is
cancelled.
Subsequent to initial recognition,
financial assets at FVTPL are measured at fair value. Gains and
losses resulting from movements in fair value are recognised in the
Statement of Comprehensive Income.
Financial liabilities are
subsequently measured at amortised cost using the effective
interest rate method.
Taxation
The following accounting policies
for taxation and deferred tax are in respect of UK tax and deferred
taxation.
Investment trusts which have
approval under Section 1158 of the Corporation Tax Act 2010 are not
liable for taxation on capital gains. Shortly after listing the
Company received approval as an investment trust by HMRC. Current
tax is the expected tax payable on the taxable income for the Year,
using tax rates that have been enacted or substantively enacted at
the date of the Statement of Financial Position.
Deferred taxation
Deferred tax is the tax expected to
be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the statement of financial
position liability method. Deferred tax liabilities are recognised
for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised.
Deferred tax is calculated at the
tax rates that are expected to apply in the period when the
liability is settled or the asset is realised. Deferred tax is
charged or credited to the Statement of Comprehensive Income except
when it relates to items charged or credited directly to equity, in
which case the deferred tax is also dealt with in
equity.
Deferred tax assets and liabilities
are offset when there is a legally enforceable right to offset tax
assets against tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Company intends to
settle its current tax assets and liabilities on a net
basis.
Income
Income includes investment income
from financial assets at FVTPL and finance income.
Dividend income is recognised when
received and is reflected in the Statement of Comprehensive Income
as Investment Income. Bank deposit interest income is earned on
bank deposits on an accruals basis.
Expenses
All expenses are accounted for on an
accruals basis. In respect of the analysis between revenue and
capital items presented within the Statement of Comprehensive
Income, all expenses, including the Investment Management fee, are
presented in the revenue column of the Statement of Comprehensive
income as they are directly attributable to the operations of the
Company.
Details of the Company's fee
payments to the Investment Manager are disclosed in note 6 to the
financial statements.
Foreign currency
Transactions denominated in foreign
currencies are translated into U.S. dollars at actual exchange
rates as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the Year end are
reported at the rates of exchange prevailing at the Year end. Any
gain or loss arising from a change in exchange rates subsequent to
the date of the transaction is included as an exchange gain or loss to capital or revenue in the Statement
of Comprehensive Income as appropriate. Foreign exchange movements
on investments are included in the Statement of Comprehensive
Income within gains on investments.
Cash and cash equivalents
Cash and cash equivalents include
deposits held at call with banks and other short-term deposits with
original maturities of three months or less.
Share capital and share premium
Shares are classified as equity.
Costs directly attributable to the issue of new Shares (that would
have been avoided if there had not been an issue of new Shares) are
recognised against the value of the Share premium
account.
Repurchases of the Company's own
Shares are recognised and deducted directly in equity. No gain or
loss is recognised in profit or loss on the purchase, sale, issue
or cancellation of the Company's own equity instruments.
Nature and purpose of equity and reserves:
Share capital represents the nominal
value (1 cent per share) of the issued share capital. The Share
premium account arose from the net proceeds of new
Shares.
The Special distributable reserve,
which can be utilised to fund distributions to the Company's
Shareholders, was created following confirmation of the Court,
through the cancellation and transfer of $121.3 million in January
2021 from the Share premium account.
The capital reserve reflects
any:
● gains or
losses on the disposal of investments;
● exchange
movements of a capital nature;
● the increases
and decreases in the fair value of investments which have been
recognised in the capital column of the Statement of Comprehensive
Income; and
● expenses
which are capital in nature.
The revenue reserve reflects all
income and expenditure recognised in the revenue column of the
Statement of Comprehensive Income and is distributable by way of
dividend.
The Company's distributable reserves
consist of the Special distributable reserve, the Capital reserve
attributable to realised profits and the Revenue
reserve.
Dividend payable
Dividends payable are recognised as
distributions in the financial statements when the Company's
obligation to make payment has been established.
4.
Investments at Fair Value Through Profit and Loss
As at 31 December 2023, the Company
had one investment, being Holdco. The cost of the investment in
Holdco was US$134,065,000 (31 December 2022:
US$134,065,000).
|
|
As at
|
As at
|
|
|
31 December
|
31 December
|
|
|
2023
|
2022
|
|
(a)
Summary of valuation
|
$'000
|
$'000
|
|
Analysis of closing
balance:
|
|
|
|
Investments at fair value through
profit or loss
|
116,798
|
127,375
|
|
Total investments as at 31 December 2023
|
116,798
|
127,375
|
|
(b)
Movements during the Year:
|
|
|
|
Opening balance of investments, at
cost
|
134,065
|
119,204
|
|
Additions, at cost
|
-
|
14,861
|
|
Cost of investments as at 31 December 2023
|
134,065
|
134,065
|
|
Revaluation of investments to fair
value:
|
|
|
|
Unrealised movement in fair value of
investments
|
(17,267)
|
(6,690)
|
|
Fair value of investments as at 31 December
2023
|
116,798
|
127,375
|
|
(c)
Losses on investment in the Year
|
|
|
|
Unrealised movement in fair value of
investments brought forward
|
(6,690)
|
(322)
|
|
Unrealised movement in fair value of
investments during the year
|
(10,577)
|
(6,368)
|
|
Losses on Investments
|
(17,267)
|
(6,690)
|
Fair value measurements
IFRS 13 requires disclosure of fair
value measurement by level. The level of fair value hierarchy
within the financial assets or financial liabilities is determined
on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities
are classified in their entirety into only one of the following
3 levels:
Level 1
The unadjusted quoted price in an
active market for identical assets or liabilities that the entity
can access at the measurement date.
Level 2
Inputs other than quoted prices
included within Level 1 that are observable (i.e. developed using
market data) for the asset or liability, either directly or
indirectly.
Level 3
Inputs are unobservable (i.e. for
which market data is unavailable) for the asset or
liability.
The classification of the Company's
investments held at fair value is detailed in the table
below:
|
|
As at 31 December
2023
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Investments at fair value through
profit and loss
|
|
|
|
|
|
Equity investments in
Holdco
|
-
|
-
|
116,798
|
116,798
|
|
Total investments as at 31 December 2023
|
-
|
-
|
116,798
|
116,798
|
|
|
|
|
|
|
|
|
As at 31 December
2022
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Investments at fair value through
profit and loss
|
|
|
|
|
|
Equity investments in
Holdco
|
-
|
-
|
127,375
|
127,375
|
|
Total investments as at 31 December 2022
|
-
|
-
|
127,375
|
127,375
|
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 year ended 31 December
2023 (2022: none).
The movement on the Level 3 unquoted
investments during the year is shown below:
|
|
As at
|
As at
|
|
|
31 December
|
31 December
|
|
|
2023
|
2022
|
|
|
$'000
|
$'000
|
|
Opening balance
|
127,375
|
118,882
|
|
Additions during the year
|
-
|
14,861
|
|
Unrealised losses on
investment
|
(10,577)
|
(6,368)
|
|
Closing balance
|
116,798
|
127,375
|
Valuation methodology
The Company owns 100% of its
subsidiary Holdco through which the Company holds all its
underlying investments in SPVs.
As discussed in Note 2, the Company
meets the definition of an investment entity as described by IFRS
10, and as such the Company's investment in Holdco is valued at
fair value. In accordance with Company policy, the Investment
Manager has engaged an independent valuation firm, Marshall &
Stevens, to carry out fair market valuations of the underlying
investments as at 31 December 2023.
Fair value of operating assets is
derived using a DCF methodology, which follows IPEV Guidelines. DCF
is deemed the most appropriate methodology when detailed projection
of future cash flows is possible. The fair value of each asset is
derived by projecting the future cash flows of an asset, based on a
range of operating assumptions for revenues and expenses, and
discounting those future cash flows to the present day with a
pre-tax discount rate appropriately calibrated to the risk profile
of the asset and market dynamics. Due to the asset class and
available market data over the forecast horizon, a DCF valuation is
typically the basis upon which renewable assets are traded in the market. Assets that are not yet operational
and still under construction at the time of the valuation are held
at cost as an estimate of fair value, provided no significant
changes to key underlying economic considerations (such as major
construction impediments or natural disasters) have
arisen.
The Company measures the total fair
value of Holdco by its net asset value, which is made up of cash,
working capital balances and the aforementioned fair value of the
underlying investments as determined using the DCF
methodology.
The Directors have considered all
relevant information and have satisfied themselves as to the
methodology, the discount rates used, and key assumptions applied
and the valuation.
Valuation Sensitivities
A sensitivity analysis is carried
out to show the impact on NAV of changes to key assumptions. For
each of the sensitivities, it is assumed that potential changes
occur independently of each other with no effect on any other key
assumption, and that the number of investments in the portfolio
remains static throughout the modelled life. The resulting NAV per
share impacts are discussed below.
(i)
Discount rates
Pre-tax discount rates applied in
the DCF valuations are determined by Marshall & Stevens using a
multitude of factors, including pre-tax discount rates disclosed by
the Company's global peers and comparable infrastructure asset
classes as well as the internal rate of return inherent in the
original purchase price when underwriting the asset. The DCF
valuations utilise two classes of pre-tax discount
rates:
a) contracted discount rate applied
to the contracted cash flows of each asset; and
b) uncontracted discount rate
(higher) applied to the uncontracted (or "merchant") cash flows of
each investment which will occur after the initial PPA and/or other
contract term.
The pre-tax discount rates used in
the DCF valuation of the investments are considered the most
significant observable input through which an increase or decrease
would have a material impact on the fair value of the investments
at FVTPL. As of 31 December 2023, the blended pre-tax discount
rates (i.e., the implied discount rate of both the contracted and
uncontracted discount rates of each investment) applied to the
portfolio ranged from 6.2% to 8.4% (31 December 2022: 6.7% to 8.0%)
with an overall weighted average of 7.4% (31 December 2022:
7.5%).
An increase or decrease of 0.5% in
the discount rates would have the following impact on
NAV:
|
Discount Rate
|
+50 bps
|
-50 bps
|
|
Increase/(decrease) in NAV
($'000)
|
(7,824)
|
9,822
|
|
NAV per Share
|
79.5c
|
92.3c
|
|
NAV per Share Change
|
(5.7c)
|
7.1c
|
|
Change (%)
|
(6.6%)
|
8.3%
|
(ii) Energy Production
Solar and wind assets are subject to
variation in energy production over time. An assumed "P75" level of
energy yield (i.e. a level of energy production that is below
"P50", with a 75% probability of being exceeded) would cause a
decrease in the total portfolio valuation, while an assumed "P25"
level of power output (i.e. a level of energy production that is
above "P50", with a 25% probability of being achieved) would cause
an increase in the total portfolio valuation.
Energy production, as measured in
MWh per annum, assumed in the DCF valuations is based on a "P50"
energy yield profile, representing a 50% probability that the
energy production estimate will be met or exceeded over time. An
independent engineer has derived this energy yield estimate for
each asset by taking into account a range of irradiation, weather
data, ground-based measurements and design/site-specific loss
factors including module performance, module mismatch, inverter
losses, and transformer losses, among others. The "P50" energy
yield case includes a 0.5% annual degradation for solar assets and
1.0% annual degradation for wind assets through the entirety of the
useful life. In addition, the P50 energy yield case includes an
assumption of availability, which ranges from 98.5% to 99% for solar assets and 96.0% for wind assets,
as determined reasonable by an independent engineer at the time of
underwriting the asset.
The application of a P75 and a P25
energy yield case would have the following impact on
NAV:
|
Energy Production
|
P75
|
P25
|
|
Increase/(decrease) in NAV
($'000)
|
(8,702)
|
9,963
|
|
NAV per Share
|
78.9c
|
92.4c
|
|
NAV per Share change
|
(6.3c)
|
7.2c
|
|
Change (%)
|
(7.4%)
|
8.5%
|
(iii) Curtailment
Curtailment is the deliberate
reduction (by the transmission operator) in energy output of an
asset below what could have been produced, in order to balance
energy supply and demand or due to transmission constraints. Due to
the contracted nature of energy production of its renewable energy
investments held by Holdco and with a substantial share of its
solar assets being behind-the-meter and directly connected to the
energy consumer, the Company's NAV is subject to a low overall
level of curtailment, which has been factored into NAV.
An increase or decrease of 50% from
the assumed level of curtailment would have the following impact on
NAV:
|
Curtailment
|
-50%
|
+50%
|
|
Increase/(decrease) in NAV
($'000)
|
(7,173)
|
6,416
|
|
NAV per Share
|
80.0c
|
89.9c
|
|
NAV per Share change
|
(5.2c)
|
4.6c
|
|
Change (%)
|
(6.1%)
|
5.5%
|
(iv) Merchant Power Prices
All of the Company's assets have
long-term PPAs and incentive contracts in place with creditworthy
energy purchasers, and thus are not impacted by fluctuations in
regional market energy prices during the contract period. Future
power price forecasts used in the DCF valuations are derived from
regional market forward prices provided by the EIA, with a 10-50%
discount applied based on the characteristics of the asset as
reasonably determined by Marshall & Stevens. Inflationary
pressures over the long-term could present a circumstance of
variability and increase merchant power prices from previous
forecasts.
An increase or decrease of 10% in
future merchant power price assumptions would have the following
impact on NAV:
|
Merchant Power Prices
|
-10%
|
+10%
|
|
Increase/(decrease) in NAV
($'000)
|
(8,356)
|
9,601
|
|
NAV per Share
|
79.2c
|
92.2c
|
|
NAV per Share change
|
(6.1c)
|
7.0c
|
|
Change (%)
|
(7.1%)
|
8.2%
|
(v)
Operating Expenses
Operating expenses include O&M,
balance of plant, asset management, site leases and easements,
insurance, property taxes, equipment reserves, decommissioning
bonds and other costs. Most operating expenses for solar and wind
assets are contracted with annual escalation rates, which typically
range from 2-3% to account for normalised inflation. As such, there
is typically little variation in annual operating expenses.
However, there may be occasions when certain expenses may be
recontracted. Inflationary pressures over the long term could also
affect future operating expenses.
An increase or decrease of 10% in
operating expenses would have the following impact on
NAV:
|
Operating Expenses
|
+10%
|
-10%
|
|
Increase/(decrease) in NAV
($'000)
|
(6,391)
|
7,627
|
|
NAV per Share
|
80.6c
|
90.7c
|
|
NAV per Share change
|
(4.6c)
|
5.5c
|
|
Change (%)
|
(5.4%)
|
6.5%
|
(vi) Overall Impact
The overall impact of the combined
downside and upside sensitivities to each key assumption as noted
above would have the following impact on NAV:
|
Overall Impact
|
+10%
|
-10%
|
|
Increase/(decrease) in NAV
($'000)
|
(38,446)
|
43,429
|
|
NAV per Share
|
57.4c
|
116.7c
|
|
NAV per Share change
|
(27.8c)
|
31.5c
|
|
Change (%)
|
(32.7%)
|
36.9%
|
5.
Income
|
|
Year ended
|
Year ended
|
|
|
31 December
|
31 December
|
|
|
2023
|
2022
|
|
Income from investments
|
$'000
|
$'000
|
|
Dividends from Holdco
|
6,200
|
9,850
|
|
Deposit interest
|
84
|
28
|
|
Total Income
|
6,284
|
9,878
|
6.
Investment Management Fees
|
|
Year ended 31 December
2023
|
Year ended 31 December
2022
|
|
|
Revenue
$'000
|
Capital
$'000
|
Total
$'000
|
Revenue
$'000
|
Capital
$'000
|
Total
$'000
|
|
Investment management
fees
|
1,246
|
-
|
1,246
|
1,300
|
-
|
1,300
|
The Investment Management Agreement
("IMA") dated 11 November 2020 between the Company and
Ecofin Advisors, LLC ("the AIFM" or "Investment Manager"),
appointed the AIFM to act as the Company's Investment Manager for
the purposes of the AIFM Directive. Accordingly, the AIFM is
responsible for providing portfolio management and risk management
services to the Company.
Under the IMA, the Investment
Manager receives a management fee of 1.00% per annum of NAV up to
and including $500 million; 0.90% per annum of NAV in excess of
$500 million up to and including $1 billion; and 0.80% per annum of
NAV in excess of $1 billion, invoiced
quarterly in arrears. Until such time as 90% of the Net Initial
Proceeds of the Company's IPO had been committed to investments,
the Investment Manager fee was only charged on the committed
capital of the Company. No performance fee or asset level fees are
payable to the AIFM under the IMA.
The Investment Manager reinvests 15%
of its annual management fee in Shares (the "Management Fee
Shares"), subject to a rolling lock-up of up to 2 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 Manager equivalent in
value to the management fee reinvested. Where shares are trading at
a discount to NAV, the Management Fee Shares are purchased by the
Company's Broker 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 Investment Manager's 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.
With respect to the first quarter of
2023, the Company issued or the Company's Broker purchased
Shares to settle investment management fees as below. In the
remaining three quarters of the Year, cash was paid in settlement
of investment fees:
Year ended 31 December 2023:
|
|
Investment
|
|
|
|
|
|
management
|
|
|
|
|
|
fee
|
Purchase
price
|
Number of
|
|
|
Shares purchased
|
($)
|
(cents)
|
Shares
|
Date of
purchase
|
|
1 January 2023 to 31 March
2023
|
48,095
|
79.0
|
60,879
|
10 May
2023
|
Year ended 31 December 2022:
|
Shares issued
|
Investment
management
fee
($)
|
Purchase
price
(cents)
|
Number of
Shares
|
Date of
purchase
|
|
1 January
2022 to 31 March 2022
|
44,559
|
97.64
|
45,636
|
03 May
2022
|
|
1 April 2022
to 30 June 2022
|
50,359
|
97.32
|
51,745
|
28 July
2022
|
|
Shares purchased
|
Investment
management
fee
($)
|
Purchase
price
(cents)
|
Number
of
Shares
|
Date of
purchase
|
|
1 July 2022
to 30 September 2022
|
49,916
|
86.50
|
57,705
|
01
November 2022
|
|
1 October
2022 to 31 December 2022
|
49,346
|
83.50
|
59,096
|
01
February 2023
|
7.
Other Operating Expenses
|
|
Year ended 31 December
2023
|
Year ended 31 December
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Secretary and Administrator
fees
|
197
|
-
|
197
|
175
|
-
|
175
|
|
Directors' fees
|
235
|
-
|
235
|
228
|
-
|
228
|
|
Directors' other employment
costs
|
28
|
-
|
28
|
36
|
-
|
36
|
|
Broker retainer
|
141
|
-
|
141
|
115
|
-
|
115
|
|
Auditor's fees payable to the
Company's
|
|
|
|
|
|
|
|
auditor for statutory audit
services*
|
183
|
-
|
183
|
160
|
-
|
160
|
|
FCA and listing fees
|
41
|
-
|
41
|
56
|
-
|
56
|
|
Research fees
|
39
|
-
|
39
|
51
|
-
|
51
|
|
Depository and custody
fees
|
6
|
-
|
6
|
5
|
-
|
5
|
|
Registrar's fees
|
18
|
-
|
18
|
16
|
-
|
16
|
|
Marketing fees
|
10
|
-
|
10
|
9
|
-
|
9
|
|
Public relations fees
|
107
|
-
|
107
|
102
|
-
|
102
|
|
Printing and postage
costs
|
26
|
-
|
26
|
45
|
-
|
45
|
|
Legal fees
|
128
|
-
|
128
|
-
|
-
|
-
|
|
Miscellaneous expenses
|
25
|
-
|
25
|
35
|
-
|
35
|
|
Total other operating expenses
|
1,184
|
-
|
1,184
|
1,033
|
-
|
1,033
|
*
The Auditor's fee for the Year is $183,000 including VAT of
$30,600 (2022: $160,000 including VAT of $26,800).
8.
Earnings Per Share
Earnings per Share is based on the
profit/(loss) in the Year ended 31 December 2023 of ($6,728,000)
(2022: $1,181,000) attributable to the weighted average number of
Shares in issue of 138,078,496 in the Year ended 31 December
2023 (2022: 132,933,277). Revenue and capital profit/(loss) were
$3,854,000 and ($10,582,000) respectively (2022: $7,545,000 and
($6,364,000)).
9.
Taxation
(a)
Analysis of charge in the Year
|
|
Year ended 31 December
2023
|
Year ended 31 December
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Corporation tax
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Taxation for the Year
|
-
|
-
|
-
|
-
|
-
|
-
|
(b)
Factors affecting total tax charge for the Year:
The effective UK corporation tax
rate applicable to the Company for the Year was 23.5% (2022: 19%).
The tax charge differs from the charge resulting from applying the
standard rate of UK corporation tax for an investment trust
company.
The differences are explained
below:
|
|
Year ended 31 December
2023
|
Year ended 31 December
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Profit/(loss) on ordinary activities
before
|
|
|
|
|
|
|
|
taxation
|
3,854
|
(10,582)
|
(6,728)
|
7,545
|
(6,364)
|
1,181
|
|
Corporation tax at 23.5% (2022:
19%)
|
906
|
(2,487)
|
(1,581)
|
1,434
|
(1,209)
|
225
|
|
Effects of:
|
|
|
|
|
|
|
|
Dividends received (not subject to
tax)
|
(1,477)
|
-
|
(1,477)
|
(1,877)
|
|
(1,877)
|
|
Loss on investments held at fair
value not
|
|
|
|
|
|
|
|
allowable
|
-
|
2,487
|
2,487
|
-
|
1,209
|
1,209
|
|
Unutilised management
expenses
|
571
|
-
|
571
|
443
|
-
|
443
|
|
Total tax charge for the Year
|
-
|
-
|
-
|
-
|
-
|
-
|
Investment companies which have been
approved by HMRC under section 1158 of the Corporation Tax Act 2010
are exempt from tax on capital gains. Due to the Company's status
as an Investment Trust, and the intention to continue meeting the
conditions required to obtain approval in the foreseeable future,
the Company has not provided for deferred tax on any capital gains
or losses arising on the revaluation of investments.
As at 31 December 2023, a deferred
tax liability of $2,870,000 (2022: $3,149,000) representing U.S.
Federal income taxes deferred had been accrued and reflected in the
valuation of the Company's subsidiary, Holdco.
The Company has excess management
expenses of $6,504,000 (2022: $4,158,000) that are available for
offset against future profits. A deferred tax asset of $1,626,000
(2022: $1,039,500) has not been recognised in respect of these
losses as they will be recoverable only to the extent that the
Company has sufficient future taxable profits.
10.
Trade and Other Receivables
|
|
As at 31
|
As at 31
|
|
|
December
|
December
|
|
|
2023
|
2022
|
|
|
$'000
|
$'000
|
|
Other receivables
|
5
|
9
|
|
Bank interest receivables
|
3
|
2
|
|
Total
|
8
|
11
|
11.
Trade and Other Payables
|
|
As at 31
|
As at 31
|
|
|
December
|
December
|
|
|
2023
|
2022
|
|
|
$'000
|
$'000
|
|
Accrued expenses
|
795
|
593
|
|
Total
|
795
|
593
|
12.
Share Capital
|
|
Year ended 31 December
2023
|
Year ended 31 December
2022
|
|
|
|
Nominal
|
|
Nominal
|
|
|
|
value
|
|
value
|
|
Allotted, issued and fully paid:
|
No. of
Shares
|
$
|
No. of
Shares
|
$
|
|
Opening balance
|
138,078,496
|
1,380,784.96
|
125,053,498
|
1,250,534.98
|
|
Placing and retail offer
|
|
|
|
|
|
Shares issued
|
-
|
-
|
12,927,617
|
129,276.17
|
|
Share issue for management fee
|
|
|
|
|
|
Share issue
|
-
|
-
|
97,381
|
973.81
|
|
Closing balance
|
138,078,496
|
1,380,784.96
|
138,078,496
|
1,380,784.96
|
The Shares have attached to them
full voting, dividend and capital distribution (including on
winding-up) rights. They confer rights of redemption.
During the Year, the Company issued
no Shares (2022: 97,381 Shares) to the Company's Investment
Manager, in relation to investment management fees payable for the
year ended 31 December 2023. The Company's issued share capital at
31 December 2023 comprised 138,078,496 (31 December 2022:
138,078,496) Shares and this is the total number of Shares with
voting rights in the Company.
13.
Dividends
(a)
Dividends paid in the Year
The Company paid the following
interim dividends during the year
|
|
Year ended 31 December
2023
|
|
|
|
Special
|
|
|
|
|
Cents per
|
distributable
|
Revenue
|
|
|
|
Share
|
reserve
|
reserve
|
Total
|
|
|
|
$'000
|
$'000
|
$'000
|
|
Quarter ended 31 December
2022
|
1.40c
|
-
|
1,933
|
1,933
|
|
Quarter ended 31 March
2023
|
1.40c
|
-
|
1,933
|
1,933
|
|
Quarter ended 30 June
2023
|
0.70c
|
-
|
967
|
967
|
|
Quarter ended 30 September
2023
|
0.70c
|
-
|
967
|
967
|
|
Total
|
4.20c
|
-
|
5,800
|
5,800
|
|
|
Year ended 31 December
2022
|
|
|
|
Special
|
|
|
|
|
Cents per
|
distributable
|
Revenue
|
|
|
|
Share
|
reserve
|
reserve
|
Total
|
|
|
|
$'000
|
$'000
|
$'000
|
|
Quarter ended 31 December
2021
|
1.40c
|
-
|
1,751
|
1,751
|
|
Quarter ended 31 March
2022
|
1.40c
|
-
|
1,933
|
1,933
|
|
Quarter ended 30 June
2022
|
1.40c
|
-
|
1,933
|
1,933
|
|
Quarter ended 30 September
2022
|
1.40c
|
-
|
1,933
|
1,933
|
|
Total
|
5.60c
|
-
|
7,550
|
7,550
|
(b)
Dividends paid and payable in respect of the financial
year
The dividends paid and payable in
respect of the financial years are the basis on which the
requirements of s1158‑s1159 of the Corporation Tax Act 2010 are
considered.
|
|
Year ended 31 December
2023
|
|
|
|
Special
|
|
|
|
|
Cents per
|
distributable
|
Revenue
|
|
|
|
Share
|
reserve
|
reserve
|
Total
|
|
|
|
$'000
|
$'000
|
$'000
|
|
Quarter ended 31 March
2023
|
1.40c
|
-
|
1,933
|
1,933
|
|
Quarter ended 30 June
2023
|
0.70c
|
-
|
967
|
967
|
|
Quarter ended 30 September
2023
|
0.70c
|
-
|
967
|
967
|
|
Quarter ended 31 December
2023
|
0.70c
|
-
|
967
|
967
|
|
Total
|
3.50c
|
-
|
4,834
|
4,834
|
|
|
Year ended 31 December
2022
|
|
|
|
Special
|
|
|
|
|
Cents per
|
distributable
|
Revenue
|
|
|
|
Share
|
reserve
|
reserve
|
Total
|
|
|
|
$'000
|
$'000
|
$'000
|
|
Quarter ended 31 March
2023
|
1.40c
|
-
|
1,933
|
1,933
|
|
Quarter ended 30 June
2023
|
1.40c
|
-
|
1,933
|
1,933
|
|
Quarter ended 30 September
2023
|
1.40c
|
-
|
1,933
|
1,933
|
|
Quarter ended 31 December
2023
|
1.40c
|
-
|
1,933
|
1,933
|
|
Total
|
5.60c
|
-
|
7,732
|
7,732
|
After the Year end, the Company
declared an interim dividend of 0.7 cents per Share for the period
1 October 2023 to 31 December 2023, which was paid on 15 March 2024
to Shareholders on the register at 23 February 2024.
14.
Special Distributable Reserve
Following the 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 (2022: $121,250,000), which can be utilised to fund
distributions to the Company's Shareholders.
15.
Net Assets Per Share
Net assets per Share are based on
$117,659,000 (2022: $130,187,000) of net assets of the Company as
at 31 December 2023 attributable to the 138,078,496 Shares in
issue as at the same date (2022: 138,078,496).
16.
Related Party Transactions
Investment Manager
Fees payable to the Investment
Manager by the Company under the IMA are shown in the Statement of
Comprehensive Income. As at 31 December 2023, the fee outstanding
but not yet paid to the Investment Manager was $297,000 (2022:
$329,000).
As at 31 December 2023, the
Investment Manager's total holding of Shares in the Company was
8,780,378 (31 December 2022: 8,787,792).
Directors
The Company is governed by a Board
of Directors, all of whom are non-executive, and it has no
employees. Each of the Directors was appointed on 22 October
2020.
Each of the Directors is entitled to
receive a fee from the Company at such rate as may be determined in
accordance with the Articles. Each Director receives a fee payable
by the Company at the rate of £40,000 per annum.
The Chairman of the Board receives
an additional £10,000 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 £6,000 per
annum.
The aggregate remuneration and
benefits in kind of the Directors in respect of the Company's
accounting year ended 31 December 2023 which were paid out of the
assets of the Company were $235,150 (2022: $228,293), which is the
USD equivalent of £188,000 (2022: £188,000). The Directors are also
entitled to the reimbursement of 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.
|
|
Ordinary
shares
|
Ordinary
shares
|
|
|
as at 31
December
|
as at 31
December
|
|
Director
|
2023
|
2022
|
|
Patrick O'D Bourke
|
104,436
|
104,436
|
|
Tammy Richards
|
25,000
|
25,000
|
|
Louisa Vincent
|
36,076
|
34,435
|
|
David Fletcher
|
62,894
|
59,406
|
17.
Financial Risk Management
The Investment Manager, AIFM and the
Administrator report to the Board on a quarterly basis and provide
information to the Board which allows it to monitor and manage
financial risks relating to the Company's operations. The Company's
activities expose it to a variety of
financial risks: market risk (including price risk, interest rate
risk and foreign currency risk), credit risk and liquidity risk.
These risks are monitored and managed by the AIFM. Each risk and
its management is summarised below.
(i)
Currency Risk
Foreign currency risk is defined as
the risk that the fair values of future cash flows will fluctuate
because of changes in foreign exchange rates. Based on current
operations, the Company's financial assets and liabilities are
denominated in U.S. dollars and substantially all of its revenues
and expenses are in U.S. dollars, the Directors do not expect
frequent transactions in foreign currencies and therefore currency
risk is considered to be low and no sensitivity to currency risk is
presented.
(ii) Interest Rate Risk
The Company's interest rate risk on
interest bearing financial assets is limited to interest earned on
money market cash deposits. The Board considers that, as project
level debt bears interest at fixed rates, they do not carry any
interest rate risk.
The Company's interest and
non-interest bearing assets and liabilities as at 31 December 2023
are summarised below:
|
|
31 December
2023
|
|
|
|
Non-interest
|
|
|
|
Interest
bearing
|
bearing
|
Total
|
|
|
$'000
|
$'000
|
$'000
|
|
Assets
|
|
|
|
|
Cash and cash equivalents
|
1,648
|
-
|
1,648
|
|
Trade and other
receivables
|
-
|
8
|
8
|
|
Investments at fair value through
profit or loss
|
-
|
116,798
|
116,798
|
|
Total assets
|
1,648
|
116,806
|
118,454
|
|
Liabilities
|
|
|
|
|
Trade and other payables
|
-
|
(795)
|
(795)
|
|
Total liabilities
|
-
|
(795)
|
(795)
|
|
|
31 December
2022
|
|
|
|
Non-interest
|
|
|
|
Interest
bearing
|
bearing
|
Total
|
|
|
$'000
|
$'000
|
$'000
|
|
Assets
|
|
|
|
|
Cash and cash equivalents
|
3,394
|
-
|
3,394
|
|
Trade and other
receivables
|
-
|
11
|
11
|
|
Investments at fair value through
profit or loss
|
-
|
127,375
|
127,375
|
|
Total assets
|
3,394
|
127,386
|
130,780
|
|
Liabilities
|
|
|
|
|
Trade and other payables
|
-
|
(593)
|
(593)
|
|
Total liabilities
|
-
|
(593)
|
(593)
|
The money market cash deposits and
bank accounts included within cash and cash equivalents bear
interest at low or zero interest rates and therefore movements in
interest rates will not materially affect the Company's income and
as such a sensitivity analysis is not necessary.
The Company's subsidiary, Holdco,
has interest rate risk through the RCF and through certain SPVs'
project level loans which are priced by reference to SOFR plus a
margin. The total exposure to debt through Holdco at
31 December 2023 was $75.8 million (2022: $64.4 million). An
increase or decrease in interest rates of 0.5% would impact the net
asset value of Holdco and the Company by $379,000 (2022: $322,000)
negatively or positively respectively.
Changes in interest rates can affect
the discount rates used. The sensitivity of the investment
valuation to changes in discount rate is disclosed in note
4.
(iii) Price Risk
Price risk is defined as the risk
that the fair value of a financial instrument held by the Company
will fluctuate. As at 31 December 2023, the Company held one
investment, being its shareholding in Holdco, which is measured at
fair value. The value of the underlying renewable energy
investments held by Holdco varies according to a number of factors,
including discount rate, asset performance, solar irradiation, wind
speeds, operating expenses and forecast power prices.
The sensitivity of the investment
valuation, due to changes to key assumptions valued on an asset by
asset basis, is shown in note 4. The sensitivity shows the impact
on the net asset value, however, the impact on the profit and loss
is the same. This does not consider price risk associated with the
valuation of the portfolio as a whole. A 30% (decrease)/increase in
the valuation of the investment portfolio as a whole would have a
($35,298,000))/$35,298,000 impact on the NAV.
As noted in the Chairman's statement
a strategic review of the Company is currently ongoing. Marathon
has conducted a comprehensive and wide-ranging exercise to identify
potential for the Company's portfolio of assets. This process has
resulted in specific discussions and negotiations taking
place.
Given the discount to NAV, it is
perhaps inevitable that, in arriving at a view on the valuation of
the Company's portfolio as a whole, buyers would take account of
both RNEW's prevailing share price as well as its reported NAV, the
latter being derived on an asset by asset basis.
(iv) Credit
Risk
Credit risk is the risk of loss due
to the failure of a borrower or counterparty to fulfil its
contractual obligations. The Company is exposed to credit risk in
respect of trade and other receivables and cash at bank.
The Company's credit risk exposure
as at 31 December is summarised below:
|
|
As at
|
As at
|
|
|
31 December
2023
|
31 December
2022
|
|
|
$'000
|
$'000
|
|
Cash and cash equivalents
|
1,648
|
3,394
|
|
Trade and other
receivables
|
8
|
11
|
|
Total
|
1,656
|
3,405
|
Cash and cash equivalents are held
with U.S. Bank whose Standard & Poor's credit rating is AA-.
The Company's credit risk exposure is minimised by dealing with
financial institutions with investment grade credit ratings. No
balances are past due or impaired.
Liquidity Risk
Liquidity risk is the risk that the
Company may not be able to meet a demand for cash or fund an
obligation when due. The Investment Manager and the Board
continuously monitor forecast and actual cashflows from operating,
financing and investing activities to consider payment of
dividends, repayment of the Company's debt or further investing
activities.
The following tables detail the
Company's expected maturity for its financial assets (excluding the
equity investment in Holdco) and liabilities together with the
contractual undiscounted cash flow amounts:
|
|
As at 31 December
2023
|
|
|
Less than 1
year
|
1-2 years
|
2-5 years
|
Total
|
|
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Assets
|
|
|
|
|
|
Cash and cash equivalents
|
1,648
|
-
|
-
|
1,648
|
|
Trade and other
receivables
|
8
|
-
|
-
|
8
|
|
Liabilities
|
|
|
|
|
|
Trade and other payables
|
(795)
|
-
|
-
|
(795)
|
|
Net
financial assets
|
861
|
-
|
-
|
861
|
|
|
As at 31 December
2022
|
|
|
Less than 1
year
|
1-2 years
|
2-5 years
|
Total
|
|
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Assets
|
|
|
|
|
|
Cash and cash equivalents
|
3,394
|
-
|
-
|
3,394
|
|
Trade and other
receivables
|
11
|
-
|
-
|
11
|
|
Liabilities
|
|
|
|
|
|
Trade and other payables
|
(593)
|
-
|
-
|
(593)
|
|
Net
financial assets
|
2,812
|
-
|
-
|
2,812
|
Capital management
The Company considers its capital to
comprise Share capital, distributable reserves and retained
earnings. The Company is not subject to any externally imposed
capital requirements. The Company's share capital and reserves are
shown in the Statement of Financial Position at a total of
$117,659,000 (2022: $130,187,000).
The Company's primary capital
management objectives are to ensure the sustainability of its
capital to support continuing operations, meet its financial
obligations and allow for growth opportunities. Generally,
acquisitions are anticipated to be funded with a combination of
current cash, borrowings and equity.
18.
Unconsolidated Subsidiaries and Associates
The following table shows
subsidiaries and associates of the Company. As the Company is
regarded as an Investment Entity as referred to in note 2, these
subsidiaries and associates have not been consolidated in the
preparation of the financial statements. The ultimate parent
undertaking is Ecofin U.S. Renewables Infrastructure Trust
PLC.
|
Name
|
Ownership Interest
|
Investment Category
|
Country of incorporation
|
Registered address
|
|
RNEW Holdco, LLC
|
100%
|
Holdco Subsidiary entity, owns RNEW
Blocker, LLC
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
RNEW Blocker, LLC
|
100%
|
Holdco Subsidiary entity, owns RNEW
Capital, LLC
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
RNEW Capital, LLC
|
100%
|
Holdco Subsidiary entity, owns
underlying SPV Entities
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
TC Renewable Holdco I,
LLC
|
100%
|
Holdco Subsidiary entity, owns CD
Global Solar CA Beacon 2 Borrower, LLC and CD Global Solar CA
Beacon 5 Borrower, LLC
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
TC Renewable Holdco II,
LLC
|
100%
|
Holdco Subsidiary entity, owns TCA
IBKR 2020 Holdco, LLC and TCA IBKR 2021 Holdco
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
TC Renewable Holdco III,
LLC
|
100%
|
Holdco Subsidiary entity, owns UCCT
Solar Group, LLC, Milford Industrial Solar, LLC, SED Three, LLC,
SED Four, LLC, and Solar Energy Partners 1, LLC
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
TC Renewable Holdco IV,
LLC
|
100%
|
Subsidiary entity
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
TC Renewable Holdco V,
LLC
|
100%
|
Holdco Subsidiary entity, owns Echo
Solar 2022 Holdco, LLC
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
|
|
|
|
|
|
TC Renewable Holdco VI,
LLC
|
100%
|
Holdco Subsidiary entity, owns
ESNJ-CB-DELRAN, LLC
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
TC Renewable Holdco VII,
LLC
|
100%
|
Holdco Subsidiary entity, owns
Whirlwind Energy, LLC
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
TCA IBKR 2020 Holdco, LLC
|
100%1
|
Holdco Subsidiary entity, owns Ellis
Road Solar, LLC and Oliver Solar 1, LLC
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
TCA IBKR 2021 Holdco, LLC
|
100%1
|
Holdco Subsidiary entity, owns
ESNJ-BL-SKILLMAN, LLC
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
Echo Solar 2022 Holdco,
LLC
|
100%1
|
Holdco Subsidiary entity, owns
Westside Solar Partners, LLC, Monroe Solar Partners, LLC, Heimlich
Solar Partners, LLC, Small Mouth Bass Solar Partners, LLC, Hemings
Solar Partners, LLC and Randolf Solar Partners, LLC
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
CD Global Solar CA Beacon 2
Borrower, LLC
|
49.5%1
|
Subsidiary entity, owns investment
in Beacon 2
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
CD Global Solar CA Beacon 5
Borrower, LLC
|
49.5%1
|
Subsidiary entity, owns investment
in Beacon 5
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
Ellis Road Solar, LLC
|
100%1
|
Subsidiary entity, owns investment
in Ellis Road Solar
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
Oliver Solar 1, LLC
|
100%1
|
Subsidiary entity, owns investment
in Oliver Solar
|
United States
|
1209 Orange Street, Wilmington, DE
19801
|
|
UCCT Solar, LLC
|
100%
|
Subsidiary entity, owns one of the
52 solar investments in the SED Solar Portfolio owned by TC
Renewable Holdco III, LLC
|
United States
|
155 Federal Street, Suite 700,
Boston, MA 02110
|
|
Milford Industrial Solar,
LLC
|
100%
|
Subsidiary entity, owns two of the
52 solar investments in the SED Solar Portfolio owned by TC
Renewable Holdco III, LLC
|
United States
|
155 Federal Street, Suite 700,
Boston, MA 02110
|
|
SED Three, LLC
|
100%
|
Subsidiary entity, owns 30 of the 52
solar investments in the SED Solar Portfolio owned by TC Renewable
Holdco III, LLC
|
United States
|
155 Federal Street, Suite 700,
Boston, MA 02110
|
|
SED Four, LLC
|
100%
|
Subsidiary entity, owns six of the
52 solar investments in the SED Solar Portfolio owned by TC
Renewable Holdco III, LLC
|
United States
|
155 Federal St, Suite 700, Boston,
MA 02110
|
|
Solar Energy Partners 1,
LLC
|
100%
|
Subsidiary entity, owns 13 of the 52
solar investments in the SED Solar Portfolio owned by TC Renewable
Holdco III, LLC
|
United States
|
155 Federal Street, Suite 700,
Boston, MA 02110
|
|
ESNJ-BL-SKILLMAN, LLC
|
100%1
|
Subsidiary entity, owns investment
in Skillman Solar
|
United States
|
100 Charles Ewing Blvd., Suite 160,
Ewing, NJ 08628
|
|
Heimlich Solar Partners,
LLC
|
100%
|
Subsidiary entity, owns investment
in Heimlich Solar
|
United States
|
251 Little Falls Drive,
Wilmington, DE 19808
|
|
Small Mouth Bass Solar Partners,
LLC
|
100%
|
Subsidiary entity, owns investment
in Small Mouth Bass Solar
|
United States
|
251 Little Falls Drive,
Wilmington, DE 19808
|
|
Hemings Solar Partners,
LLC
|
100%
|
Subsidiary entity, owns investment
in Hemings Solar
|
United States
|
251 Little Falls Drive,
Wilmington, DE 19808
|
|
Randolf Solar Partners,
LLC
|
100%
|
Subsidiary entity, owns investment
in Randolf Solar
|
United States
|
251 Little Falls Drive,
Wilmington, DE 19808
|
|
Westside Solar Partners,
LLC
|
100%1
|
Subsidiary entity, owns investment
in Westside Solar
|
United States
|
251 Little Falls Drive,
Wilmington, DE 19808
|
|
Monroe Solar Partners,
LLC
|
100%1
|
Subsidiary entity, owns investment
in Monroe Solar
|
United States
|
251 Little Falls Drive,
Wilmington, DE 19808
|
|
ESNJ-CB-DELRAN, LLC
|
100%
|
Subsidiary entity, owns investment
in Delran Solar
|
United States
|
100 Charles Ewing Blvd., Suite 160,
Ewing, NJ 08628
|
|
Whirlwind Energy LLC
|
100%
|
Subsidiary entity, owns investment
in Whirlwind
|
United States
|
615 South Dupont Highway, Dover, KY
19901
|
1.
Represents percentage ownership of class B membership interest in
the tax equity partnership.
19. Commitments and
Contingencies
As at 31 December 2023 the Company
had the following future investment obligations:
The Company had a collective future
unlevered net equity commitment amount of $5.0 million, which will
be funded by $19.2 million of pending future financing on closed
assets. This commitment figure is 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. 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.
20.
Post Balance Sheet Events
The strategic review announced on 8
September 2023 remains ongoing with specific discussions and
negotiations taking place with potential buyers as of the date of
the balance sheet and to the date of this report. Assuming a
satisfactory transaction can be agreed, the Board expects a
proposal to be set out in a circular and put to a general meeting
at which Shareholders will have the opportunity to
vote.
Other Information
Alternative Performance Measures
In reporting financial information,
the Company presents alternative performance measures, ("APMs"),
which are not defined or specified under the requirements of IFRS.
The Company believes that these APMs, which are not considered to
be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance
of the Company. The APMs presented in this report are shown
below:
Discount
The amount, expressed as a
percentage, by which the Share price is less than NAV per
Share.
|
|
|
|
As at
|
As at
|
|
|
|
|
31 December
|
31 December
|
|
|
|
|
2023
|
2022
|
|
NAV per Share (cents)
|
a
|
|
85.2
|
94.3
|
|
Share price (cents)
|
b
|
|
56.5
|
83.3
|
|
Discount
|
(b÷a)-1
|
|
33.7%
|
11.7%
|
Total return
Total return is a measure of
performance that includes both income and capital returns. It takes
into account capital gains and the assumed reinvestment of
dividends paid out by the Company into its Shares on the
ex-dividend date. The total return is shown below, calculated on
both a share price and NAV basis.
|
|
|
|
Share price
|
|
|
Year ended 31 December 2023
|
|
|
(cents)
|
NAV (cents)
|
|
Opening at 1 January 2023
|
a
|
|
83.3
|
94.3
|
|
Closing at 31 December
2023
|
b
|
|
56.5
|
85.2
|
|
Dividends paid during the
Year
|
c
|
|
4.2
|
4.2
|
|
Dividend/income adjustment
factor1
|
d
|
|
0.9875
|
0.9968
|
|
Adjusted closing e = (b +c) x
d
|
e
|
|
59.9
|
89.1
|
|
Total return
|
(e÷a)-1
|
|
-28.0%
|
-5.5%
|
1 The
dividend adjustment factor is calculated on the assumption that the
dividends paid out by the Company are reinvested into the shares of
the Company at share price and NAV at the ex-dividend
date.
|
|
|
|
Share price
|
|
|
Year ended 31 December 2022
|
|
|
(cents)
|
NAV (cents)
|
|
Opening at 1 January 2022
|
a
|
|
99.0
|
98.0
|
|
Closing at 31 December
2022
|
b
|
|
83.3
|
94.3
|
|
Dividends paid during the
Year
|
c
|
|
5.6
|
5.6
|
|
Dividend/income adjustment
factor1
|
d
|
|
0.9939
|
1.0010
|
|
Adjusted closing e = (b +c) x
d
|
e
|
|
88.3
|
100.0
|
|
Total return
|
(e÷a)-1
|
|
-10.8%
|
1.1%
|
Ongoing charges ratio
A measure, expressed as a percentage
of average NAV, of the regular, recurring annual costs of running
an investment company.
|
|
|
|
Year ended
|
Year ended
|
|
|
|
|
31 December
|
31 December
|
|
|
|
|
2023
|
2022
|
|
Average NAV ($'000)
|
a
|
|
124,293
|
129,345
|
|
Annualised expenses
($'000)
|
b
|
|
2,209
|
2,332
|
|
Ongoing charges
|
(b÷a)
|
|
1.78%
|
1.80%
|
FINANCIAL INFORMATION
|
Year ended 31 December
2023
|
|
|
|
The figures and financial
information for the year ended 31 December 2023 are extracted from
the Company's Annual Financial Statements for that period and do
not constitute statutory financial statements for that year. The
Company's Annual Financial Statements for the year ended 31
December 2023 have been audited but have not yet been delivered to
the Registrar of Companies. The Independent Auditor's Report on the
2023 Financial Statements was unqualified, did not include a
reference to any matter to which the Auditors drew attention
without qualifying the report, and did not contain any statements
under sections 498(2) and 498(3) of the Companies Act
2006.
|
|
|
|
|
|
Year ended 31 December
2022
|
|
|
The figures and financial
information for the period ended 31 December 2022 are extracted
from the Company's Financial Statements for that period and do not
constitute statutory financial statements for that year. The
Company's Annual Financial Statements for the year ended 31
December 2022 have been audited and delivered to the Registrar of
Companies. The Independent Auditor's Report on the 2022 Financial
Statements was unqualified, did not include a reference to any
matter to which the Auditors drew attention without qualifying the
report, and did not contain any statements under sections 498(2)
and 498(3) of the Companies Act 2006.
|
|
|
|
ANNUAL REPORT
The Annual Report for the year ended
31 December 2023 was approved on 26 April 2024. The full
Annual Report can be accessed via the Company's website
at: https://uk.ecofininvest.com/funds/ecofin-us-renewables-infrastructure-trust-plc/
The Annual Report will be submitted
to the National Storage Mechanism and will shortly be available for
inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
This announcement contains regulated
information under the Disclosure Guidance and Transparency Rules of
the FCA.
ANNUAL GENERAL MEETING
("AGM")
The AGM of Ecofin U.S.
Renewables Infrastructure Trust plc will be held at 6th Floor, 125
London Wall, London, EC2Y 5AS on 13 June 2024 at 3:00pm.
Even if Shareholders intend to
attend the AGM, all Shareholders are encouraged to cast their vote
by proxy and to appoint the "Chair of the Meeting" as their proxy.
Details of how to vote, either electronically, by proxy form or
through CREST, can be found in the Notes to the Notice of AGM in
the Annual Report.
26 April 2024
For further information
contact:
Company Secretary and registered
office:
Apex Listed Companies Services (UK)
Limited
6th Floor, 125 London Wall, London,
EC2Y 5AS