LEI: 254900V23329JCBR9G82
14 May 2024
Asian Energy Impact Trust plc
(the "Company" or "AEIT")
AUDITED RESULTS for year ended 31
DECEMBER 2023
Asian Energy Impact Trust plc, the renewable
energy investment trust providing direct access to sustainable
energy infrastructure in fast-growing and emerging economies in
Asia, announces its audited results for the year ended 31 December
2023 ("2023 Annual
Report").
Following this announcement, the 2023 Annual
Report will be uploaded to the National Storage Mechanism
immediately. On the same day, the Company will apply to the FCA for
the restoration of the listing and will make a further announcement
in due course.
FINANCIAL HIGHLIGHTS
|
|
As at
31 December 2023
(audited)
|
As at
31 December 2022
(audited)
|
|
GAAP Measures
|
|
|
|
Net assets - US$ million
|
81.5
|
86.6
|
|
Fair value of investment portfolio
- US$ million
|
42.1
|
11.5
|
|
Cash held at AEIT - US$
million
|
41.2
|
115.8
|
|
Dividends declared in respect of
the period - cents per share
|
1.3
|
2.5
|
|
Alternative Performance Measures
|
|
|
|
NAV per share - cents
|
46.4
|
49.3
|
|
NAV total return per share since
IPO
|
-51.5%
|
-49.2%
|
|
Gearing (as a % of Adjusted
GAV)
|
57%
|
27%
|
|
Ongoing charges ratio
|
3.58%
|
2.50%
|
IMPACT HIGHLIGHTS
|
|
As at
31 December
2023
|
As at
31 December
2022
|
|
Alternative Performance Measures
|
|
|
|
Total installed capacity
|
271MW
|
132MW
|
|
Renewable energy generated in the
period
|
391,683
MWh
|
85,199
MWh
|
|
Estimated tonnes of carbon avoided
from generated electricity
|
311,752
tCO2e
|
62,770
tCO2e
|
|
Jobs supported (full time
equivalents)
|
197
|
148
|
|
Investments qualifying as
sustainable in line with the EU Taxonomy
|
100%
|
100%
|
key points
·
As announced on 11 April 2024, having
undertaken a comprehensive strategic review of the options for the
Company's future and after consultation with its advisers and
having taken into account feedback from investors representing a
significant proportion of AEIT's issued share capital, the Board
concluded that it is in the best interests of shareholders as a
whole to put forward a proposal for the orderly realisation of
AEIT's assets. The proposal will seek to achieve a balance between
maximising the value of AEIT's investments and progressively
returning cash to shareholders in a timely manner. Details of this
proposal, which is subject to shareholder approval at a general
meeting of the Company expected to be held in Q2 2024, will be set
out in a separate circular to be sent to shareholders. For this
reason, the Financial Statements have been prepared on a basis
other than that of a going concern.
·
Net assets at 31 December 2023 of US$81.5
million (2022: US$86.6 million), being a NAV of 46.4 cents
per share (2022: 49.3 cents per share).
·
The unaudited NAV as at 31 December 2023,
which was announced on 13 March 2024, assumed commissioning
of the 200MW solar project that forms part of the Rewa Ultra Mega
Solar Park (the "RUMS
project") would occur in March 2024 based on the information
known regarding the project as at 31 December 2023. In the
announcement on 13 March 2024, it was noted that commissioning was
now expected to happen in May 2024 and that there would be a
further reduction in NAV of up to US$2.1 million in the event that
commissioning did not occur until June 2024. The audited NAV at 31
December 2023 reflects a downward movement of US$3.5 million from
the unaudited NAV as a result of an increased contingency,
principally due to the delays in construction in January and
February 2024, which were not within the control of SolarArise. The
increased contingency is based on commissioning now occurring in
June 2024 and does not impact the additional funding of up to
US$4.5 million for the RUMS project referred to below.
·
As at 31 December 2023, the Company had
cash reserves of US$41.2 million (2022:
US$115.8 million). During the 12 months ended 31 December 2023 the
Company: acquired the remaining 57% of SolarArise for US$38.5
million and 99.8% of Viet Solar System Company Limited for US$3.1
million; funded the construction of the RUMS project, via a US$20
million loan; paid dividends of US$4.4 million (2022: US$1.9
million); and paid recurring and exceptional running costs of the
Company. In March 2024, the Board agreed additional cash funding of
up to US$4.5 million to fund RUMS project delays and additional
costs.
· The
annualised ongoing charges ratio for the year was 3.6% (2022:
2.5%).
·
As at 31 December 2023, gearing in
AEIT's investment portfolio represented 57% (2022:
27%) of the Adjusted GAV.
Copies of the 2023 Annual Report will shortly
be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
and on the Company's website www.asianenergyimpact.com
Enquiries
|
Asian Energy Impact Trust
plc
Sue Inglis, Chair
|
Tel: +44 (0)20 3757
1892
|
|
Octopus Energy Generation (Transitional
Investment Manager)
Press
Office
|
Tel: +44 (0)20 4530
8369
aeit@octopusenergygeneration.com
|
|
Shore Capital (Joint Corporate
Broker)
Mark Percy / Gillian Martin / Rose Ramsden (Corporate)
|
Tel: +44 (0)20 7408
4050
|
|
Peel Hunt LLP (Joint Corporate
Broker)
Luke Simpson / Huw Jeremy (Investment Banking Division)
|
Tel: +44 (0)20 7418
8900
|
|
Smith Square Partners LLP (Financial
Advisor)
John Craven / Douglas
Gilmour
|
Tel: +44 (0)20 3696
7260
|
|
Camarco (PR
Advisor)
Louise Dolan / Eddie Livingstone-Learmonth
/ Phoebe Pugh
|
Tel: +44 (0)20 3757
4982
asianenergyimpacttrust@camarco.co.uk
|
About Asian Energy Impact Trust
plc
Asian Energy Impact Trust plc listed on the
premium segment of the main market of the London Stock Exchange in
December 2021 and was awarded the Green Economy Mark upon
admission. The Company is an Article 9 fund under the EU
Sustainable Finance Disclosure Regulation.
With effect from 1 November 2023,
the Company appointed Octopus Energy Generation as its transitional
investment manager.
Further information on the Company can be found
on its website at
www.asianenergyimpact.com.
About Octopus Energy
Generation
Octopus Energy Generation ("OEGEN") is driving the renewable
energy agenda by building green power for the future.
Its London-based, leading specialist renewable energy fund
management team invests in renewable energy assets and broader
projects helping the energy transition, across operational,
construction and development stages. The team was set up in 2010
based on the belief that investors can play a vital role in
accelerating the shift to a future powered by renewable energy. It
has a 13-year track record with approximately £6.7 billion of
assets under management (AUM) (as of December 2023) across 19
countries and total 3.7GW. These renewable projects generate enough
green energy to power 2.4 million homes every year, the equivalent
of taking over 1.4 million petrol cars off the road. Octopus Energy
Generation is the trading name of Octopus Renewables
Limited.
Further details can be found at www.octopusenergygeneration.com.
Overview
About the Company
Asian Energy Impact Trust plc
("AEIT" or the "Company", formerly ThomasLloyd Energy Impact Trust
plc) is a closed‑ended investment company incorporated in England
and Wales. The Company's ordinary shares were admitted to the
premium listing segment of the Official List of the Financial
Conduct Authority and to trading on the main market of the London
Stock Exchange on 14 December 2021.
Having undertaken a comprehensive
strategic review of the options for the Company's future and after
consultation with its advisers and having taken into account
feedback from investors representing a significant proportion of
AEIT's issued share capital, the Board has concluded that it is in
the best interests of shareholders as a whole to put forward a
proposal for the orderly realisation of AEIT's assets. The proposal
will seek to achieve a balance between maximising the value of
AEIT's investments and progressively returning cash to shareholders
in a timely manner. Details of this proposal, which is subject to
shareholder approval at a general meeting of the Company expected
to be held in Q2 2024, will be set out in a separate circular
to shareholders and will be made available on the Company's website
in due course.
This Annual Report and the
Company's website may contain certain 'forward-looking statements'
with respect to the Company's financial condition, results of its
operations and business, and certain plans, strategies, objectives,
goals and expectations with respect to these items and the markets
in which the Company invests. Forward-looking statements are
sometimes, but not always, identified by their use of a date in the
future or such words as 'aims', 'anticipates', 'believes',
'estimates', 'expects', 'intends', 'targets', 'objective', 'could',
'may', 'should', 'will' or 'would' or, in each case, their negative
or other variations or comparable terminology. Forward-looking
statements are not guarantees of future performance. By their very
nature forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
Many of these assumptions, risks and uncertainties relate to
factors that are beyond the Company's ability to control or
estimate precisely. There are a number of such factors that could
cause the Company's actual investment performance, results of
operations, financial condition, liquidity, dividend policy and
financing strategy to differ materially from those expressed or
implied by these forward-looking statements. These factors include,
but are not limited to: changes in the economies and markets in
which the Company operates; changes in the legal, regulatory and
competition frameworks in which the Company operates; changes in
the markets from which the Company raises finance; the impact of
legal or other proceedings against or which affect the Company;
changes in accounting practices and interpretation of accounting
standards under IFRS; and changes in power prices and interest,
exchange and discount rates. Any forward-looking statements made in
this Annual Report or the Company's website, or made subsequently,
which are attributable to the Company, or persons acting on its
behalf (including the Investment Manager), are expressly qualified
in their entirety by the factors referred to above. Each
forward-looking statement speaks only as of the date it is made.
Except as required by its legal or statutory obligations, the
Company does not intend to update any forward-looking statements.
Nothing in this Annual Report or the Company's website should be
construed as a profit forecast or an invitation to deal in the
securities of the Company.
2023 Performance Metrics
As at 31 December 2023
Financial
|
Capital raised to date
US$180.9m
(December 2022:
US$180.9m)
|
Net asset value ("NAV")
US$81.5m
(December 2022:
US$86.6m)
|
Gross asset value ("GAV")1,2
US$83.3m
(December 2022:
US$127.3m)
|
|
|
|
|
|
NAV per share2,3
46.4 cents
(December 2022: 49.3
cents)
|
Dividend per share4
1.32 cents
(December 2022: 2.5
cents)
|
Fair value of investment portfolio
US$42.1m
(December 2022:
US$11.5m)
|
|
|
|
|
|
NAV total return per share in the
year2
(3.6)%
(December 2022:
(49.2)%)
|
NAV total return per share since
IPO2
(51.5)%
(December 2022:
(49.2)%)
|
Adjusted gross asset value
("Adjusted GAV")2,5
US$193.1m
(December 2022:
US$173.3m)
|
|
|
|
|
|
Market capitalisation2
Shares suspended7
(December 2022:
US$207.3m)
|
Cash held at AEIT
US$41.2m
(December 2022:
US$115.8m)
|
Gearing ratio2,6
57%
(December 2022: 27%)
|
Impact8
|
Total installed capacity
271 MW
(December 2022: 132 MW)
|
Renewable energy generated in the year
391,683 MWh
(December 2022: 85,199
MWh)
|
Estimated tonnes of carbon avoided from generated
electricity
311,752 tCO2e
(December 2022: 62,770
tCO2e)
|
|
|
|
|
|
GHG intensity of investee companies
tCO2e/USDm9
82.6
(December 2022: 35.9)
|
Jobs supported (full time equivalents)
197
(December 2022: 148)
|
Investments qualifying as sustainable (EU
Taxonomy)
100%
(December 2022: 100%)
|
|
|
|
|
1 GAV is the value of all
assets of the Company, being the sum of all investments held in the
investment portfolio at the balance sheet date together with any
cash and cash equivalents.
2 An alternative
performance measure ("APM").
3 Calculated on the basis
of 175,684,705 ordinary shares in issue.
4 Total dividends declared
in relation to the year ended 31 December 2023.
5 Adjusted GAV is GAV plus
proportionate share of asset level debt.
6 Group debt and non-Group
investment debt (calculated on a proportionate basis) as a % of
Adjusted GAV.
7 As at 31 December 2023,
the Company's shares were temporarily suspended. The suspension was
lifted on 6 March 2024 and at close on that day the market
capitalisation was US$52.7 million.
8 These metrics have been
proportioned to account for AEIT's share of its investment
portfolio during the reporting period.
9 In 2023, the GHG
intensity of AEIT's investee companies has been calculated using
Scope 1 and market-based Scope 2 emissions. In 2022, this KPI was
calculated using Scope 1 and location-based Scope 2 emissions.
Using a location-based method, the GHG intensity of AEIT's investee
companies in 2023 was 42.76 tCO2e/$m revenue.
Investment Portfolio at a Glance
As at 31 December 2023
The Company has investments in
three countries across 11 solar operating assets, one construction
asset and one development project.
|
Strategy
|
Technology
|
Country
|
Sites
|
Revenue type
|
Capacity
|
Average remaining
asset life
|
Economic ownership
|
|
NISPI
|
Solar
|
Philippines
|
3 operational
|
Wholesale electricity
market
|
80MW
|
19 years
|
40%
|
|
SolarArise
|
Solar
|
India
|
6 operational
1 construction
1 development
|
25-year fixed-price PPA
|
233MW
200MW
150MW
|
21 years
|
100%
|
|
VSS
|
Solar
|
Vietnam
|
2 operational
|
20-year PPA
|
6MW
|
17 years
|
99.8%
|
Strategic Report
Chair's Statement
I am pleased to present the Annual
Report for Asian Energy Impact Trust plc for the year ended 31
December 2023. The difficulties of the past year, notably
navigating the complexities of the RUMS project (a 200 MW
construction-ready asset in our SolarArise investment in India),
valuation uncertainties, the breakdown in the relationship with the
Former Investment Manager, resulting general meetings and wind-up
resolution, have been significant. However, they have been
instrumental in establishing a firmer foundation from which we can
assess this year's performance. The resolution of these issues,
particularly the resolution regarding the RUMS project and the
transition to a new Investment Manager, marked a crucial step in
realigning our operational focus and governance. As outlined below,
the suspension of listing of the Company's shares was lifted on 6
March 2024. Due to a small number of outstanding points in respect
of the Company's Annual Report and audit for the year ended 31
December 2023 we were not able to publish the Annual Report by the
required regulatory deadline of 30 April 2024, resulting in the
suspension of the listing of and trading in the Company's shares
since 7.30am on 1 May 2024. Now that the Annual Report has been
published in accordance with the Company's obligations, we will
move expeditiously to apply to the FCA for a restoration of the
Company's listing.
Against the backdrop of the issues
referred to above, the Board undertook a comprehensive
strategic review of the options for the Company's
future. The Board announced that, after consultation with its
advisers and having taken into account feedback from investors
representing a significant proportion of AEIT's issued share
capital, the Board had concluded that it is in the best interests
of shareholders as a whole to put forward a proposal for the
orderly realisation of AEIT's assets. The proposal will seek to
achieve a balance between maximising the value of AEIT's
investments and progressively returning cash to shareholders in a
timely manner. This proposal is subject to shareholder approval at
a general meeting of the Company expected to be held in Q2
2024.
What follows below is a review of
the year ended 31 December 2023 and the outlook for the Company in
light of the outcome of the strategic review.
Impact
Despite the challenges there are
some positives to reflect upon. The Company was launched in
response to investor interest in an impact-led investment trust
focused solely on fast-growing and emerging economies in Asia where
greenhouse gas emissions ("GHG") continue to grow rapidly. At IPO,
the Company was the first, and it continues to be the only,
London-listed investment company focused on Asia, being the region
with the most urgent need for investment in sustainable energy
infrastructure and where capital invested can have the greatest
impact.
A significant highlight is our
investment in NISPI. This project is enabling real social impact
through its many projects that include gardening and livelihood
programmes, health and wellness and educational outreach to name
but a few. These projects are enabling us to extend our United
Nations Sustainable Development Goals ("UN SDGs") impact to
contribute to nine goals in total. In aggregate, the Company's
investments generated clean energy that avoided 311,752
tCO2e
of greenhouse gas emissions and supported 197 full time equivalent
jobs. Once the RUMS project becomes operational, the avoided
greenhouse gas emissions are expected to increase to 564,624
tCO2e.
Investment activity
The Company completed two
transactions during the year. The first involved increasing our
stake in SolarArise India Projects Private Limited ("SolarArise"),
an Indian solar energy platform with a total capacity of 433 MW,
including six operating plants totalling 233 MW, one
construction-ready 200 MW project and one 150 MW development
project. We acquired an initial 43% interest in August 2022
for US$32.9 million, followed by the acquisition of the remaining
57% for US$38.5 million on 13 January 2023, having committed to
acquire this stake in June 2022. As at 31 December 2022, the
Company had identified an onerous contract in respect of the
committed 57% acquisition since the fair value of that interest was
lower than the US$38.5 million consideration to be paid to acquire
it, primarily due to potential abandonment liabilities relating to
the RUMS project. This provision was utilised following acquisition
during 2023. The Company is now the sole owner of
SolarArise.
On 1 November 2022, we committed
to acquiring Viet Solar System Company Limited ("VSS"), which owns
6.12 MW of rooftop solar assets, for US$3.1 million. This
acquisition, finalised on 31 May 2023, resulted in a 99.8%
ownership interest in VSS, marking our entry into the Vietnamese
solar market.
Following the suspension of
trading in the Company's shares in April 2023, the Board suspended
all new investment activity. The suspension of new investment
activity will become permanent if shareholders approve the Board's
recommended orderly realisation proposal. Further investment or
capital expenditure into existing assets will be permitted in order
to meet existing commitments, preserve or enhance the value of such
investments or to facilitate an orderly disposal.
In terms of pre-operational
investments, on 11 October 2023, the Board decided to proceed with
the construction of the RUMS project, considering it the most
viable option to minimise value erosion for our shareholders. We
committed up to US$20 million in funding for this project through
an INR-denominated external commercial borrowings loan from AEIT to
SolarArise, with US$19.8 million disbursed on 18 October 2023. In
March 2024, the Board approved additional funding of up to US$4.5
million to fund RUMS project delays and additional costs. In
addition, on 1 August 2023, our only development project (the "TT8
project"), a 150 MW DC solar PV project held by a SPV of
SolarArise, signed a 25-year power purchase agreement with
Maharashtra State Electricity Distribution Company Limited, having
successfully participated in the relevant auction in November
2022.
Portfolio performance
The electricity generation across
our portfolio totalled 391,683 MWh, falling short of our budgeted
projections, which included haircuts to original forecasted
generation. SolarArise and NISPI experienced generation decreases
more significant than anticipated, notably due to lower than
forecast irradiance and site-specific issues, whereas VSS
outperformed expectations. The financial outcomes were also less
favourable, with turnover and EBITDA being below budgets primarily
due to government rebates forecasted in the SolarArise operational
SPVs which were not realised, as well as additional unbudgeted
costs incurred by the SolarArise holding company.
Construction of the RUMS project
commenced in November 2023. The solar modules have arrived on site,
alongside most of the other equipment needed to build the solar
farm. Installation of the module mounting structure for the panels
is in progress. After initial construction progress, post the year
end, issues between the landowner of the Rewa Ultra Mega Solar Park
and the surrounding farmers, which were outside of the control of
the Company, in January and February 2024 delayed construction
work. While these delays pose potential cost implications, our
Transitional Investment Manager, technical adviser and local asset
manager are working tirelessly with the contractors to mitigate
risks to project delivery. It is expected that commissioning
will now occur in June 2024.
Results
The NAV of the Company at 31
December 2023 was US$81.5 million, a reduction of US$5.1 million in
the year.
The unaudited NAV as at 31
December 2023, which was announced on 13 March 2024, assumed
commissioning of the RUMS project would occur in March 2024 based
on the information known regarding the project as at 31 December
2023. In the announcement on 13 March 2024, it was noted that
commissioning was now expected to happen in May 2024 and that there
would be a further reduction in NAV of up to US$2.1 million in the
event that commissioning did not occur until June 2024. The
audited NAV at 31 December 2023 reflects a downward movement of
US$3.5 million from the unaudited NAV as a result of an increased
contingency, principally due to the delays in construction in
January and February 2024, which were not within the control of
SolarArise. The increased contingency is based on
commissioning now occurring in June 2024 and does not impact the
additional funding of up to US$4.5 million for the RUMS project
referred to above.
The Company had a cash balance of
US$41.2 million at the year end. The Company had no gearing and
gearing on a 'look-through' basis to its underlying investments was
57% of Adjusted GAV at 31 December 2023.
The annualised ongoing charges
ratio was 3.6% at the year end. In view of the Company's
substantially reduced size, we are endeavouring to reduce costs
wherever possible. Of course, the ongoing charges ratio
does not include the substantial additional
professional costs that the Company has incurred over the last 12
months as a result of the challenges it faced. The Board is
currently investigating the Company's right to seek compensation
for these additional professional costs, as well as material asset
value loss that it has suffered, whilst reserving all of the
Company's other rights.
The Company's revenue for the year
was US$5.7 million, giving rise to a loss for the period of US$0.6
million. This was mainly driven by a positive valuation movement on
investments during the year, details of which can be found in the
'Portfolio Valuation' section of the Strategic Report, which were
offset by total costs of US$7.3 million of which US$4.2 million
were exceptional costs incurred following the temporary share
suspension.
Dividends totalling 1.32 cents per
share have been paid in respect of the period 1 January 2023 to 30
September 2023. All dividends were paid out of the Company's
distributable capital reserves. Upstreaming cash back to the UK
from some of the underlying assets is either subject to
restrictions, currently not legally possible or subject to
significant tax leakage under the current structures. A core
priority for 2024 will be to undertake capital restructurings to
mitigate the current issues. EBITDA from the Company's operational
assets over the year, including costs within the SolarArise holding
company, was US$29.0 million10 compared to the aggregate
cost of dividends paid to shareholders in respect of the year of
US$2.3 million. A quarterly dividend has not been paid or proposed
in respect of the quarter ended 31 December 2023.
Temporary share suspensions
Following the publication on 22
January 2024 of both the annual report and accounts for the period
ended 31 December 2022 and the interim report for the period ended
30 June 2023, as well as the publication of the Company's updated
key information document on 5 March 2024, the suspension of the
listing of the Company's shares was lifted and trading restored
with effect from 6 March 2024. Disappointingly, due to a small number of outstanding points
in respect of the Company's Annual Report and audit for the year
ended 31 December 2023 we were not able to publish the Annual
Report by the required regulatory deadline of 30 April 2024,
resulting in the suspension of the listing of and trading in the
Company's shares since 7.30am on 1 May 2024. Now that the Annual
Report has been published in accordance with the Company's
obligations, we will move expeditiously to apply to the FCA for a
restoration of the Company's listing.
Status of strategic review
As stated above, following a
comprehensive strategic review, we have
concluded that an orderly realisation of AEIT's assets to be
effected in a manner that seeks to achieve a balance between
maximising the value of its investments and progressively returning
cash to shareholders in a timely manner, is in the best interests
of shareholders as a whole.
It is intended that, subject to
shareholders approving the orderly realisation proposal, the
Transitional Investment Manager, will be appointed to continue to
manage AEIT's investments and their orderly realisation.
If the orderly realisation
proposal is approved by shareholders, it is currently expected that
surplus cash will be returned to shareholders from time to time in
the form of capital rather than dividends and that dividends, if
any, will be paid on an ad hoc basis.
Details of the orderly realisation
proposal, which is subject to shareholder approval at a general
meeting of the Company expected to be held in Q2 2024, will be set
out in a separate circular to shareholders and will be made
available on the Company's website in due course.
Outlook
Subject to shareholders approving
the proposal for the realisation of AEIT's assets, the Company's
focus will be to conduct an orderly realisation of the Company's
assets in a manner that seeks to achieve a balance between
maximising the value of its investments and progressively returning
cash to shareholders in a timely manner. In the meantime, our
Transitional Investment Manager will continue to provide the active
management needed, including pursuing portfolio optimisation
opportunities.
In addition, the Company will
continue to investigate its right to seek compensation for the
material asset value loss that is has suffered and the additional
professional fees that it has incurred over the last 12 months
whilst reserving all the Company's other rights.
On behalf of the Board, I thank
shareholders for their continued support of the Board throughout
the numerous general meetings held in 2023 and also for their
levels of engagement with the Board during the last 12
months.
Sue Inglis
Chair
13 May 2024
10 EBITDA generated from 1 January 2023
for NISPI and SolarArise and date of ownership (31 May 2023) for
VSS, pro rated for economic ownership.
Our Operating Model
AEIT was incorporated as a public
company limited by shares and carries on business as an investment
trust within the meaning of section 1158 of the Corporation Tax Act
2010. The Company's shares were admitted to trading on the premium
segment of the main market of the London Stock Exchange on 14 December 2021.
The Company invests in sustainable
energy infrastructure assets, with a geographic focus on
fast-growing and emerging economies in Asia. Assets within the
investment portfolio are held through locally incorporated holding
companies or special purpose vehicles ("SPVs"). Following the suspension of trading in the Company's shares
in April 2023, the Board suspended all new investment activity. The
suspension of new investment activity will become permanent if
shareholders approve the Board's recommended orderly realisation
proposal.
At 31 December 2023, the Company
owned, in India, six solar assets with 233MW is the total of all
assets, but this is specifically for India 233 MW of operational
capacity, one 200 MW construction-ready asset (the "RUMS project")
and one 150 MW development project (the "TT8 project") (held across
nine SPVs) and, in the Philippines, a 40% interest in three
operational solar assets (held within one SPV) with 80 MW of
operational capacity. In addition, the Company owned indirectly
through its UK intermediate holding company, AEIT Holdings Limited
("AEIT Holdings"), a 99.8% interest in two Vietnamese solar assets
with 6 MW of operational capacity (held across five
SPVs).
External debt financing is only at
locally incorporated holding company or SPV levels. At 31 December
2023, this comprised outstanding principal amounts of US$109.8
million in the Indian and Vietnamese solar portfolios, representing
a gearing ratio of 57%11.
The Company has a 31 December
financial year end . The Company initially paid dividends
quarterly, targeting payments in March, June, September and
December each year. A dividend has not been paid or proposed in
respect of the quarter ended 31 December 2023 and, subject to
shareholders approving the orderly realisation proposal at a
general meeting of the Company expected to be held in Q2 2024, the
Company's priority will be to achieve a balance between maximising
the value of its investments and progressively returning cash to
shareholders in a timely manner. It is currently expected that
surplus cash will be returned from time to time in the form of
capital rather than dividends and that any dividends will be paid
on an ad hoc basis.
The Company has an independent
board of non-executive directors and has appointed Adepa Asset
Management S.A as its Alternative Investment Fund Manager (the
"AIFM") to provide portfolio and risk management services to the
Company. The AIFM has delegated the provision of portfolio
management services to the Investment Manager. For the period from
IPO to 31 October 2023, the Investment Manager was ThomasLloyd
Global Asset Management (Americas) LLC (the "Former Investment
Manager"). From 1 November 2023, Octopus Renewables Limited,
trading as Octopus Energy Generation ("OEGEN" or "Octopus Energy
Generation"), was appointed as a transitional Investment Manager
(the "Transitional Investment Manager") for the Company and assumed
all day-to-day portfolio management responsibilities for the
Company from this date. OEGEN has been appointed for an initial
six-month term until 30 April 2024. Following the end of the
initial term, OEGEN's appointment will be extended to the date of
the general meeting of the Company at which shareholders will be
asked to vote on the orderly realisation proposal, which is
expected to be held in Q2 2024. It is
intended that, subject to shareholders approving the orderly
realisation proposal, the Transitional Investment Manager, will be
appointed to continue to manage AEIT's investments and their
orderly realisation.
As an investment trust, the
Company does not have any employees and is reliant on third-party
service providers for its operational requirements. With the
exception of NISPI, the SPVs do not have any direct employees and
services are provided through third-party service providers. The
AEIT Management Engagement Committee (the "MEC") reviews the
service levels and performance of the Company's key service
providers at least annually, as described in the Management
Engagement Committee Report. In the previous period, the MEC
identified the top priorities for improving the performance of the
Former Investment Manager during 2023, including improving the
robustness of the Former Investment Manager's internal processes,
significantly enhancing the quality, transparency and timeliness of
management and other information and continuing to add strength in
depth to the teams responsible for the Company. During the year, a
decision was taken to terminate the appointment of the Former
Investment Manager and Octopus Energy
Generation was appointed as the Transitional Investment Manager
from 1 November 2023. Following the end of the initial term,
OEGEN's appointment will be extended to the date of the general
meeting of the Company at which shareholders will be asked to vote
on the orderly realisation proposal, which is expected to be held
in Q2 2024.
11 See APM calculation.
Objectives and KPIs
During the year under review (and
until the proposed realisation strategy has been approved by
shareholders), the Company had a triple return investment objective
which consists of: (i) financial return; (ii) environmental return;
and (iii) social return.
|
Objective
|
KPI
|
Performance commentary
|
|
Financial return12
· Target annual dividend yield (based on the IPO price) of 2-3%
for 2022, 5-6% for 2023 and at least 7% for 2024, with the aim of
progressively increasing the nominal target thereafter
· Target 10-12% NAV return per annum (based on the IPO price)
once the investment portfolio is fully operational on a fully
invested and geared basis
· Over
the medium term (from IPO), target annual dividends fully covered
by EBITDA from the operational assets that results from the MWh of
clean energy generated; in the short term, the Directors may
determine to pay all or part of any dividend from capital
reserves
|
1.32 cents per share dividend paid
in respect of the year ended 31 December 2023, equivalent to a
yield of 1.3% based on the IPO price
NAV per share of 46.4 cents at
31 December 2023, a -3.6% return in the year and a -51.5%
return based on the IPO price
EBITDA from the Company's
investment portfolio over the
year, was US$18.0
million13 compared to the aggregate cost of dividends paid to
shareholders in respect of the period of US$2.3 million
391,683 MWh clean energy
generated
|
The Company generated loss of
US$0.6 million in the year, driven largely by an increase in the
fair value of investments since 31 December 2022, offset by
exceptional costs of US$4.2 million incurred as a result of the
temporary share suspension.
The NAV total return since IPO is
extremely disappointing and reflects the material decline in the
Company's investment portfolio valuation since IPO.
The Transitional Investment
Manager is exploring ways to optimise value throughout the
investment portfolio and the Board is seeking to reduce costs at
the Company level.
A dividend has not been paid or
proposed in respect of the quarter ended 31 December 2023 and,
subject to shareholders approving the orderly realisation proposal
at a general meeting of the Company expected to be held in Q2 2024,
the Company's priority will be to achieve a balance between
maximising the value of its investments and progressively returning
cash to shareholders in a timely manner. It is currently expected
that surplus cash will be returned from time to time in the form of
capital rather than dividends and that any dividends will be paid
on an ad hoc basis.
|
|
Environmental return
· Protecting natural resources and the environment with
significant greenhouse gas avoidance
|
271 MW installed operational
capacity (AEIT's share)
311,752
tCO2e14
100% EU Taxonomy
alignment
|
The 271 MW of installed capacity
avoids GHG emissions through the generation of clean
energy.
The 311,752 tonnes of GHG
emissions avoided is equivalent to avoiding the amount of emissions
associated with 158,265 cars on the road in the
UK15.
100% of investments substantially
contribute to climate change mitigation in line with the EU
Taxonomy criteria.
|
|
Social return
· Delivering economic and social progress, helping build
resilient communities and supporting purposeful activity - aligned
with the UN Sustainable Development Goals
|
197 FTEs (employment directly
supported full time equivalent jobs16)
Alignment with 9 SDGs
|
The portfolio provided social
returns through the creation and support of quality jobs. As at 31
December 2023 the portfolio directly supported 197 full time
equivalent jobs, helping to ensure the Just Transition.
Investments made purposeful
contributions to SDGs 7 (affordable and clean energy), 8 decent
work and economic growth), 13 (climate action) and 15 (life on
land). Impact initiatives contributed to SDGs 2 (zero hunger),
3 (good health and well‑being), 11 (sustainable cities
and communities), 12 (responsible consumption and production) and
17 (partnerships for the goals).
|
12 Having undertaken a strategic review
of the options for the Company's future, the Board is recommending
a proposal for the orderly realisation of assets and liquidation of
the Company. Details of this proposal, which is subject to
shareholder approval at a general meeting of the Company expected
to be held in Q2 2024, will be set out in a circular to
shareholders and will be made available on the Company's website in
due course.
13 EBITDA generated from 1 January 2023
for NISPI and SolarArise and 31 May 2023 for VSS, pro-rated for
economic ownership where applicable.
14 Carbon avoided calculated using the
International Financial Institution's approach for harmonised GHG
accounting.
15 Equivalent cars calculated using a
factor for displaced cars derived from the UK government GHG
Conversion Factors for Company Reporting.
16 Total FTE jobs supported as at 31
December 2023 through AEIT's proportional share of the NISPI,
SolarArise and VSS portfolios.
Investment Strategy and Policy17
The Company seeks to achieve its
investment objective by investing directly, predominantly via equity and equity-like
instruments, in a diversified portfolio of
unlisted sustainable energy infrastructure assets in the areas of
renewable energy power generation, transmission infrastructure,
energy storage and sustainable fuel production ("Sustainable Energy Infrastructure Assets"), with a
geographic focus on fast-growing and emerging economies in Asia.
The Company aims to adopt a
socially and environmentally responsible investment approach that
is geared towards sustainable business values and which reduces investment risk through
diversification across countries, sectors and
technologies.
Investment restrictions
The Investment Manager will ensure
that the Company's portfolio is diversified, so as to ensure a
sufficient diversification of investment risk, while also taking into account ESG criteria in making
its investment decisions.
The following specific investment
restrictions apply to the Company:
· the
Company will only invest in sustainable energy infrastructure
assets situated in fast-growing and emerging countries in
Asia;
· in
relation to: (i) the Company's investments in sustainable energy
infrastructure assets situated in any single country; (ii) the
Company's investment in any single
sustainable energy infrastructure asset;
and (iii) the Company's investments in sustainable energy infrastructure
assets under contract with any single governmental or
quasi‑governmental offtaker, the relevant
investment restriction will vary depending on the Company's NAV,
as follows:
|
|
% of Company's
GAV
|
|
|
|
Exposure
|
Exposure
|
|
|
|
to single
|
to single
|
|
|
|
sustainable
|
governmental
|
|
|
|
energy
|
or quasi-
|
|
|
Exposure to
|
infrastructure
|
governmental
|
|
Company's NAV
|
single
country
|
asset
|
offtaker
|
|
Up to and including
|
50%
|
25%
|
25%
|
|
US$1 billion
|
|
|
|
|
Above US$1 billion and up to and
including US$3 billion
|
40%
|
20%
|
20%
|
|
Above US$3 billion
|
30%
|
15%
|
15%
|
· due
to the exceptional circumstances of avoiding the greater value
destruction associated with abandoning the RUMS project rather than
proceeding with construction, assessment of the single country
limit will exclude any funds invested in the RUMS project up to
completion of commissioning. The Company's assessment of the single
country limit as set out in the table above will otherwise apply
and, from the point of making the decision to commit to construct
the RUMS project, no further sustainable energy infrastructure
assets shall be acquired, or projects committed to, with exposure
to India until the Company is in compliance with that
limit;
· the
Company's investments in sustainable energy infrastructure assets
under contract with any single private offtaker will not exceed 20%
of GAV for investment grade offtakers and 10% of GAV for
non-investment grade offtakers;
· the
Company will only invest in countries which the Investment Manager
considers as having a stable political system and a transparent and
enforceable legal system and which recognise the rights of foreign
investors;
· the
Company will only invest in operational assets, or in construction
phase assets where: (i) an offtake agreement has been entered
into; (ii) the land on which the
sustainable energy infrastructure asset is situated
is identified or contractually secured where
appropriate; and (iii) all relevant permits have been
granted;
· the
Company will only invest in technologies, such as solar panels,
wind turbines, boilers and steam turbine generators, the commercial
use of which has already been proven;
· the
Company will only hold investments that are denominated in
currencies which are freely transferable;
· the
Company will not invest in other externally managed investment
companies or collective investment schemes; and
· the
Company will not typically provide funding for development or
pre-construction projects and any such funding will, in any event,
not exceed 5% of GAV in aggregate and 2.5% of GAV per development
or pre-construction project and would only be undertaken when
supported by customary security.
The investment restrictions and
limits set out above will be measured at the time of the relevant
investment. These investment restrictions and limits apply to the
Group (comprising the Company and its proportionate
interest in investments, intermediate holding
companies and project SPVs) as a whole on a 'look-through'
basis. Where the Company holds its
interest in sustainable energy infrastructure
assets through a project SPV, the
investment restrictions and limits will apply directly to the
underlying sustainable energy
infrastructure asset as if it was held directly by the Company,
save where the relevant project SPV is part of a co-obligor group
with other project SPVs in which case any co‑obligor group will
be assessed on an aggregated basis as set
out below under 'Gearing'.
The Company will not be required
to dispose of any investment or to
rebalance the investment portfolio as a result of a change in
the respective valuations of its assets. However, in such
circumstances, the Investment Manager will
take such steps as it considers appropriate to enable the Company to comply with its investment
restrictions, unless the Investment
Manager reasonably believes that doing so would be prejudicial to
the interests of the Company and its shareholders as a
whole.
17 Having undertaken a strategic review
of the options for the Company's future, the Board is recommending
a proposal for the orderly realisation of assets and
liquidation of the Company. Details of this proposal, which is
subject to shareholder approval at a general meeting of the Company
expected to be held in Q2 2024, will be set out in a circular to
shareholders and will be made available on the Company's website in
due course.
Gearing
Subject to the limits set out
below, the Company will maintain gearing at a level which the
Directors and the Investment Manager consider to be appropriate in
order to enhance returns and to provide flexibility to make
investments and for cash management purposes.
Gearing will not be employed at
the level of the Company and will generally be employed at the
level of the relevant project SPV or intermediate holding company.
The level of long-term gearing to be employed in relation to any
project SPV or intermediate holding company will be assessed so
that it is commensurate with the terms of the offtake agreement for
the underlying sustainable energy infrastructure asset. Gearing,
save for construction projects where the guarantee of the
intermediate holding company is required, will generally be
structured as non-recourse finance, typically at the level of the
relevant project SPV or intermediate holding company, including but
not limited to bank borrowings, public bond issuance or private
placement borrowings, provided that aggregate borrowings across all
project SPVs and intermediate holding companies will not exceed 65%
of the sum of: (i) the Company's GAV; (ii)
the aggregate borrowings of the Company's intermediate holding
companies; and (iii) the Company's proportionate share of
borrowings at the level of its sustainable energy infrastructure
assets (the "Adjusted GAV"), with the Company targeting below 50%
in the medium term. This limit will be measured based on the
Adjusted GAV at the time any project SPV or intermediate holding
company enters into the relevant facility.
Although co-obligor guarantee
arrangements between multiple SPVs will normally be avoided, any
such arrangements will be considered as bringing the SPVs concerned
into a single asset and, therefore, subject to the single
sustainable energy infrastructure asset restriction referred to in
the table above at the time that such arrangement is entered
into.
No financing arrangements on a
cross border basis between the Company's subsidiaries will be
entered into, so keeping the Company's various pools of assets and
liabilities insulated within their own geographies.
The Company expects all borrowings
to be denominated in the currency of the relevant sustainable
energy infrastructure asset or US Dollars to help offset any
foreign currency exposure. In addition, borrowings will typically
be amortising over the term of the associated offtake
agreement.
For the avoidance of doubt, any
investments by the Company in project SPVs or intermediate holding
companies which are structured as debt will not be considered
gearing for these purposes and, therefore, will not be subject to
the restrictions set out above.
Cash management policy
Whilst it is the intention of the
Company to be fully or near fully invested or contractually
committed in normal market conditions, the Company may in its
absolute discretion decide to hold cash on deposit or invest in
cash equivalent investments, which may include short-term
investments in money market funds and tradeable debt securities
("Cash and Cash Equivalents"). There is no restriction on the
amount of Cash and Cash Equivalents that the Company may hold and
there may be times when it is appropriate for the Company to have
significant holdings of Cash and Cash Equivalents instead of being
fully or near fully invested or contractually committed. No
financial transactions are permitted with counterparties with a
credit rating of less than BBB- from Standard & Poor's or Baa3
from Moody's.
Changes to investment policy
No material change will be made to
the Company's investment policy without the prior approval of
shareholders by ordinary resolution and the prior approval of the
FCA. Any changes to the Company's investment policy are also
required to be notified to HMRC in advance of the filing date for
the accounting period in which the investment policy is
amended (together with details of why the
change does not impact the Company's status as an investment
trust).
Timeline of Key Events in the Year
|
Date
|
Event
|
|
13 January 2023
|
Completion of the acquisition of
the remaining 57% economic interest in SolarArise.
|
|
25 April 2023
|
Temporary share suspension at the
Company's request due to a material uncertainty regarding the fair
value of its assets and liabilities, in particular with regard to
the RUMS project.
|
|
31 May 2023
|
Decision not to proceed with
construction of the RUMS project, predominantly due to high solar
panel prices.
Completion of the acquisition of
the 99.8% economic interest in VSS and its two solar power
projects.
|
|
30 June 2023
|
Annual General Meeting
held.
|
|
|
Alongside the standard annual
resolutions to re-elect the Board, which were passed, in accordance
with the commitment in the Company's IPO prospectus, a Continuation
Resolution was due to be proposed as 75% of the net IPO proceeds
had not been deployed within 12 months of admission to
trading. The AGM was adjourned prior to the Continuation Resolution
being proposed.
|
|
12 July 2023
|
Company announced that the final
portfolio valuation as at 31 December 2022 could reflect a material
downward movement that would be in addition to the costs written
off and potential abandonment liabilities associated with not
proceeding with the RUMS project.
|
|
1 August 2023
|
AEIT's only development project
(the "TT8 project"), a 150 MW DC solar PV project held by an SPV of
SolarArise, signed a power purchase agreement with Maharashtra
State Electricity Distribution Company Limited.
|
|
15 August 2023
|
Company announced receipt of new
information under protections of its whistleblowing policy
revealing that the Former Investment Manager was aware of material
information relating to the RUMS project by August 2022 and,
therefore, it appeared that key information had been withheld from
the Board, and misleading information given to it, over a
protracted period of time.
|
|
24 August 2023
|
Shareholders representing 58% of
the votes cast (and a majority of the issued share capital) voted
against the Continuation Resolution, in line with the Board's
recommendation. As a result, the Board was required to bring
forward proposals for the reconstruction, reorganisation or
winding-up of the Company for shareholder approval within four
months.
Strategic review of options for
the Company's future commenced.
|
|
15 September 2023
|
Company served notice terminating
ThomasLloyd Global Asset Management (Americas) LLC's appointment as
Investment Manager with effect from 31 October 2023.
|
|
25 September 2023
|
Shareholders representing
approximately 54% of the Company's total issued share capital
supported the current Board and the resolutions to replace the
current Board were not passed.
|
|
11 October 2023
|
Decision to proceed with the RUMS
project due to it now being the least value destructive option for
shareholders, predominantly due to a material fall in solar panel
prices.
|
|
27 October 2023
|
Company changed its name to Asian
Energy Impact Trust plc.
|
|
31 October 2023
|
Shareholders representing 91% of
the issued share capital voted in favour of changes to the
Company's investment policy (to avoid any potential breach of the
single country limit as a consequence of proceeding with the RUMS
project and make clarificatory changes to the gearing policy), in
line with the Board's recommendation.
Termination of the Former
Investment Manager's appointment effective.
|
|
1 November 2023
|
Octopus Energy Generation
appointed as Transitional Investment Manager.
AEIT launched a new corporate
website.
|
|
13 December 2023
|
Unaudited NAV as at 30 September
2023 announced of US$88.5 million (50.4 cents per
share).
Company announced that moving
forward with the development of the TT8 project whilst the
strategic review was underway may not be the best option for the
Company.
|
|
19 December 2023
|
Shareholders representing 83% of
the votes cast (and 69% of the issued share capital) voted against
a resolution to wind up the Company, in line with the Board's
recommendation.
|
|
Material events post year end
|
|
|
22 January 2024
|
Company published its 2022 Annual
Report and its unaudited 2023 Interim Report.
|
|
27 February 2024
|
Accounts General Meeting
held.
|
|
6 March 2024
|
Share suspension lifted and
trading in shares recommenced.
|
|
13 March 2024
|
Unaudited NAV of US$85.0 million
(48.4 cents per share) as at 31 December 2023 announced.
|
|
11 April 2024
|
Result of the strategic review
announced. Following consultation with advisers, and having taken
into account feedback from investors representing a significant
proportion of AEIT's issued share capital, the Board concluded that
it is in the best interests of shareholders as a whole to put
forward a proposal for the orderly realisation of AEIT's assets and
progressive return of surplus cash to shareholders in a timely
manner.
|
|
22 April 2024
|
It was announced that Kirstine
Damkjaer will resign from her directorship with effect from 30
April 2024. Following her appointment to a full-time position, she
intends to step down from all her non-executive positions as soon
as practicable.
|
|
30 April 2024
|
Kirstine Damkjaer resigned as a
director of the Company, in line with the announcement on 22 April
2024.
|
|
1 May 2024
|
Temporary suspension of the
Company's shares due to the Company being unable to publish its
annual report and accounts for the year ended 31 December 2023 by
the required regulatory deadline of 30 April 2024.
|
Further information on the most
material events are outlined below.
Temporary share suspensions
On 25 April 2023 the Company
announced a temporary suspension in the listing of, and trading in,
the Company's shares (the "temporary share suspension"). The
temporary share suspension was at the Company's request due to a
material uncertainty regarding the fair value of its assets and
liabilities, in particular with regard to the 200 MW
construction-ready RUMS project, which was acquired as part of the
SolarArise portfolio. Further work was required to assess the
quantum of the liabilities and commercial viability of the project.
Due to this, the Company was unable to finalise its 2022 Annual
Report within four months after the accounting period end date, as
required by the FCA's Disclosure Guidance and Transparency Rules.
Following publication of the Company's 2022 Annual Report,
unaudited 2023 Interim Report and updated key information document,
the temporary share suspension was lifted, and trading in AEIT's
shares recommenced, on 6 March 2024.
Due to a small number of
outstanding points in respect of the Company's Annual Report and
audit for the year ended 31 December 2023 the Company was not able
to publish the Annual Report by the required regulatory deadline of
30 April 2024, resulting in the suspension of the listing of and
trading in the Company's shares since 7.30am on 1 May 2024. Now
that the Annual Report has been published in accordance with the
Company's obligations, the Board will move expeditiously to apply
to the FCA for a restoration of the Company's listing.
The RUMS project
Following the temporary share
suspension, the Board appointed independent advisors to undertake
detailed reviews of the liabilities associated with abandoning the
RUMS project and the Company's options for the project (including
proceeding with constructing it or abandoning it). In parallel, the
Former Investment Manager re-evaluated the options for the RUMS
project, including the funding requirement in the event of
proceeding with construction. Based on the reviews undertaken at
that time, and the information provided to the Board on 31 May 2023
by the Former Investment Manager, the Board concluded that it would
not be in the interests of shareholders to proceed with the
construction of the RUMS project. As well as being commercially
unviable, predominantly due to the high solar panel prices at that
time, proceeding would breach the Company's investment policy
restrictions.
On 11 October 2023 the Board
announced its decision to proceed with the RUMS project due to it
having become the least value destructive option for shareholders.
This was based on the advice received from the Former Investment
Manager that:
· panel prices had fallen by 30% which meant that the negative
NPV was significantly less than at 31 December 2022 and also at 31
May 2023 when the Board took the decision not to proceed with
construction of the RUMS project;
· aborting the RUMS project would: (i) crystallise an immediate
write off of US$8.9 million of costs incurred in respect of the
project as at 30 September 2023; (ii) result in the encashment of
US$1.2 million of performance bank guarantees; (iii) potentially
indirectly expose SolarArise to abandonment liabilities (net of the
performance bank guarantees) of up to US$32.3 million and likely
protracted associated litigation; and (iv) lead to reputational
damage that could adversely impact the value of the SolarArise
platform; and
· whilst the RUMS project was clearly not value accretive,
proceeding to construct it would: (i) allow SolarArise to better
manage its liabilities in respect of the RUMS project, providing
greater certainty compared to a very uncertain process of aborting
it, both in terms of the value of any potential abandonment
liabilities and the expected timeline for settlement; and (ii) add
a further 200 MW of capacity to the SolarArise platform and, once
operational as part of a wider portfolio, may facilitate a more
attractive exit of SolarArise in any future liquidity
event.
To proceed with the RUMS project,
the Board put forward a resolution to amend the single country
limit in the Company's investment policy to avoid any potential
breach of that limit as a consequence of proceeding with the RUMS
project (and also to make clarificatory changes to the gearing
policy), which was passed at a general meeting held on 31 October
2023.
Construction of the RUMS project
is underway.
General meetings
At the Annual General Meeting held
on 30 June 2023, alongside the standard annual resolutions to
re-elect the Board which were passed and in accordance with the
commitment in the Company's IPO prospectus, a Continuation
Resolution was due to be proposed as 75% of the net IPO proceeds
had not been deployed within 12 months of admission to trading. If
the Continuation Resolution did not pass, the Directors would be
required by the Company's Articles of Association to put forward
proposals for the reconstruction, reorganisation or winding up of
the Company to shareholders for their
approval within four months of the date of the meeting at which the
Continuation Resolution was proposed. Given the uncertainty of the
Company's financial situation, the Board recommended that
shareholders abstain from voting on the Continuation Resolution and
adjourned the AGM ahead of the shareholder vote on the Continuation
Resolution.
On 11 July 2023, the Company
received a notice from certain entities and funds affiliated with
the Former Investment Manager (the "Requisitioners"), which held
14.8% of the Company's issued share capital, requisitioning a
general meeting of the Company's shareholders to vote on, amongst
other things, the Continuation Resolution.
On 31 July 2023 in the notices for
the requisitioned general meeting and adjourned Annual General
Meeting (the "August Meetings"), the Board recommended shareholders
to vote against the Continuation Resolutions to be proposed at
those meetings as shareholders would be unable to form a considered
view of the Company as, at that time: (i) its valuation was
uncertain; (ii) the RUMS project was believed to be commercially
unviable and the non-completion liabilities were expected to be
substantial; (iii) the audit of its financial statements for the
period ended 31 December 2022 and associated annual report could
not be completed; (iv) its shares were suspended from listing; and
(v) there was no clear strategy for the future of the
Company.
Prior to the August Meetings a
second notice from the Requisitioners was received by the Company
requisitioning a further general meeting to consider ordinary
resolutions that the current Board be removed from office as
directors of the Company and replaced with new directors nominated
by the Requisitioners with immediate effect.
Ahead of the August Meetings that
were held on 24 August 2023, the Board continued to provide updates
to shareholders on material new information in support of its
recommendation to vote against the Continuation Resolutions. At the
August Meetings, shareholders representing 58% of the votes cast
(and a majority of the issued share capital) voted against the
Continuation Resolutions in line with the Board's recommendation.
The Board immediately commenced an evaluation of the options for
the Company's future in view of its obligation, under the Company's
Articles of Association, to put proposals to shareholders for the
reconstruction, reorganisation or winding-up of the Company by 24
December 2023. The second requisitioned general meeting was held on
25 September 2023. Shareholders representing approximately 54% of
the Company's total issued share capital supported the current
Board and the resolutions to replace the current Board were not
passed.
In accordance with its obligation
to put forward proposals for the reconstruction, reorganisation or
winding-up of the Company to shareholders for their approval within
four months of the Continuation Resolutions not having been passed,
the Board convened a further general meeting on 19 December 2023 to
consider a resolution to wind up the Company and appoint
liquidators.
The Board had considered possible
options for a reconstruction or reorganisation of the Company but,
given, in particular, the concentrated and illiquid nature of the
Company's portfolio and the current size of the Company, the Board
concluded that a reorganisation or reconstruction was not viable or
in the best interests of shareholders as a whole. Accordingly, in
order to comply with its obligation under the Articles, the Board's
only option was to put forward a winding up proposal, but recommend
shareholders vote against the resolution principally for the
following reasons: (i) if the resolution was passed, it was
expected that the listing of the Company's shares would be
permanently suspended; and (ii) if the resolution was not passed
(in-line with the Board's voting recommendation), the Board would
have the additional time needed to complete the strategic review of
the options for the Company's future and shareholders would have
the opportunity to vote on the outcome of the strategic review.
Shareholders representing 83% of the votes cast (and 69% of the
issued share capital) voted against the winding-up resolution, in
line with the Board's recommendation.
Due to the delay in the completion
and publication of the Company's 2022 Annual Report, certain
matters of business usually dealt with at an annual general meeting
could not be dealt with at the Company's 2023 Annual General
Meeting or at the adjourned Annual General Meeting held on 24
August 2023. Following the publication of the Company's 2022 Annual
Report on 22 January 2024 and as required by the Companies Act
2006, the Board convened a general meeting on 27 February 2024 to
lay the 2022 Annual Report before the Company's shareholders and
carry out certain other related business. All resolutions proposed
at that general meeting were passed, although there was a
significant minority vote (being just over 20%) against the
resolutions to receive the 2022 Annual Report, approve the
Directors' Remuneration Report and approve the Directors'
remuneration policy. The Board has sought to engage with those
shareholders who voted against those resolutions to discuss any
views they may have and will take into account any feedback around
their concerns.
Change of Investment Manager
As the Continuation Resolutions
were not passed at the August Meetings, the Company was entitled to
terminate its investment management agreement with the Former
Investment Manager summarily at any time and without further
payment in respect of the Former Investment Manager's initial
five-year term of appointment. Due to, amongst other things, the
deteriorated relationship with the Former Investment Manager and
concerns about performance, the Board determined it would be in the
best interests of shareholders to terminate the Former Investment
Manager's appointment as the Investment Manager. Following a
competitive tender process, the Board announced on 28 September 2023 that it had agreed heads
of terms to appoint Octopus Energy Generation as the Transitional
Investment Manager for an initial term expiring on 30 April 2024.
Following completion of the customary take-on and regulatory
procedures, Octopus Energy Generation's appointment with immediate
effect was subsequently confirmed on 1 November 2023. The
Company's existing investment management arrangements, which are
due to terminate on 30 April 2024, will roll over until the
orderly realisation proposal is approved by
shareholders.
The Board expects that, subject to
shareholders approving the orderly realisation proposal, the
Company's Transitional Investment Manager, will be appointed to
continue to manage AEIT's investments and their orderly
realisation.
Re-evaluation of the portfolio valuations
Due to the ongoing material
uncertainties regarding the Company's financial position and in
support of progressing the audit and associated annual report and
financial statements for the period ended 31 December 2022, the
Board appointed, in May 2023, PricewaterhouseCoopers LLP ("PwC") to
undertake a detailed review of the key assumptions included in the
financial models and the valuation methodology of the operational
assets within the portfolio, namely the SolarArise and NISPI
assets, as at 31 December 2022 proposed by the Former Investment
Manager. On 12 July 2023, the Board announced it had received a
draft report from PwC and that the Board anticipated the final
portfolio valuation as at 31 December 2022 could reflect a material
downward movement that would be in addition to the costs written
off and potential abandonment liabilities associated with not
proceeding with the RUMS project.
One of the key priorities of the
Transitional Investment Manager was to re-evaluate the portfolio
valuations as at each valuation date. The valuations for 31
December 2022 and 30 June 2023 were an integral part of the
respective Annual and Interim Reports that were published on 22
January 2024. However, ahead of that date, on 13 December 2023, the
Board announced the unaudited NAV as at 30 September 2023 in order
to provide investors with the most recent financial information at
the earliest possible time. Unaudited net assets at 30 September
2023 were US$88.5 million (NAV of 50.4 cents per share), a
marginal increase on the net assets (and NAV per share) as at 31
December 2022.
Result of the strategic review
Having undertaken a comprehensive
strategic review of the options for the Company's future and after
consultation with its advisers and having taken into account
feedback from investors representing a significant proportion of
AEIT's issued share capital, the Board has concluded that it is in
the best interests of shareholders as a whole to put forward a
proposal for the orderly realisation of AEIT's assets.
The proposal will seek to achieve
a balance between maximising the value of AEIT's investments and
progressively returning cash to shareholders in a timely manner.
Details of this proposal, which is subject to shareholder approval
at a general meeting of the Company expected to be held in Q2 2024,
will be set out in a separate circular to shareholders and will be
made available on the Company's website in due course.
Investments
|
No. of individual assets held
13
|
Total investment portfolio
value18
US$42.1m
|
Adjusted GAV
US$193.1m
|
On 13 January 2023 the Company
completed its acquisition of the remaining 57% economic interest in
SolarArise, owning 100% of SolarArise from this date. The
acquisition was made for a cash consideration of US$38.5 million.
As at 31 December 2022, the Company had recognised an onerous
contract provision in respect of this commitment as the fair value
of the investment was deemed to be lower than the consideration
paid to acquire the investment, primarily due to potential
liabilities relating to aborting the 200 MW construction-ready RUMS
project.
On 31 May 2023 the Company,
through its subsidiary AEIT Holdings, completed the acquisition of
99.8% of VSS, a privately-owned company which holds 6.12 MW of
rooftop solar assets for US$3.1 million. The gross value of the
assets was US$4.6 million including external debt.
Summary of deployment
|
|
|
Proportion
|
|
|
AEIT
proportion
|
AEIT
proportion
|
|
|
Date of
|
acquired/
project
|
Amounts
paid
|
Total
operational
|
of
operational
|
of ready to
build
|
|
Investment
|
investment
|
funded
|
(US$m)
|
capacity
|
capacity
|
capacity
|
|
|
August
22
|
43.0%
|
32.9
|
|
100
MW
|
86
MW
|
|
SolarArise
|
January
23
|
57.0%
|
38.5
|
233
MW
|
133
MW
|
114
MW
|
|
|
October
23
|
RUMS
project
|
19.8
|
|
|
|
|
NISPI
|
December
21
|
40.0%
|
25.4
|
80
MW
|
32
MW
|
n/a
|
|
VSS
|
May
23
|
99.8%
|
3.1
|
6
MW
|
6
MW
|
n/a
|
|
Total
|
|
|
119.7
|
319 MW
|
271 MW
|
200 MW
|
On 1 August 2023, the Company's
only development project (the "TT8 project"), a 150 MW solar PV
project, held by a special purpose vehicle of SolarArise, signed a
power purchase agreement with Maharashtra State Electricity
Distribution Company Limited. This required the Company to put in
place a performance bank guarantee for US$1.7 million in line with
the terms of the PPA funded from existing cash reserves within
SolarArise.
On 11 October 2023, the Board
announced its decision to proceed with the RUMS project due to it
having become the least value destructive option for shareholders
and agreed to provide funding of up to US$20 million by way of an
INR denominated external commercial borrowings loan from the
Company to SolarArise. Accordingly, a loan of US$19.8 million
was provided on 18 October 2023. The RUMS project's budget did not
initially include provisions for the installation of dynamic
reactive power equipment. The responsibility for this additional
infrastructure, as mandated by Central Electricity Authority
regulations, was unclear. In January 2024, in a meeting with the
owner of the Rewa Ultra Mega Solar Park ("RUMSL"), SolarArise and
other significant developers were informed that the dynamic
reactive power equipment would need to be self-funded by those
constructing them. RUMSL is also now behind schedule in
constructing the transmission line and other infrastructure
required for commissioning the RUMS project. It is expected that
commissioning the RUMS project will not occur until June
2024.
For the purpose of the unaudited
NAV as at 31 December 2023, announced on 13 March 2024, a US$2.8
million contingency was included in the modelled RUMS project
costs. Delays to the commissioning date beyond 31 March 2024
impacts the RUMS project costs. Every month of delay beyond 31
March 2024 will have a negative impact of US$0.5 million - US$0.7
million on NAV. The unaudited NAV assumed commissioning of the RUMS
project would occur in March 2024, based on the information held as
at 31 December 2023. It was noted in the announcement of the
unaudited NAV that commissioning was now expected to happen in May
2024 and that there would be a further reduction in NAV of up to
US$2.1 million in the event that commissioning did not occur until
June 2024. An increased contingency of US$6.3 million has
been included in the audited NAV, resulting in a downward movement
of US$3.5 million from the unaudited NAV. The increased contingency
is principally due the delays in construction in January and
February 2024, which were not within the control of SolarArise, and
is based on commissioning now occurring in June 2024. The
contractual avenues to recoup additional costs will be
explored.
The Board has approved additional
cash funding of up to US$4.5 million to fund the RUMS project
delays and additional costs. The NAV impacts presented above assume
this cash injection has taken place.
As at 31 December 2023, the
Company had invested US$119.7 million, 66% of total capital raised.
Following the temporary share suspension, the Board suspended
acquisitions of, or commitments to, new investments without
consultation with the Board. Subject to shareholders approving the
proposal for the orderly realisation proposal at a general meeting
of the Company expected to be held in Q2 2024, the Company will not
make any further acquisitions or commitments to new
investments.
18 The value of the Company's
operational investment portfolio.
Portfolio Breakdown
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Total
|
renewable
|
|
|
|
|
|
|
|
renewable
|
energy
|
|
|
|
|
|
|
|
energy
|
generating
|
Average
|
|
|
|
|
|
|
generating
|
capacity
|
remaining
|
|
|
|
|
|
|
capacity on
|
based on
|
life of
asset
|
|
|
|
|
|
|
a 100%
basis
|
economic
share
|
modelled
|
Economic
|
|
Plant or site
|
Technology
|
Country
|
Revenue
type
|
(MWp)
|
(MWp)
|
(years)
|
ownership
|
|
NISPI
|
80
|
32
|
|
|
|
Islasol IA
|
Solar
|
Philippines
|
Wholesale electricity market
|
18
|
7
|
17.0
|
40%
|
|
Islasol IB
|
Solar
|
Philippines
|
Wholesale electricity market
|
14
|
6
|
17.0
|
40%
|
|
Islasol II
|
Solar
|
Philippines
|
Wholesale electricity market
|
48
|
19
|
17.0
|
40%
|
|
SolarArise
|
433
|
433
|
|
|
|
Telangana I ("TT")
|
Solar
|
India
|
25 year
fixed price PPA
|
12
|
12
|
17.5
|
100%
|
|
Telangana II ("TT6")
|
Solar
|
India
|
25 year
fixed price PPA
|
12
|
12
|
17.5
|
100%
|
|
Karnataka I ("TT1")
|
Solar
|
India
|
25 year
fixed price PPA
|
40
|
40
|
19.0
|
100%
|
|
Karnataka II ("TT2")
|
Solar
|
India
|
25 year
fixed price PPA
|
27
|
27
|
21.0
|
100%
|
|
Maharashtra ("TT4")
|
Solar
|
India
|
25 year
fixed price PPA
|
67
|
67
|
19.0
|
100%
|
|
Uttar Pradesh ("TT5")
|
Solar
|
India
|
25 year
fixed price PPA
|
75
|
75
|
22.5
|
100%
|
|
Total operating generating capacity
|
233
|
233
|
|
|
|
Madhya Pradesh In construction
("RUMS project")
|
Solar
|
India
|
25 year
fixed price PPA
|
200
|
200
|
n/a
|
100%
|
|
Maharashtra In development ("TT8
project")
|
Solar
|
India
|
25 year
fixed price PPA
|
150
|
150
|
n/a
|
100%
|
|
Total 'in construction' or
'in development' generating capacity
|
350
|
350
|
|
|
|
VSS
|
|
|
|
6
|
6
|
|
|
|
Mo Cay
|
Solar
|
Vietnam
|
20 year
PPA
|
2
|
2
|
17.0
|
99.8%
|
|
Hoang Thong
|
Solar
|
Vietnam
|
20 year
PPA
|
4
|
4
|
17.0
|
99.8%
|
|
Total generating capacity
|
319
|
271
|
|
|
|
Total 'in construction' generating capacity
|
200
|
200
|
|
|
|
Total 'in development' generating capacity
|
150
|
150
|
|
|
The following charts are
representative of the pro-rata share of the assets owned at 31
December 202319.
|
Geographical diversification
-
as a % of generating capacity (MWp)
|
Asset phase
-
as a % of generating
capacity (MWp)
|
Revenue structure
-
as a % of generating
capacity (MWp)
|
19 All charts exclude development
projects.
Portfolio Performance
Portfolio performance for NISPI
and SolarArise has been compared to the budgeted performance
expected in the year as per the 31 December 2022 valuation models.
The assumptions that drove the cashflows of those models are
detailed in the 2022 Annual Report available on the Company's
website and included 'haircuts' to the expected generation from the
P50 generation profiles.
A P50 generation profile for solar
assets is a statistical measure used to estimate the expected
energy production of a solar power project. The term 'P50' refers
to the median probability scenario for the energy output of a solar
asset. It means that there is a 50% chance that the actual energy
production will exceed the P50 estimate and a 50% chance that it
will fall below. This is considered a 'best estimate' scenario,
balancing optimism and conservatism.
A technical advisor was appointed
in September 2023 to provide updated P50 yield assessments. Reports
for SolarArise were received in January 2024, with the results
being incorporated into the valuation of the assets at 31 December
2023. Reports for the Philippine and Vietnamese assets were
received in March 2024 and will be incorporated into the 31 March
2024 valuations. Material deviations from generation assumptions
already modelled in the 31 December 2023 valuations are not
anticipated.
|
Output generated by
underlying operating assets20
391,683 MWh
|
Revenue generated by
underlying operating assets20
US$24.1m
|
EBITDA generated by
underlying operating assets20
US$18.0m
|
During the year ended 31 December
2023, the investment portfolio's electricity generation was 391,683
MWh, 6% below the original P50 generation profile, and 3% below the
anticipated generation following the 'haircuts' to the P50
generation estimates. The reported figures reflect the
proportionate share of the electricity generated by investments
from the date of acquisition and therefore consider 100% of
SolarArise from 13 January 2023, the date on which AEIT purchased
the remaining 57% stake, and 99.8% of VSS from 31 May
2023.
20 Pro-rated for economic ownership
from the date of acquisition if after 1 January 2023. These are not
IFRS measures and are KPIs used to monitor the performance of the
underlying assets.
Philippines
The Philippine portfolio comprises
NISPI, an investee company with three operating solar plants with a
total capacity of 80 MW situated on the island of Negros,
Philippines. All three solar plants export electricity to the grid
at the wholesale electricity spot market ("WESM") price.
The 2023 budgets for ISLASOL II
and ISLASOL III anticipated decreases in energy generation of 3.4%
and 3.7%, respectively, aligning with past deviations from the
established P50 generation forecasts. This year's actual
performance was 1% below the adjusted P50, with ISLASOL II and
ISLASOL III underperforming by 3% and 0.1% below the amended P50. A
portion of this discrepancy, amounting to 1%, was attributed to
lower solar irradiation levels. The remainder of the
underperformance was linked to site-specific challenges, which had
been factored into our budget forecasts. In addition, ISLASOL II
faced a series of technical difficulties which were not anticipated
and have since been resolved.
Over the 12 months ended 31
December 2023 NISPI generated revenues of PHP 731.2 million
(US$13.2 million), a 2.5% decrease to budgeted revenues
of PHP 749.7 million (US$13.5 million). This was primarily due to
the lower generation explained above and slightly lower than
expected WESM prices being achieved of 6.6PHP/kWh compared to
a budgeted price of 6.7PHP/kWh. EBITDA for the year was PHP
572.0 million (US$10.3 million), 1.2% above budget, boosted by the
sale of unbudgeted carbon credits.
As at 31 December 2023, on a 100%
basis, NISPI held PHP 1,078 million of cash reserves, equivalent to
US$19.5 million. NISPI has no debt.
India
The 2023 budgets accounted for a
5% reduction in generation based on historical observed
underperformance from the existing P50 generation expectations.
After accounting for weather effects, the overall performance
matched our expectations. However, as we predicted, some specific
sites did not perform as well as anticipated in our budgets. Two of
the sites had specific issues that impacted generation; TT2
experienced issues with pollution in the area and TT6 experienced
issues with flooding and the control system. The Transitional
Investment Manager is continuing to work with the technical advisor
and the SolarArise asset manager to further understand the root
causes of the underperformance of the SolarArise assets and
evaluate possible optimisation options.
Over the year the operational
portfolio of SolarArise generated a turnover of INR 1,534 million
(US$18.4 million), an underperformance compared to the
budgeted figure of INR 1,649 million (US$19.8 million) by 7.0%.
This underperformance is driven by government rebates budgeted but
not received of INR 149 million (US$1.8 million), offset in part by
the receipt of carbon credit income, amounting to INR 51 million
(US$0.6 million). As a result, EBITDA for the year was INR 1,131
million (US$13.6 million), below the budgeted INR 1,380
million (US$16.6 million) by INR 249 million (US$3.0 million).
Throughout the year, operational SPVs paid management fees
totalling INR 61 million (US$0.7 million) to the SolarArise holding
company.
In the year, the SolarArise
holding company incurred expenses of INR 169 million (US$2.0
million), compared to expected expenditure per the December 2022
valuation model (which assumed normalised costs for this structure)
of INR 58 million. The actual expenditure for the year
included asset management fees (INR 99.5 million) and other
operating costs (INR 69.8 million) and were covered by management
fees, interest income and loan repayments from the operational
SPVs. The Transitional Investment Manager is working with the
SolarArise asset management team to agree new budgets for the year
ending 31 March 2025 (SolarArise's year
end) and reduce holding company costs as much as
possible.
As at 31 December 2023,
SolarArise's cash reserves, including the underlying SPVs, were INR
964 million (US$11.6 million). Of this balance, US$8.1 million
was held to fund the ongoing construction of the RUMS project.
SolarArise had approximately US$108.6 million of borrowings at 31
December 2023.
Construction progress of the 200 MW RUMS
project
The RUMS project is held by a
wholly owned special purpose subsidiary, Talettutayi Solar Projects Nine Private Limited ("TT9"), of
SolarArise.
Construction of the RUMS project
commenced in November 2023. The solar modules have arrived on site,
alongside most of the other equipment needed to build the solar
farm. Installation of the module mounting structure for the panels
is in progress.
Post the year end, despite initial
progress, construction faced delays due to farmers from the
surrounding land temporarily restricting access to the construction
site in early to mid-January, and limiting on-site activities from
mid-January 2024 to mid-February. This stemmed from land-related
issues between the owner of the land, RUMSL21, and the neighbouring
farmers. Resolution between these two parties was outside of the
Company's control. The local asset manager of SolarArise escalated
the issue within the relevant Indian government departments and
local authorities. Following resolution, construction recommenced
in the third week of February.
Additionally, the project's budget
did not initially include provisions for the installation of
dynamic reactive power equipment. The responsibility for this
additional infrastructure, as mandated by Central Electricity
Authority (CEA) regulations, was unclear. In a January 2024 in a
meeting with RUMSL, SolarArise and other significant developers
were informed that the cost would need to be self-funded. RUMSL is
also now behind schedule in constructing the transmission line and
other infrastructure required for
commissioning. It is expected that this will not be delivered until
June 2024.
The audited NAV as at 31 December
2023 includes a contingency of US$6.3 million principally due the
delays in construction in January and February 2024. The
contingency is based on commissioning now occurring in June 2024.
All contractual avenues to recoup costs will be
explored.
The Board has approved additional
cash funding of up to US$4.5m to fund the project delays and
addition costs. The NAV impacts referred to above assume this cash
injection has taken place.
Vietnam
On 31 May 2023, AEIT completed the
acquisition of a 99.8% stake in VSS and its four subsidiaries,
incorporating 6.12 MW of rooftop solar assets, for a total of
US$3.1 million.
Following the acquisition, the
portfolio's performance was 12% lower than the initial investment
projections, primarily due to the Hoang Thong system's output,
which fell 27% short of expectations. This shortfall was largely
attributed to sawdust from the adjacent facility, which compromised
the solar panels' efficiency by accumulating on their surfaces. As
a result, the 2023 budgets were updated as part of the valuation
update conducted in September 2023. The budgets accounted for a
reduction in generation based on a PVsyst report completed in June
2023 which encompasses issues identified on the sites.
In relation to the updated budget,
the portfolio has outperformed the generation expectations by 5%.
This uplift in performance is attributed to the cleaning regime
adopted on the solar panels and inverters in addition to
rectification of some sections of the DC cables touching the roof
in the Hoang Thong project. The asset manager, Solar Electric
Vietnam, has provided a proposal of further rectification works to
resolve the identified issues. The improvement in performance
observed is a good indication of some upside expected to be
recovered following the completion of the rectification
works.
During the period since
acquisition, VSS has generated revenue of VND 8.2 billion (US$0.33
million), and generated EBITDA of VND 6.8 billion (US$0.27
million).
At 31 December 2023, VSS had VND
6.8 billion (US$0.3 million) of cash reserves and approximately
US$1.2 million of borrowings.
21 RUMSL is a joint venture between
Madhya Pradesh UrjaVikas Nigam Limited and Solar Energy Corporation
of India. Solar Energy Corporation of India Ltd is a company of the
Ministry of New and Renewable Energy, Government of
India.
Portfolio Valuation
Valuation process
Regular valuations are undertaken
for the Company's portfolio of assets. The process follows
International Private Equity Valuation ("IPEV") Guidelines,
typically using a discounted cashflow ("DCF") methodology. The DCF
methodology is deemed the most appropriate valuation basis where a
detailed projection of likely future cash flows is possible. Due to
the asset class, availability of market data and the ability to
project the asset's performance over the forecast horizon, a DCF
valuation is typically the basis upon which renewable assets are
traded in the market. In a DCF analysis, the fair value of the
investee companies is the present value of the expected future cash
flows, based on a range of operating assumptions for revenues,
costs, leverage and any distributions, before applying an
appropriate discount rate. Key macroeconomic and fiscal
assumptions for the portfolio valuation are set
out in note 9 to the Financial Statements. The assets held in the
Company's UK subsidiary, AEIT Holdings, substantially comprise
working capital balances and therefore the Directors consider the
fair value of AEIT Holdings to be equal to its book
value.
In accordance with the Company's
valuation policy, the investment portfolio at 31 December 2023 has
been valued by the Transitional Investment Manager. PwC was engaged
as an independent valuation expert to provide a private independent
opinion on the reasonableness of the valuations which were prepared
by the Transitional Investment Manager, and adopted by the Board
and AIFM when they approved the 31 December 2023
valuations.
Portfolio valuation as at 31 December 2023
The fair value of the Company's
investment portfolio as at 31 December 2023 was USS42.1 million.
The movements over the year are detailed in the bridge
below.
Whilst the Company holds its
investments at fair value, the final value realised on disposal of
each investment as the Company implements its orderly realisation
strategy may be materially different to its fair value as at 31
December 2023.
Fair value of investments from 31 December 2022 to 31
December 2023 (US$m)
Acquisitions and cash injections
During the year, AEIT announced
the following investments:
· In
January 2023, the Company completed its acquisition of the
remaining 57% economic interest in SolarArise, bringing ownership
to 100%. The acquisition was made for a cash consideration of
US$38.5 million.
· In
May 2023, the Company, through its subsidiary AEIT Holdings,
completed the acquisition of a 99.8% stake in VSS and its four
subsidiaries, which hold 6.12 MW of rooftop solar assets. Total
funding into AEIT Holdings was US$5.0 million, of which US$3.1
million was used to fund the acquisition of VSS. As at 31 December
2023, US$1.8 million remains as cash sitting within AEIT Holdings
and is included within the fair value of the investment
portfolio.
· In
October 2023, the Board approved the provision of funding up to
US$20 million through an INR-denominated external commercial
borrowings ("ECB") loan from the Company to SolarArise to enable
the construction activities for the RUMS project. Subsequently, a
loan amounting to US$19.8 million was disbursed to SolarArise on 18
October 2023.
Utilising onerous contract provision
At 31 December 2022, the Company
recognised an onerous contract provision in respect of the
commitment to acquire of the remaining 57% shareholding in
SolarArise as the fair value of the investment was deemed to be
lower than the consideration to be paid to acquire the investment,
primarily due to potential liabilities relating to aborting the 200
MW construction-ready RUMS project. This provision of US$38.5
million has been utilised during the year and offsets against the
US$38.5 million included as cash paid for the acquisition. As a
result, the impact of the valuation at 31 December 2023 of this
acquisition was neutral.
Discount rate unwind
This bridge step reflects the net
present value of future cashflows being brought forward from 31
December 2022 to 31 December 2023, except for VSS which is
from the date of acquisition to 31 December 2023.
Change in discount rates
A range of discount rates are
applied in calculating the fair value of the investments,
considering the location, technology and lifecycle of each asset as
well as leverage and the split of fixed and variable
revenues.
In determining the reasonableness
of discount rates, these have been estimated by considering data
points from transactional and other valuation benchmarks,
disclosures in broker reports, other public disclosures and broader
market experience of investors in the market. Discount rates are in
the range 10-12.5% across the assets with the construction asset in
India being top of the range and the Vietnamese assets at the
bottom of the range. Changes to discount rates had minimal impact
on valuations.
Revaluation of the RUMS project
Falling solar module prices during
the year resulted in improving economics for the RUMS project.
Updating the model with the declining panel prices and other
assumption changes reduced the overall negative net present value
("NPV") and on 11 October 2023 the Board announced its decision to
proceed with the RUMS project due to it having become the least
value destructive option for shareholders. As at 31 December 2023,
the fair value of the RUMS project included within the valuation of
SolarArise was US$0.7 million after the capital injection of
US$19.8 million provided by AEIT, additional capital injections
made from excess cash within the SolarArise holding company of
US$3.3 million and including a contingency
of US$6.3 million. Actual changes in the underlying project
economics from the abort case as at 31 December 2022, which was a
negative NPV of US$27.9 million, amounted to a US$5.4 million
uplift in value. This is largely as a result of improving economics
for the project, including declining panel prices and updating for
macro-assumptions and other model updates, which were offset
slightly by an increase in interest rate on the signed facility
agreements entered into in October 2023 and an updated budget with
additional capex and contingency as commissioning is not expected
to occur until at least June 2024, further detail for which is
shown in the 'Investments' section.
Macroeconomic assumptions
The main economic assumptions used
in the portfolio valuation at 31 December 2023 are inflation
forecasts and foreign exchange rates. Updating for assumptions at
31 December 2023 had a small negative impact on the
valuation.
· Inflation
forecasts: Our approach is to blend
two inflation forecasts from reputable third-party
sources.
· Interest
rates: Interest rate forecasts are
only relevant for the Indian and Vietnamese portfolios of assets.
As existing facility agreements are in place, we have assumed the
current rates at 31 December 2023 as the fixed rates long
term.
· Foreign exchange
rates: Underlying valuations are
calculated in local currency and converted back to USD at the spot
rate at the relevant valuation date.
Power price forecasts
Unless fixed under PPAs (such as
the Indian portfolio) or otherwise hedged, the power prices used in
the valuations are based on an equal blend of two independent and
widely used market consultants' technology-specific capture price
forecasts for each asset.
Updating the valuations for the
most recent power price forecasts available resulted in a decrease
in the valuation over the period from 31 December 2022 to 31
December 2023. A significant fall was seen in the first half of the
year with some recovery seen in the updated forecasts in the second
half of 2023. This is primarily due to reduced market forecasts,
particularly commodity prices in the near term (with delivered coal
and liquified natural gas being two of these major commodities)
being key drivers in the expected power prices in the
Philippines.
In Vietnam, while both advisors
raised the tariff forecast in the latest update, they also
highlighted that it will mostly follow the trend of the gradual
increase target set by the government rather than any fundamental
factors.
Generation
Each asset's valuation assumes a
P50 level of electricity output based on yield assessments prepared
by technical advisors and is the market standard assumption to
utilise in valuation models. At 31 December 2022, as there was an
observed historical underperformance of the Company's operational
assets when compared with the level of P50 generation assumed at
the time of acquisition, an estimated reduction was applied so that
the generation forecasts reflected actual performance.
A technical advisor was appointed
to provide updated P50 yield assessments. These assessments were
received in January 2023 for SolarArise. The technical advisor
produced two separate reports for SolarArise; revision one ('worst
case') which included all potential losses (even those that arose
from one-off events) and revision two ('best case') which assumed
all losses assumed in revision one would be fully recoverable. The
Transitional Investment Manager continues to work with the
technical advisor to produce a realistic P50 yield assessment that
is expected to fall roughly in the middle of the two reports
received, on the basis that it is unlikely that all of the excluded
losses in revision two would be recoverable. For the 31 December
2023 valuations, in the absence of a final report from the
technical advisor, the midpoint of both reports has been taken to
generate a P50 yield to be included in the valuation models for
SolarArise. The impact on the valuation of this assumption was a
reduction to investment value of US$0.9m. The updated P50 yield
assessments were received in March 2024 in respect of NISPI and
VSS. These P50 yield assessments were not adopted in the 31
December 2023 valuations as actual performance is expected to be
below these, and not material different to the existing
assumptions.
Further, since its acquisition in
May 2023, one of the assets within the Vietnamese portfolio, which
is a rooftop solar project on a furniture factory, is significantly
underperforming against expectations at the time of acquisition.
This is a result of the sawdust from the facility below escaping
and settling on the panels. Subsequently, the generation forecasts
have been reduced to account for the underperformance, which is net
of a slight improvement in performance expected to be achieved
following completion of an asset rectification plan.
In line with December 2022, a
3.3%-3.7% 'haircut' to the original P50 yields based on the
observed historical underperformance of NISPI has been taken in the
absence of updated yields.
Updating the valuations for the
updated yield assessments in SolarArise and VSS resulted in a
negative impact on the valuations.
Changes to capital structure
As a result of the capital
injection into the RUMS project, a reorganisation of intercompany
debt was required within the SolarArise SPVs, resulting in greater
cash traps as distributions are delayed. This resulted in a
negative US$3.2 million impact on the valuation. A review is
underway to consider options for optimising the SolarArise capital
structure to mitigate further delays.
Other movements
This refers to the balance of
valuation movements in the period excluding the factors noted
above. The positive value is largely driven by an uplift of US$2.0
million relating to the inclusion of residual land value where land
is owned within the SolarArise portfolio, US$0.8 million relating
to updates to operating expense assumptions within the SPVs and
other updates to decommissioning and distribution
assumptions.
Also within other movements,
resulting in a neutral valuation impact, is the funding of the TT8
project development costs (US$1.9 million) and the RUMS
project construction costs (US$3.3 million) out of excess cash
within the SolarArise holding company.
As at 31 December 2023, total cash
injected into the TT8 project was US$1.9 million and, in line with
the Company's valuation policy, the fair value of this development
asset at the year-end is deemed to be equal to its cost.
Valuation sensitivities
For each of the sensitivities
shown, it is assumed that potential changes occur independently
with no effect on any other assumption. The sensitivity movements
are presented both on a cents per share basis and as a percentage
of the Company's NAV.
Discount rate: A range of
discount rates are applied in calculating the fair value of
investments, considering the location, technology and lifecycle
stage of each asset as well as leverage and the split of fixed to
variable revenues. A 100bps increase or decrease in the levered
cost of equity for each portfolio has been applied.
Generation: The sensitivity
assumes a 10% decrease or increase in total forecast generation
relative to the base case for each year of the asset
life.
Power price curve: The
sensitivity assumes a 25% decrease or increase in power prices
relative to the base case for each year of the asset life
(excluding any period covered by a PPA).
Inflation: The sensitivity
assumes a 1% decrease or increase in inflation relative to the base
case for each year of the asset life. Where revenue or cost items
have a contractually defined indexation profile, this has not been
sensitised.
Construction delay: The
sensitivity assumes a three-month delay in the completion of
construction of the RUMS project from the current assumed date of
30 June 2023 (i.e. that completion does not occur until 30
September 2024).
Cash extraction delay: At 31
December 2023, NISPI, the SolarArise holding company and each of
the SolarArise SPVs had significant negative distributable reserve balances, prohibiting the payment of
dividends. The valuations reflect this, but assume that some
measures to eliminate cash traps (for example, capital reductions)
are implemented within a reasonable timeframe. The sensitivity
assumes that such measures to eliminate cash traps are delayed by
12 months at both NISPI and SolarArise.
FX rate: Investments are held
in the currency of the territory in which the asset is located. A
flat increase or decrease of 10% in the relevant rate over the
remaining asset life of each plant has been applied to the final
values at 31 December 2023.
Financial Review
The Financial Statements of the
Company for the year ended 31 December 2023 are set out in this
report. The Financial Statements have been prepared in accordance
with United Kingdom adopted international accounting standards and
the applicable legal requirements of the Companies Act
2006.
Basis of accounting
The Company applies IFRS 10 and
Investment Entities: Amendments to IFRS 10, IFRS 12 and IAS 28,
which state that investment entities should measure all their
subsidiaries, joint ventures and associates that are themselves
investment entities at fair value. The primary impact of this
application, in comparison to consolidating subsidiaries, is that
the cash balances, working capital balances and borrowings in its
subsidiaries are presented as part of the Company's fair value of
investments.
The comparative period is the
period from 1 November 2021 to 31 December 2022.
Results for the year/period
|
|
31
December
|
31
December
|
|
|
2023
|
2022
|
|
|
US$m
|
US$m
|
|
Net asset value
|
81.5
|
86.6
|
|
Fair value of Company's
investments
|
42.1
|
11.5
|
|
Movement on fair value of
investments
|
5.0
|
(47.0)
|
|
Net assets per share
(cents)
|
46.4
|
49.3
|
|
Onerous contract provision with
respect to 57% acquisition of SolarArise
|
-
|
(38.5)
|
|
Loss for the
year/period
|
(0.6)
|
(88.8)
|
Net assets
The net asset value as at 31
December 2023 was US$81.5 million or 46.4
cents per ordinary share (2022: US$86.6 million or 49.3 cents per
ordinary share). The fair value of the Company's investment
portfolio as at 31 December 2023 was
US$42.1 million (2022: US$11.5 million). Movements between 31
December 2022 and 31 December 2023 are detailed in the bridge
below:
Net asset value bridge - 31 December 2022 to 31 December
2023
Notes to the NAV bridge
· Change in fair value of
investments: The change of US$5.7
million represents the increase in fair value of the underlying
investments of US$5.0 million and investment income of US$0.7
million, net of the additional capital injections made in the year.
These include US$5.0 million invested into AEIT Holdings in April
2023, of which US$3.1 million was used for the VSS acquisition, and
a further US$19.8 million invested into SolarArise to fund the
construction of the RUMS project in October 2023. For further
information see note 9 to the Financial Statements.
· Exceptional costs following
temporary share suspension: Since the material uncertainty arose
during the preparation of the December
2022 accounts and audit, additional professional fees have been
incurred to provide an in-depth examination of the valuations, to
audit and validate the valuation models, to undertake an extensive
review into the tax and cash extraction positions, to undertake a
comprehensive review of the RUMS project and seek advice with
regard to the likely abort liabilities and to provide advice
associated with the temporary share suspension, shareholder meeting
requisitions by funds managed by the Former Investment Manager, the
changes to the investment policy, effecting the change in
Investment Manager and the Board's strategic review of the options
for the Company's future. The Board is investigating the
Company's right to seek compensation for these
exceptional costs whilst reserving all the Company's other
rights.
· Other Company-level
costs: Other ongoing Company-level
costs incurred in the year, excluding management fees of US$1.4
million. Total ongoing Company-level costs for the year were US$3.1
million as detailed in the OCR APM calculation.
· Other
movements: Principally comprise of
FX gains (US$0.3 million) and interest received on cash deposits
(US$0.6 million).
Income
In accordance with the Statement of
Recommended Practice: Financial Statements of Investment Trust
Companies and Venture Capital Trusts ("SORP") issued in July 2022
by the Association of Investment Companies ("AIC"), the statement
of comprehensive income differentiates between the 'revenue'
account and the 'capital' account, and the sum of both items equals
the Company's profit for the year. Items classified as capital in
nature either relate directly to the Company's investment portfolio
or are costs deemed attributable to the long-term capital growth of
the Company.
In the year ended 31 December
2023, the Company's total revenue was US$5.7 million comprising of
the movement of fair value of investments of US$5.0 million and
interest receivable from its investments of US$0.7m (2022: total
revenue of negative US$85.5 million, consisting of negative US$47.0
million movement in fair value of investment and negative US$38.5
million onerous contract provision).
Operating expenses
The operating expenses included in
the statement of comprehensive income for the year were US$6.4
million (2022: US$3.3 million). These comprise US$4.2 million of
exceptional one-off costs following the temporary share suspension,
US$1.4 million fees relating to the Transitional Investment Manager
and Former Investment Manager and US$5.9 million operating expenses
offset by US$0.3 million net foreign exchange gains and net finance
income of US$0.6 million in the year. The US$1.4 million of
management fees includes fees of US$1.0 million which may be
claimed by the Former Investment Manager but are not being paid to
the Former Investment Manager whilst the Board evaluates all
available options. The details on how the Transitional Investment
Manager's and Former Investment Manager's fees were charged are as
set out in note 19 to the Financial Statements.
Ongoing charges
The ongoing charges ratio ("OCR")
is a measure, expressed as a percentage of average net assets, of
the regular, recurring annual costs of running the Company. It has
been calculated and disclosed in accordance with the AIC
methodology, as annualised ongoing charges (i.e. excluding
acquisition costs and other non-recurring items) divided by the
average published undiluted NAV in the year. For the year ended 31
December 2023, the OCR was 3.6% (2022: 2.5%). The increase in OCR
is driven primarily due to the lower average NAV in 2023 compared
to 2022. The OCR is an APM and its calculation is detailed in the
APMs. Total costs (i.e. including
acquisition costs and other non-recurring expenses) were equivalent
to 8.4% (2022: 4.1%) of the average net assets for the
year.
Financing
The Company does not have any
debt. However, it is permitted to have debt within its underlying
investments. Per the Company's investment policy, gearing should
not exceed 65% of the Adjusted GAV (measured at the time the
facility is entered into), with the Company targeting gearing of
below 50% in the medium term. External debt financing is only at
the level of the Indian and Vietnamese solar portfolios and, as at
31 December 2023, this comprised outstanding principal amounts of
US$109.8 million, (2022: US$45.9 million pro rated for economic
ownership) representing a gearing ratio of 57% (2022: 27%). At 31
December 2023, US$7.2 million had been drawn under the US$54.9
million project finance facility for construction of the RUMS
project. On a pro forma basis, gearing would increase to 65% once
the full project finance facility of the RUMS project is drawn down
based on the NAV as at 31 December 2023.
Dividends
During the year, interim dividends
totalling US$4.4 million were paid (1.18 cents per share was paid
in respect of the quarter to 31 December 2022 in May 2023, 0.44
cents per share paid in respect of the quarter to 31 March 2023 in
July 2023, 0.44 cents per share paid in respect of the quarter to
30 June 2023 in September 2023 and 0.44 cents per share paid in
respect of the quarter to 30 September 2023 in December
2023).
A dividend has not been paid or
proposed in respect of the quarter ended 31 December 2023 and,
subject to shareholders approving the orderly realisation proposal
at a general meeting of the Company expected to be held in Q2 2024,
the Company's priority will be to achieve a balance between
maximising the value of its investments and progressively returning
cash to shareholders in a timely manner. It is currently expected
that surplus cash will be returned from time to time in the form of
capital rather than dividends and that any dividends will be paid
on an ad hoc basis.
Impact Report
Impact highlights24
Providing financial returns through clean energy
generation
|
Installed operational capacity - MW
|
Clean energy generated - MWh
|
EU Taxonomy alignment25
|
|
233 - SolarArise (2022:
100)
|
391,683 (2022:
85,199)
|
100% (2022:
100%)
|
|
32 - NISPI (2022: 32)
|
|
|
|
6
- VSS (2022: Nil)
|
|
|
|
Providing environmental returns through GHG emission
avoidance
|
Providing social returns through quality jobs
created
|
|
GHG emissions avoided - tCO2e
|
Equivalent UK cars taken off the road - No.
|
Employment directly supported full time equivalent ("FTE")
jobs - No.
|
|
311,752 (2022:
62,770)
|
158,265 (2022:
34,427)
|
197 (2022:
148)
|
24 These metrics have been proportioned
to account for AEIT's share of the SolarArise, NISPI and VSS assets
during the reporting period.
25 This calculation excludes cash held
by the Company.
AEIT contribution to UN SDG targets
Through its investments, the
Company made significant active contributions to four UN SDGs as
outlined below.
Affordable and clean energy
7.2: Reducing India's, the
Philippines' and Vietnam's reliance on fossil fuels through
renewable energy generation by AEIT's assets.
Decent work and economic growth
8.5: Achieve productive employment
and decent work, illustrated by the 197 jobs supported by the
portfolio and the additional income generated for locals through
the robotics program at NISPI.
8.8: Protecting labour rights and
promoting safe and secure working environments for all workers
through policies and grievance mechanisms and health and safety
training.
Take urgent action to combat climate change and its
impacts
13.1: Strengthening resilience of
portfolio to climate-related hazards through climate risk analysis
and monitoring.
13.2: Contributing to national
strategies to increase share of renewable energy to the grid in the
fight against climate change.
Life on land
15.5: Reduce the degradation of
natural habitats and loss of biodiversity, protecting and
preventing impacts to threatened species and other local flora and
fauna through the implementation of environmental screening and
monitoring at AEIT's assets.
Additional contributions were made through impact
initiatives
Impact and ESG approach
Objective
The Company delivers on climate
change mitigation through its investments. Nowhere is it more
urgent to invest in renewable energy solutions that provide an
alternative to polluting fossil fuels and coal than in Asia. The
Company's investments in sustainable energy target these
fast-growing and emerging economies where greenhouse gas emissions
("GHGs") continue to grow rapidly. The investee companies within
the investment portfolio address the climate change mitigation
priorities set out in those countries' Nationally Determined
Contributions under the Paris Agreement on Climate Change, and
efforts to achieve the United Nations Sustainable Development Goals
("UN SDGs"). The investment strategy finances renewable energy
generation and avoids GHG emissions, while having a positive impact
in the communities where we invest.
As a result of this inherently
green contribution, the Company was awarded the Green Economy Mark
by the London Stock Exchange in December 2021. In 2022 AEIT was
also classified as an Article 9 financial product with a
sustainable objective under the EU Sustainable Finance Disclosure
Regulation ("SFDR").
Approach
The Company integrates
environmental, social and governance ("ESG") risk management into
its due diligence and management systems and applies a
triple-return approach that considers social and environmental
objectives alongside the financial returns of the
Company.
|
Financial return26
|
Environmental return
|
Social return
|
|
Providing shareholders with
attractive dividend growth and prospects for long‑term capital
appreciation.
|
Protecting natural resources and
the environment.
|
Delivering economic and social
progress, through job creation and contribution to UN
SDGs.
|
The Investment Manager supports
investee companies in monitoring and reporting on mandatory
Principle Adverse Impact ("PAI") indicators established under the
SFDR framework, and a range of additional ESG-related indicators,
as part of its approach to active investment management.
The Company uses a set of key
performance indicators ("KPIs") that aims to balance economic,
environmental and social considerations, aligning the triple-return
approach to the impact areas of generating clean energy, avoiding
emissions and supporting quality jobs. The KPIs are listed
below:
|
Impact area
|
Metric
|
Unit
|
Definition
|
Definition framework
|
|
Financial return: Generating clean energy
|
Installed operational
capacity
|
MW
|
Total amount of energy the
portfolio can transmit as of the end of the reporting
period
|
IRIS+. Energy Capacity
(PD3764).
|
|
|
New energy capacity
added
|
MW
|
Amount of new energy capacity
connected to the grid during the reporting period
|
IRIS+. Energy Capacity Added
(PI9448)
|
|
|
Energy generated for
sale
|
MWh
|
Amount of energy generated
and sold to offtaker(s)
during the reporting period
|
IRIS+. Energy Generated for Sale:
Renewable (PI5842)
|
|
Environmental return: Avoiding emissions
|
Avoided emissions
|
tCO2e
|
Avoided emissions from renewable
energy generation estimated using standardised grid emission
factors per MWh.
|
IFI Joint Methodology for
Renewable Energy Accounting approach
|
|
Social return: Quality jobs
|
Jobs in directly financed
companies
|
Number of FTE jobs
|
Number of full time equivalent
employees working for enterprises financed or supported by the
organisation as of the end of the reporting period, aligned with
HIPSO Direct Jobs Supported (Operations and Maintenance)
|
IRIS+. Jobs in Directly Supported/
Financed Enterprises. (PI4874)
|
Beyond the Company's contributions
to these selected impact KPIs, investments support a range of
positive contributions in the communities where the Company
operates assets, including through ancillary corporate social
responsibility efforts. These additional sustainability
contributions are also monitored and highlighted in this Impact
Report.
26
Subject to shareholders approving the orderly
realisation proposal at the general meeting of the Company expected
in Q2 2024, the Company's target financial return will be changed
to focus on achieving a balance between maximising the value to be
obtained from existing investments held and progressively returning
cash to shareholders in a timely manner.
Financial return: generating clean
energy27
The financial return target, in
particular yield through dividends, is contributed to through the
generation of clean energy and the operational performance of
assets. Put simply, with all other things being equal, the more
green energy an asset produces, the better the financial return for
investors through receiving revenue for the electricity that is
sold. In this respect, there is no tradeoff between financial
return and positive impact through avoided emissions.
In looking through the impact
lens, the financial return are generated though the installed
operational capacity and the resulting clean energy generated, and
this return is sustainable through the alignment to the EU
Taxonomy.
The following KPIs are
proportionally based on AEIT's equity stake in the SolarArise,
NISPI and VSS portfolios.
|
Installed operational capacity - MW
|
Clean energy generated - MWh
|
EU Taxonomy alignment
|
|
233 - SolarArise
|
391,683
|
100%
|
|
32 - NISPI
|
|
|
|
6
- VSS
|
|
|
In 2023 the investment portfolio
comprised interests in 319 MW of installed operational capacity.
The proportional share of this was 271 MW of generating capacity
which generated 391,683 MWh of clean renewable energy in the
Philippines, India and Vietnam in 2023. This clean energy
generation is equivalent to providing 413,144 people with clean
electricity (see table for breakdown by country). This directly
supports these countries Nationally Determined Contributions under
the Paris Agreement on Climate Change, helping to address their
climate mitigation priorities.
Equivalent number of people
provided with clean electricity - No.
|
51,415 in the Philippines28
|
360,022 in India29
|
1,707 in Vietnam30
|
27
Subject to shareholders approving the orderly
realisation proposal at the general meeting of the Company expected
in Q2 2024, the Company's target financial return will be changed
to focus on achieving a balance between maximising the value to be
obtained from existing investments held and progressively returning
cash to shareholders in a timely manner.
28
On the basis of: IEA
2020. Average per capita
electricity consumption in Philippines (0.84 MWh).
29
On the basis of: IEA
2020. Average per capita
electricity consumption in India (0.96 MWh).
30
On the basis of: IEA
2020. Average per capita
electricity consumption Vietnam (2.44 MWh).
Potential annual MWh contribution
and impact of AEIT's operational portfolio once fully
constructed.
|
|
|
Potential
once
|
|
|
Metric
|
2023
Actual
|
fully
constructed
|
Change
|
|
MW capacity
|
271
|
471
|
+74%
|
|
MWh generation
|
391,683
|
700,452
|
+79%
|
|
People powered
|
413,144
|
734,434
|
+78%
|
The EU Taxonomy
The EU Taxonomy was published in
2020, the culmination of an extensive effort to develop a shared
framework for defining environmentally sustainable activities
across the European Union. The EU Taxonomy specifies six
environmental objectives:
· climate change mitigation;
· climate change adaption;
· protecting marine and water resources;
· transitioning to a circular economy; preventing
pollution;
· protecting and restoring biodiversity and
ecosystems
The EU Taxonomy is a critical
element of the EU's Sustainable Finance Action Plan, and has a
central role in the EU SFDR which requires definition of the extent
to which investments with an environmentally sustainable objective
will meet EU Taxonomy requirements.
The Company aims for 100%
alignment of sustainable investments with the EU Taxonomy. In some
cases, bringing infrastructure assets into alignment with the full
requirements of technical screening criteria may be part of the
value addition of the acquisition. Investee companies may also make
substantial contributions to other environmental objectives of the
EU Taxonomy. To ensure no significant harm to biodiversity and
ecosystems, environmental screening is conducted for all
investments. Physical climate risk and vulnerability assessments
have been completed for all investee company sites by an external
consultant. Investee companies will continue to develop longer term
climate change risk management plans as part of their ongoing ESG
management approach.
As at 31 December 2023 100% of
existing investments made a significant contribution to climate
change mitigation and were aligned with the EU Taxonomy.
This analysis was conducted
drawing on publicly available information and proprietary data
sets, and information provided directly by investee companies.
Where necessary, inputs from third-party technical advisors may be
reflected.
Improving the resilience of the
investment portfolio is another way to ensure long-term financial
returns. Climate change is a daily lived reality at the renewable
energy sites operated by investee companies, which are located in
some of the most climate vulnerable regions of the world. The
Company's efforts to assess climate risk and develop scenarios for
its investment portfolio are discussed as part of its "Task Force
on Climate-Related Financial Disclosures" in this Annual
Report.
Environmental returns: avoiding emissions
Through investments in renewable
energy, the Company protects natural resources and the environment,
directly avoiding greenhouse gas emissions.
The following KPIs are
proportionally based on AEIT's equity stake in the SolarArise,
NISPI and VSS portfolios.
|
Avoided emissions -
tCO2e31
26,768 - NISPI
282,931 - SolarArise
2,054 - VSS
|
Equivalent cars taken off the
road in the UK32 - No.
158,265
|
GHG intensity of investee companies - tCO2e/ US$m
revenue
82.55
|
The total 391,683 MWh of clean
energy generated resulted in a total of 311,752 tonnes of avoided
CO2 emissions. This is equivalent to 158,265 cars taken off the
road in the UK for a year.
Potential
tCO2e
avoided emissions and impact from AEIT's operational portfolio once
fully constructed.
|
Metric
|
2023
Actual
|
Potential
once fully constructed
|
Change
|
|
MWh generation
|
391,683
|
700,452
|
+79%
|
|
tCO2e avoided
|
311,752
|
564,624
|
+81%
|
|
Cars off the road
|
158,265
|
286,639
|
+81%
|
31
Carbon avoided is calculated using the
International Financial Institution's approach for harmonised GHG
accounting.
32
Equivalent cars is calculated using a factor for
displaced cars derived from the UK government GHG Conversion
Factors for Company reporting.
2023 carbon footprint
Some GHG emissions will inevitably
be associated with investments even though they help avoid
emissions that would otherwise result if the same electricity was
produced using fossil fuels. The Investment Manager engaged with
its investee companies to measure their GHG emissions through
collecting data.
During the reporting period, the
Investment Manager appointed Altruistiq to provide the platform to
calculate the GHG emissions footprint for the Company. The Company
has quantified and reported organisational GHG emissions in line
with the iCI and ERM Greenhouse Gas Accounting and Reporting Guide
for the Private Equity Sector (2022). This methodology was
developed to complement both the World Resources Institute's
Greenhouse Gas Protocol Standards and the Partnership for Carbon
Accounting Financials' ("PCAF") standard for the financial
industry. This approach consolidates the organisational boundary
according to the operational control approach. More detail on how
different activities were allocated to different scopes is laid out
below:
|
|
2023 AEIT carbon
footprint
|
|
|
|
|
Portfolio
emissions
|
Company
emissions
|
Total
emissions
|
|
|
Scope
|
(tCO2e)
|
(tCO2e)
|
(tCO2e)
|
% of Total
|
|
1 - Direct emissions
|
32.11
|
-
|
32.11
|
0.02%
|
|
2 - Indirect emissions:
market-based33
|
1,430.31
|
-
|
1,430.31
|
0.91%
|
|
3 - Indirect emissions
|
154,968.26
|
478.26
|
155,446.52
|
99.07%
|
|
- Purchased Goods and
Services
|
154,254.76
|
478.26
|
154,733.02
|
98.61%
|
|
- Fuel & Energy Related
Activities
|
560.63
|
-
|
560.63
|
0.36%
|
|
- Travel and
Transport34
|
49.08
|
-
|
49.08
|
0.03%
|
|
- Waste
|
103.79
|
-
|
103.79
|
0.07%
|
|
Total
|
156,430.68
|
478.26
|
156,908.94
|
|
33
Using a location-based approach, AEIT's Scope 2
emissions in 2023 were 1,202.79 tCO2e.
34
This category includes upstream transportation
and distribution, employee commuting, business travel and
contractor travel.
Scope 1 emissions are primarily
associated with on-site fuel combustion. In 2023, Scope 1 emissions
accounted for the smallest proportion of the investment portfolio's
carbon footprint. This figure reflects limited use of on-site
combustion. Scope 2 emissions are associated with imported
electricity to the solar portfolio and accounted for 0.91% of its
total emissions. The Company, as a legal entity, has no direct
employees, owned or leased real estate, or direct assets, and
therefore the Company has no Scope 1 or 2 emissions.
98% of AEIT's total carbon
footprint relates to TT9, the 200 MW asset that is under
construction.
It will only take an estimated 7.5 months
of operation for
TT9 to avoid the equivalent emissions it generated during
2023.
Scope 3 emissions account for the
majority of emissions, making up 99.07% of the total carbon
footprint. The vast majority of these Scope 3 emissions relate to
TT9's purchased goods and services which equate to 97.6% of AEIT's
total carbon footprint. This is a result of the large amount of
embodied carbon in the equipment and materials purchased for the
construction of this 200 MW site. The remainder of the emissions
are associated with activities that are indirectly associated with
the Company and its portfolio investments (for example, waste
generated on site, other fuel and energy related activities,
upstream transportation and distribution, employee commuting,
business travel and contractor travel). The Company's emissions
relate to the AEIT's purchased goods and services (specifically,
the emissions relating to the Company's legal services and the
Investment Manager's services).
As a result of the carbon
intensity of the TT9 project, the carbon intensity of AEIT
increased to 333.14 tCO2e/MW capacity in 2023 (from
19.76 tCO2e/ MW capacity in 2022). This includes Scope 1, 2 and 3 of
the whole of AEIT's emissions. If shareholders approve the orderly
realisation proposal at a general meeting of the Company expected
to be held in Q2 2024, the Company will not make any further
acquisitions or commitments to new investments and absolute
emissions are expected to decrease over time. The weighted average
carbon intensity ("WACI") in 2023, which represents the emissions
intensity per million US Dollars of revenue generated, also saw an
increase from 35.87 tCO2e/US$m revenue to 82.55
tCO2e/US$m revenue. This reflects the change in methodology from
location-based Scope 2 emissions to market-based Scope 2 emissions,
and more location-specific emission factors. Using a location-based
calculation, the GHG intensity of AEIT's investee companies was
42.76 tCO2e/US$m revenue.
Data quality
The Company recognises the
challenges in measuring its GHG emissions for its sites and
activities. In particular:
· quality and availability of data collected for conversion
calculations can significantly impact the accuracy of the final
emissions output; and
· availability and specificity of emissions factors used to
convert data into related emissions can also impact the validity of
final emissions output.
In 2023, the Transitional
Investment Manager engaged with Investee Companies to capture
higher quality carbon-emission related data and to reduce reliance
of calculations on financial expenditure data. As a result of this
engagement, the Transitional Investment Manager procured all
relevant datapoints from AEIT's investee companies directly, and
thus no proxy calculations for portfolio emissions were required.
Of the data received, 74% was activity-based and 26% was
spend-based. Further, by partnering with Altruistiq, the Company
has benefitted from the large database of emission factors that
Altruistiq use for their carbon calculations. As a result of these
two improvements, the Transitional Investment Manager has a greater
degree of confidence over the precision of these emission
calculations relative to those collated in 2022.
Social return: quality jobs
The Company aims to contribute to
delivering economic and social progress and help build resilient
communities through supporting jobs and contributing to the UN
SDGs.
|
Employment: directly supported full time equivalent jobs -
No.
197
|
UN SDGs contributed to - No.
4
- SDGs 7,8,13,15
|
As at 31 December 2023, the
investment portfolio (proportioned by share) supported four FTE
salaried jobs at its investee companies and 193 FTE contractor
positions.
|
FTE employee opportunities supported - No.
4
|
FTE contractor employment opportunities
supported - No.
193
|
The vast majority of both direct
and contractor jobs were occupied by men. NISPI is the only
investee company with direct employees, disclosing a 32% difference
in the gross hourly salary between men and women. Attracting and
retaining diverse talent, including female employees, remains a
challenge within the industry. However, in 2023 c.38% of NISPI's
workforce was comprised of female employees. This is in line with
the share of woman in the solar PV industry
(40%)35. No targets have been set in the reporting
period.
No major health and safety
incidents resulting in lost working time were reported on any of
the investee company sites in 2023.
Adherence with global standards
and guidelines on human rights and good governance, such as the UN
Principles on Business and Human Rights and the OECD Guidelines for
Multinational Enterprises, are key to the Company's commitments.
All investee companies in the investment portfolio have grievance
mechanisms through which any counterparty could raise concerns
about their project implementation frameworks. In 2023, no
complaints related to adherence with these frameworks were
reported. The Investment Manager will continue to work closely with
investee companies to identify and action areas where
implementation of these frameworks can be further enhanced, make
information about the functioning of these mechanisms more readily
available and establish appropriate policies to promote respect for
human rights in all activities, including with their suppliers. All
of the investee companies' asset managers have signed up to the
Investment Manager's Supplier Code of Conduct or have an equally
robust one in place.
35
"Solar PV: A Gender Perspective", IRENA
2022.
Case study - Impact initiatives and Stakeholder Management
Programs at NISPI in 2023
In 2023, NISPI's impact
initiatives demonstrated a multifaceted approach towards
sustainable development, community engagement, and environmental
stewardship. Key activities included:
· agrivoltaics, integrating agriculture within solar farms to
enhance land use efficiency;
· biodiversity conservation through tree planting;
· renewable energy advocacy and infrastructure
support;
· health and wellness programs for local
communities;
· educational outreach and assistance;
· innovative waste management solutions; and
· robust government and community relations efforts.
These initiatives underscored
NISPI's commitment to creating shared value, prioritising
stakeholder welfare and leading by example in the renewable energy
sector.
Agrivoltaic program: Harmonises solar energy production with
agricultural activities, supporting local farming communities and
optimising land use on site.
The women's organisation KALIPI is
reaping the benefits of a gardening and livelihood program, having
been allocated designated land within the solar farm, along with
water supply and the initial set of seeds for a diverse array of
crops.
Health and wellness: Community health initiatives, including
blood donations drives and wellness seminars.
In 2023, three blood drives were
organised, collecting over 60 bags of blood for the local
communities' reserves.
Renewable energy advocacy: Develops infrastructure and raises
awareness for renewable energy transition.
In 2023, NISPI conducted numerous
renewable energy advocacy drives for local schools, delivering
talks about renewable energy as well as access to infrastructure.
An example beneficiary of these drives is a remote school in the La
Carlota region where 32 families of the 55 pupils attending the
school have been gifted access to solar flood lights. The drive
introduced NISPI to the community and promoted the use of solar
renewable energy as the main source of light for households that
are not reachable to the local distribution utility. The solar
flood light can be used by the beneficiaries to light their houses
but can also be used as portable emergency lights. This is also
useful as they traverse the mountain trails during the dark. NISPI
also donated a 1-KW solar system to the school, facilitating the
use of electronics at the school as well as providing an emergency
charging station for the community.
Waste management: Promotes recycling and sustainable waste
practices through I-SWEEP, a solid waste exchange economy
program.
Through this initiative, plastic
wrappers are collected and transformed into materials for throw
pillows or stuffed toys, while plastic bottles are sold to junk
shops. Revenue generated from these activities is allocated towards
purchasing educational materials for the local community, ensuring
the project's self-sustainability. This initiative aims to foster a
culture of segregation and recycling, reducing plastic waste and
generating profit from recycled products, thereby contributing to
environmental conservation and educational support.
Biodiversity initiatives: Tree planting and honeybee farming
to promote ecological balance and economic
opportunities.
In September 2023 8,000
fruit-bearing trees were planted by 41 volunteers. The activity is
in coordination with the City Environment and Natural Resources
("ENR") Management Office, the Agricultural and Biosystems
Engineering Office of La Carlota City, the Office of the Provincial
Agriculture and Brgy Ara-al Agrarian Reform Beneficiary Association
("BAARBA"). The trees will provide livelihood to members of BAARBA
and as well as assist in the reforestation efforts of the local ENR
Office. Training with the Negros Occidental Honeybee Association is
being scheduled to facilitate the honeybee introduction and farming
initiative.
Community and government engagement.
NISPI participated and supported
many government initiatives and programs to strengthen stakeholder
relationships and support local community projects. Examples during
2023 included the multi-sectoral clean up drives, Earth Hour
celebration and local festivals.
NISPI's comprehensive impact
initiative strategy in 2023 illustrates a proactive approach to
social responsibility, environmental conservation and stakeholder
engagement. By sharing the benefits of the solar farm with the
local community, NISPI has integrated itself as a core part of
these communities and promoted a "Just Transition".
Risk and Risk Management
Risk appetite
The Board is ultimately responsible
for defining the level and type of risk that the Company considers
appropriate, ensuring it remains in line with the Company's
investment objective and investment policy which set out the key
components of its risk appetite. The Company's risk appetite is
considered in light of the principal and emerging risks that the
Company faces, including having regard to, amongst other things,
the level of exposure to power prices, gearing and financing risk
and operational risk.
Risk management
The Company's risk management
framework is overseen by the Audit and Risk Committee, comprising
independent non-executive Directors.
The Company's risk management
policies and procedures do not aim to eliminate risk completely, as
this is neither possible nor commercially viable. Rather, they seek
to reduce the likelihood of occurrence, and ensure that the Company
is adequately prepared to deal with risks and minimise their impact
if they materialise.
Procedures to identify principal or emerging
risks
The Board regularly reviews the
Company's risk matrix, with a focus on ensuring appropriate
controls are in place to mitigate each risk. The risk management
framework was implemented at IPO and has been in place for the year
under review and continues to be in operation.
The following is a description of
the procedures for identifying principal risks that each service
provider highlights to the Board on a regular basis.
1. Alternative Investment Fund Manager:
The Company has appointed Adepa Asset Management S.A to be the
Alternative Investment Fund Manager of the Company (the "AIFM") for
the purposes of UK AIFM Directive. Accordingly, the AIFM is
responsible for exercising the risk management function in respect
of the Company. As part of this the AIFM has put in place a risk
management policy which includes stress testing procedures and risk
limits. As part of this risk management function, the AIFM
maintains a register of identified risks including emerging risks
likely to impact the Company. This is updated quarterly following
discussions with the Investment Manager and presented to the Board
for review and challenge.
2. Investment Manager: Portfolio
management has been delegated by the AIFM to the Investment
Manager. The Investment Manager provides a report to the Board at
least quarterly on asset level risks, industry trends and insight
to future challenges in the renewable sector including the
regulatory, political and economic changes likely to impact the
renewables sector.
3. Brokers: Brokers provide regular
updates to the Board on Company performance, advice specific to the
Company's sector, competitors and the investment company market
whilst working with the Board and Investment Manager to communicate
with shareholders.
4. Company Secretary and Auditor: Both
brief the Board on forthcoming legislation/regulatory change that
might impact on the Company. The Auditor also provides specific
briefings at least annually.
Procedures for oversight
The Audit and Risk Committee
undertakes a quarterly review of the Company's risk matrix and a
formal review of the risk procedures and controls in place at the
AIFM and other key service providers to ensure that emerging (as
well as known) risks are adequately identified and, so far as
practicable, mitigated.
The Board has completed a robust
assessment of the Company's principal and emerging risks,
including:
(a) a description of its
principal risks;
(b) what procedures are in
place to identify emerging risks; and
(c) an explanation of how
these are being managed or mitigated.
Following the issues that came to
light during the audit of the 2022 Annual Report, the Audit and
Risk Committee has reflected on the risks that crystallised during
the year and the steps it has taken and changes it has made as a
result. These are detailed in the table below:
|
Crystallised risk
|
Impact of crystallisation
|
Steps taken/changes made
|
|
Valuation process
|
· Temporary share suspension due to a material uncertainty
regarding the fair value of the Company's assets.
· Identified errors and inaccuracies in the prior period
valuations.
|
· Inaccurate or aggressive valuation assumptions identified by
the Company following an independent review have been updated in
line with best practice and market standards.
· Introduction of a SolarArise holding company model to
accurately reflect Indian tax liabilities and cash repatriation out
of India.
· Replacement of the Former Investment Manager effective from 1
November 2023 by the Transitional Investment Manager.
· Replacement of the former independent valuation
expert.
· Appointment of PwC as an independent valuation expert to
provide a private independent opinion on the reasonableness of the
valuations that are prepared by the Investment Manager.
· Commenced a review of value optimisation strategies with the
Transitional Investment Manager.
|
|
Asset valuations
|
· Large
decreases in the NAV when subsequent valuations carried out using
less aggressive assumptions in line with best practice and market
standards.
|
· Replacement of the Former Investment Manager effective from 1
November 2023 by the Transitional Investment Manager.
· Updated valuation assumptions in line with best practice and
market standards and replaced the independent valuation expert as
detailed above.
· The
Transitional Investment Manager has additional controls in place
for any conflicted transactions.
|
|
Reliance on third- party service
providers (Company and asset level)
|
· Valuations based on inaccurate or aggressive assumptions
subsequently being updated in line with best practice and market
standards, leading to a large decline in the NAV.
· Inherited asset acquisitions that do not optimise cash
extraction by AEIT, thus requiring reorganisation.
· Asset
management contracts have not been formalised.
· Reports from whistleblowers of key information being withheld
from the Board, particularly with regard to the cost and funding of
the proposed construction of the RUMS project and the potential
penalties that would result from aborting it.
|
· Replacement of the Former Investment Manager effective from 31
October 2023 by the Transitional Investment Manager. The
Transitional Investment Manager has a comprehensive due diligence
process that should flag pre-construction risks at the point at
which commitments are made.
· The
Transitional Investment Manager is currently undertaking a review
of governance procedures across all of the investment portfolio to
identify areas of weakness and propose potential improvements to
the Board.
· The
former independent valuation expert has been replaced and PwC has
been appointed as the independent valuation expert to provide a
private independent opinion on the reasonableness of the valuations
that are prepared by the Transitional Investment
Manager.
· The
Board, which had embedded itself in the detail of the Company's
activities, has ensured, in so far as possible, that the new
service providers have been given the appropriate handover and
information to carry out their duties.
· Getting in place appropriate asset management agreements is a
priority for the Transitional Investment Manager.
· Changes made to SPV governance to ensure that the Board is
aware of all commitments made in the underlying investments prior
to signing.
|
|
Construction risk
|
· Changes in macro-economic factors from the commitment date to
the construction commencement date, such as the increase in solar
panel prices (and EPC costs) and the changes in FX
rates.
· Commitments made without the Board being made aware of all
associated risks of the project.
· Delays to the RUMS project construction beyond the scheduled
commercial operation date of 5 February 2024.
|
· Appointment of an independent India-based financial adviser to
advise the Board on the options for the RUMS project, including
proceeding with construction and aborting it, and the associated
risks of each option.
· Appointment of an independent technical advisor, Fichtner, to
oversee the construction of RUMS project and provide independent
reports to the Transitional Investment Manager and the
Board.
· Contingency and provision for liabilities associated with a
delay in COD included in the construction budget.
|
|
Generation
|
· Operational assets acquired underperformed against P50
technical assumptions at time of investment.
|
· Appointment of independent technical advisor, Sgurr, to
conduct refreshed due diligence on the P50 technical assumptions to
validate or update modelled assumptions for subsequent
valuations.
|
Principal risks and uncertainties
The Board has defined principal
risks that have the potential to materially impact the Company's
business model, reputation or financial standing.
Subject to shareholders approving the Board's
recommended orderly realisation proposal, the Board considers the
following to be the principal risk faced by the Company along with
the potential impact of these risks and the steps taken to mitigate
it.
|
Risk
|
Potential impact
|
Mitigation
|
|
Disposal of investments
|
The realisation of the Company's
investments is subject to sale processes. The final value realised
on disposal of each investment as the Company implements its
orderly realisation strategy may be materially different to its
fair value, which could impact the value of the Company either
positively or negatively.
|
The Company will seek to ensure any
sale processes are led effectively by the Transitional Investment
Manager and the Company's other advisors. The Company will
seek to achieve a balance between maximising the value of AEIT's
investments and progressively returning cash to shareholders in a
timely manner.
|
The Board considers the following
to be the additional principal risks faced by the Company along
with the potential impact of these risks and the steps taken to
mitigate them.
External economic, political and climate risk factors for the
Company - external risks that could
impact the income and value of the Company's investments
|
Risk
|
Potential impact
|
Mitigation
|
|
Foreign currency
|
The Company's functional currency
is US Dollars (USD), but the Company's investments are based in
countries whose local currency is not USD.
Therefore, changes in foreign
currency exchange rates may adversely affect the value of the
investments or dividend income, interest or capital payments from
the investment portfolio may be less than expected when received in
US Dollars.
|
While the Company does not hedge
translational risk on the valuation of the investment portfolio,
the Company may hedge revenues which are to be received by the
Company in currencies other than the US Dollar and used to fund
dividend payments to shareholders.
The Investment Manager monitors
foreign exchange exposures using short and long-term cash flow
forecasts. The Company's portfolio concentrations and currency
holdings are monitored regularly by the Board, AIFM and Investment
Manager.
|
|
Interest rates
|
While most borrowing arrangements
are on fixed rate terms, the timing of entering into such
agreements when interest rates are increasing, may lead to reduced
project returns and a lower valuation of the investment
portfolio.
Where rates are variable, rising
rates could lead to adverse debt-cover ratios.
Refinancing of borrowings may be at
higher interest rates than expected resulting in lower returns and
decreased revenue flows to AEIT.
Macro level changes in interest
rates may affect the valuation of the investment portfolio by
impacting the valuation discount rates and could also impact
returns on any cash deposits.
|
The Company seeks to maintain a
leverage ratio of below 65% of Adjusted GAV.
The Company seeks to limit its
exposure to interest rate volatility and therefore the investee
companies fix the finance costs at the date of signing.
Debt cover ratios are monitored
monthly at the investee company level.
Interest rate assumptions are
reviewed and monitored regularly by the AIFM and Investment Manager
in the valuation process.
|
|
Inflation
|
The expenditure of the Company's
investments is frequently partially index-linked and therefore any
discrepancy with the Company's inflation expectations could impact
positively or negatively on the Company's cash flows.
The Indian portfolio currently has
a non-index-linked fixed price revenue stream over the lives of the
assets presenting the risk that high-cost inflation could
cannibalise returns.
|
Inflation assumptions are reviewed
and monitored regularly by the AIFM and Investment Manager in the
valuation process.
|
|
Tax
|
Changes to the existing rates and
rules could have an adverse effect on the valuation of the
investment portfolio and levels of dividends paid to
shareholders.
|
The Company considers tax matters
at the point of investment, actively monitors forthcoming changes
in the jurisdictions in which it operates and has tax advisors to
ensure it is abreast of any upcoming changes to tax legislation and
rates and can implement necessary changes.
Investment in multiple
jurisdictions diversifies exposure to individual country
regulations and hence risk.
During the year, the Board
commissioned additional tax advice, particularly in relation to
SolarArise.
|
|
Reputation
|
Events over the course of 2023,
namely the temporary share suspension, the decline in the Company's
NAV and public allegations between the Board and Former Investment
Manager, can impact the Company's reputation and ultimately have an
adverse effect on shareholder returns.
|
Following the temporary share
suspension, the Board worked tirelessly to complete the activities
required to enable the suspension to be lifted, which occurred on 6
March 2024. In doing so, the Board appointed external advisors to
perform detailed reviews, has actively and transparently engaged
with shareholders, including notifying them of issues as soon as
they arose, and made positive changes to improve the Company's
future and outlook.
|
|
Government policy or regulatory
changes
|
Relevant government support for the
transition to clean affordable energy in the countries in which the
investment portfolio is situated may change or decrease. Changes to
government policy may lead to changes in tax incentives, auction
processes for PPAs and other contracting and pricing mechanisms for
renewable energy, which could lead to opportunities being
commercially unviable or unattractive which may lead to lower
returns or slower deployment of capital.
|
The Company aims to hold a
diversified investment portfolio, and a diversified set of
electricity sale arrangements within target countries, so that it
is unlikely that all assets will be affected equally by any single
potential change in regulation or policy. Country level investment
strategies have assessed government commitments to scaling up low
carbon energy and taking ambitious action on climate change, and
the Investment Manager and investee companies monitor policy
developments closely.
Additionally, the investment
portfolio does not benefit from any revenue subsidies.
|
|
Climate change
Further detail can be found in the
TCFD disclosures
|
Climate-related risks relate to
transition risks and physical risks.
The prominent transition risk
relates to oversupply of renewable energy over time, which may
cause downward pressure on long-term power price forecasts setting
lower capture prices, including the risks associated with periods
of negative power prices and power price volatility in markets This
could ultimately lead to a shortfall in anticipated revenues to the
Company.
The prominent physical risks
relate to long-term changes to weather patterns, which could cause
a material adverse change to an asset's energy yield from that
expected at the time of investment. Physical risks associated with
acute and chronic temperature change could lead to flooding, storms
and typhoons, and high winds. This could damage equipment and force
operational downtime resulting in reduced revenue capability and
profitability of the portfolio of assets.
|
Climate risk assessments are
undertaken for each asset in the portfolio as part of the
investment process and screening for EU Taxonomy
alignment.
There is growing demand for
consistent, comparable, reliable, and clear climate-related
financial disclosure from many participants in financial markets.
The Board, AIFM and Investment Manager have included TCFD
disclosures as part of this Annual Report which provide a detailed
analysis of risks and opportunities associated with climate
change.
|
Internal risk factors for the Company
- internal risks that could impact target returns
and result in Company objectives not being met over the longer
term
|
Risk
|
Potential impact
|
Mitigation
|
|
Strategic review
|
Having undertaken a strategic
review of the options for the Company's future, the Board is
recommending an orderly realisation strategy and winding up of the
Company.
Details of this proposal, which is
subject to shareholder approval at a general meeting of the Company
expected to be held in Q2 2024, will be set out in a separate
circular to shareholders and made available on the Company's
website in due course.
|
As part of the strategic review,
the Board, with its advisers, completed a thorough analysis of a
range of options, including proposals to relaunch the Company, to
undertake a managed wind down and subsequent winding up of the
Company and an immediate winding up of the Company. Following
careful consideration of the options available to the Company and
after taking into account feedback from investors representing a
significant proportion of AEIT's issued share capital, the Board
concluded that it is in the best interests of shareholders as a
whole to put forward a proposal for the orderly realisation of
AEIT's assets, to be effected in a manner that seeks to achieve a
balance between maximising the value of its investments and
progressively returning cash to shareholders in a timely
manner.
The proposal is subject to
shareholder approval at a general meeting of the Company expected
to be held in Q2 2024.
|
|
Investment restrictions
|
Failure to comply with the
investment restrictions may arise due to foreign currency
movements, construction over- spend, asset allocation or failure to
deploy capital in a timely manner.
Breaches of investment restrictions
may result in lower returns than expected, lower dividend income or
reputational damage.
|
The restrictions in the Company's
investment policy are measured at the time of investment or
commitment.
The Board monitors compliance
through information provided by the Investment Manager, Company
Secretary and AIFM on a quarterly basis as well as prior to
commitment of capital. The assessment of potential or actual
breaches to investment restrictions forms part of the Board's risk
management framework.
The decision to proceed with the
RUMS project could have resulted in a breach of the single country
limit and as a mitigation measure shareholder and FCA approval was
sought, and received, to amend the investment policy. Further
information can be found in this report. This risk did not
materialise due to the significant reduction in NAV announced
following this change, whilst still having a large cash
balance.
|
|
Conflicts of interest
|
The appointments of the AIFM and
Investment Manager are on a non-exclusive basis and each of the
AIFM and Investment Manager manages other accounts, vehicles and
funds pursuing similar investment strategies to that of the
Company. This has the potential to give rise to conflicts of
interest.
Asset transfers between funds
managed by the Investment Manager give rise to potential conflicts
of interest.
There are possibilities for the
Board to have conflicts of interest.
|
The AIFM and Investment Manager
have clear conflicts of interest and allocation policies in place.
Transactions where there may be potential conflicts of interest
follow these policies.
Conflicts of interest policies are
also in place at the Board and Company levels.
The Board, AIFM and Investment
Manager are responsible for establishing and regularly reviewing
procedures to identify, manage, monitor and disclose conflicts of
interest relating to the activities of the Company.
|
|
Reliance on Company level
third-party service providers
(crystallised risk)
|
The Company has no employees and
therefore it has contractually delegated to third-party service
providers the day-to-day management of the Company.
A deterioration in the performance
of any of the key service providers including the Investment
Manager, AIFM and Administrator could have an impact on the
Company's performance and there is a risk that the Company may not
be able to find appropriate replacements should the engagement with
the service providers be terminated.
In particular, the Company relies
on the experience and recommendations of the Investment Manager for
the achievement of its investment objective.
|
All third-party service providers
are subject to ongoing oversight by the Board and AIFM and the
performance of the key service providers is reviewed on a regular
basis. The Board's Management Engagement Committee (the "MEC")
undertakes a formal review at least once a year to consider the
ongoing performance of the Investment Manager and other service
providers and makes a recommendation on the continuing
appointments. See the Management Engagement Report for the outcome
of the MEC's formal review in 2023.
As explained under 'Procedures for
oversight', following the reliance on third-party service provider
risk having crystallised during the year, changes have been made to
further mitigate the crystallisation of this risk in the
future.
|
|
Valuation process
(crystallised risk)
|
The valuation of the investment
portfolio is dependent on financial models which utilise certain
key drivers and assumptions: principally discount and local
inflation rates, FX rates, near and long-term electricity price
outlooks and the amount of electricity generated and
sold.
Some assumptions and projections
are based on the experience and judgement of the Investment
Manager.
Actual results may vary
significantly from the projections and assumptions which may reduce
the valuations and profitability of the Company leading to reduced
returns to shareholders.
Errors may occur in financial
models.
|
It is Company policy to retain an
independent valuation expert to provide a private independent
opinion on the reasonableness of the quarterly valuations prepared
by the Investment Manager. Valuations are reviewed by the Audit and
Risk Committee and approved by the AIFM and Board before adoption
in the quarterly results.
As explained under 'Procedures for
oversight', following the valuation process risk crystallised
during the year, changes have been made to further mitigate the
crystallisation of this risk, at the time of both acquisitions of
investments and subsequent valuations, in the future.
|
|
Environmental, Social and
Governance ("ESG")
|
Material ESG risks may arise such
as health and safety, human rights, bribery, corruption
and environmental damage that may impact shareholder
returns.
If the Company fails to adhere to
its public commitments and policies as stated in its
SFDR pre-contractual disclosures and its triple return
investment objective, this could result in shareholder
dissatisfaction and adversely affect the reputation of the
Company.
|
The Board has put in place an ESG
Committee to specifically review and monitor ESG-related polices,
processes and risks.
ESG risk consideration is embedded
in the investment cycle. Ongoing operational and construction ESG
risk management is reviewed periodically by the Investment Manager,
who works closely with asset managers on ESG and impact standards
and reporting.
Further details on the ESG
Committee can be found in the ESG Report.
|
|
Cyber security
|
Attempts may be made to access the
IT systems and data used by the Investment Manager, Administrator
and other service providers through a cyber-attack or malicious
breaches of confidentiality that could impact the Company's
reputation or result in financial loss.
|
Cyber security policies and
procedures implemented by key service providers are reported to the
Board and AIFM periodically to ensure conformity.
Thorough third-party due diligence
is carried out on all suppliers engaged to service the
Company.
All providers have processes in
place to identify cyber security risks and apply and monitor
appropriate risk plans.
|
|
Compliance with relevant laws,
regulations and rules
|
Failure to comply with any relevant
laws, regulations and rules, including section 1158 of the
Corporation Tax Act 2010, the rules of the FCA (including the
Listing Rules and the Prospectus Regulation Rules), the Companies
Act 2006, the UK Market Abuse Regulation, the UK AIFM Directive,
Accounting Standards and the General Data Protection Regulation,
could result in financial penalties, loss of investment trust
status, legal proceedings against the Company and/or its Directors
or reputational damage.
|
The Board monitors compliance with
relevant laws, regulations and rules and associated information
provided by the Company Secretary, AIFM and Investment Manager on a
quarterly basis and the assessment of associated risks forms part
of the Board's risk management framework. All parties are
appropriately qualified professionals and ensure that they keep
informed with any developments or updates to relevant laws,
regulations and rules.
|
Risk factors for the investment portfolio
- risks that could adversely impact the
portfolio's performance and, as a result, the ability to achieve
the Company's objectives and target returns over the longer
term.
|
Risk
|
Potential impact
|
Mitigation
|
|
Power prices
|
Revenues of certain investee
companies in the investment portfolio are wholly dependent on the
wholesale electricity market price achieved and therefore such
revenue is subject to volatility.
The income and value of the
Company's investments may be adversely impacted by changes in the
prevailing market prices of electricity and/or prices achievable
for offtaker contracts.
There is a risk that the actual
prices received vary significantly from the model assumptions,
leading to a shortfall in anticipated revenues to the Company and
dividends payable to shareholders.
|
The Investment Manager will seek to
acquire assets which have a PPA in place, or obtain a PPA to ensure
visibility of revenue streams. It is targeted that more than 75% of
an investee company's revenue, on an aggregated basis, will be
secured by a mid to long-term PPA therefore minimising the impact
of declining energy prices.
Model assumptions are based on
semi-annual reports from a number of independent established market
consultants to inform on the electricity prices over the longer
term. The Company policy is to blend at least two wholesale
electricity spot market price curves as prepared by market advisors
that are reputable in the relevant markets.
|
|
Capital structure
|
The ability to extract cash
efficiently from the underlying investee companies is imperative to
maximise the value of the Company's Investment
portfolio.
The risk that cash extraction is
delayed or trapped due to inefficient capital structures can
decrease the value of the underlying investments.
|
The Transitional Investment Manager
has ensured that the underlying valuation models reflect the
current capital structures of the underlying
investments.
Assumptions have been made within
the underlying valuation models with regard to capital
restructurings and the timing required to put these into effect.
The sensitivity of delays in this timing are shown in note 9 to the
Financial Statements.
|
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Credit risk
|
Some investee companies may have
one offtaker, therefore increasing the concentration of credit
risk. Late or non-payment of sales invoices issued by the investee
companies may lead to lower cash flows and revenues received by the
Company.
|
Prior to taking part in the auction
process for a PPA, the Investment Manager diligences and assesses
the credit risk of an offtaker to conclude on credit
worthiness.
Where possible, late interest
payment terms will be included in PPAs.
The Investment Manager ensures
asset managers monitor outstanding balances and actively chase
non-payments.
|
|
Construction
(crystallised risk)
|
Construction projects carry the
risk of over‑spend, supply chain risk, delays or disruptions to
construction milestones, connection failures, changes in market
conditions and/ or inability of contractors to perform their
contractual commitments, all of which could impact Company
performance. These include, but are not limited to:
· increase in prices of component parts (for example, solar
panels);
· legislative changes impacting the construction timeline or
construction cost;
· community-related issues that disrupt construction;
and
· inaccurate forecasts for build timelines or associated
costs.
|
Where an investment is made in a
construction phase asset, it must have an offtake agreement in
place, the land for the construction must be identified or
contractually secured where appropriate and all relevant permits
must have been granted.
The Investment Manager carries out
due diligence on any external third-party construction contractors
prior to engaging. Its ESG due diligence processes also support
efforts to anticipate and manage construction-related
risks.
Construction of the RUMS project
has seen a number of these risks being crystallised. The Company
has appointed an independent technical advisor, Fichtner, to
oversee the construction.
|
|
Generation
|
The volume of solar irradiation
available on a given day is out of the Company's control and this
is a risk on the performance of the assets.
Inconsistent irradiation may have a
significant effect on performance of the investment portfolio if
actual electricity generation is significantly different from the
assumptions made in the valuation models. This may negatively
impact project returns or expected dividend income.
Additionally, the investment
portfolio may be subject to the risk of interruption in grid
connection or irregularities in overall power supply
infrastructure.
Circumstances may arise that
adversely affect the performance of the relevant renewable energy
asset.
These include health and safety,
grid connection, material damage or degradation, equipment failures
and environmental risks.
|
The Company utilises technical
consultants prior to acquisition to advise on the assumptions which
should be made regarding volume and its impact on performance for
each investment and to minimise downtime.
The Investment Manager works with
investee companies to stay informed of grid and supporting
infrastructure maintenance arrangements, and liaises with relevant
operators to seek to anticipate and minimise
interruptions.
The investee companies have in
place insurance to cover certain losses and damage.
The Board has appointed an
independent technical advisor, Sgurr, to review the technical
assumptions associated with each asset in the portfolio.
|
|
Reliance on asset level third-party
service providers
|
The performance of some investee
companies may be dependent on external O&M service providers
and/or asset managers in remote locations and relies upon them
performing their duties with the required skill or level of
care.
|
Prior to entering into a service
contract, the Investment Manager carries out due diligence on
third-party suppliers to assess reputation, experience and breadth
of the local team.
The Investment Manager seeks to
include service level metrics in O&M agreements with minimum
production, overall plant performance metrics and health and safety
targets as a minimum.
Formal asset management agreements
are outstanding on some portfolio assets and this is a priority for
the Transitional Investment Manager.
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Cyber security
|
Attempts may be made to access the
IT systems and data used by the third-party asset managers through
a cyber-attack or phishing attempts that could result in financial
loss.
|
Processes in place and training for
the Transitional Investment Manager to mitigate risks associated
with receiving emails from bad actors.
Third-party due diligence is
carried out on asset managers engaged to manage investment
portfolio.
|
Further financial risks are
detailed in note 18 to the Financial Statements.
Task Force on Climate-Related Financial
Disclosures
Compliance statement
The Company has complied with the
requirements of LR 9.8.6(8)R by including climate-related financial
disclosures consistent with the TCFD recommendations and
recommended disclosures.
Improvements have been made from
the 2022 disclosures to include quantitative information around
climate risks and opportunities alongside transition plans as
required by TCFD Strategy principle (b), and accurate Scope 3
emission data as required under Metrics and Targets principle (b),
as set out on in this report.
Sue Inglis
Chair
13 May 2024
Governance
a) Describe the Board's oversight of climate-related risks
and opportunities.
Addressing climate change through
investment in renewable energy in fast-growing and emerging
economies in Asia is the essence of the investment strategy. The
Board has established an ESG Committee to review and monitor
ESG‑related matters, which include climate-related risks. The ESG
Committee meets at least two times a year and reports back to the
Board to provide recommendations for how sustainability should be
considered within the Company's investment strategy. The Committee
understands climate change issues and seeks support from external
advisors to supplement its work.
The Company embeds climate change
within its triple return investment strategy through investments
into assets that support the transition to a low carbon economy, or
which mitigate the effects of climate change. The Board has
considered climate change as an integral component of the
investment objective and has defined the Company as an Article 9
Fund under the SFDR, targeting 95% of investments to be aligned
with the EU Taxonomy's Climate Change Mitigation criteria. In 2022,
the Board instructed the Former Investment Manager to appoint an
external advisor to undertake climate change assessments on AEIT's
portfolio to identify climate-related risks and potential
mitigation strategies. This analysis considered all SolarArise,
NISPI and VSS assets. These reports were reviewed in 2023 by the
Transitional Investment Manager and have been reviewed by the ESG
Committee as part of preparing this report.
The Audit and Risk Committee
("ARC") also considers climate change as part of its oversight of
investment processes. The ESG Committee and ARC work closely to
oversee climate-related disclosures and agree remedial
measures. Climate change risk is included
within the Company's risk register.
b) Describe management's role in assessing and managing
climate-related risks and opportunities.
The Former Investment Manager had
an ESG Monitoring and Stewardship Committee and considered climate
change as part of its remit. Climate risk assessments were
completed for prospective investments, reports were shared with the
Former Investment Manager and opportunities to build resilience
around investments were considered. The Transitional Investment
Manager will continue to assess climate risks and consider
opportunities for mitigation for existing and prospective
investments with oversight of policies by the ESG
Committee.
Strategy
The Company aims to finance
climate action by investing in sustainable energy and the business
model is expressly designed to accelerate the low-carbon transition
in emerging Asian economies, both benefitting from and reinforcing
efforts to act on climate change. As highlighted in the Impact
Report, the investment portfolio has contributed to climate change
mitigation. The Company invests in some of the most
climate-vulnerable countries in the world, and is seeking to assess
and manage climate risk and foster resilience through its
investment strategy.
a) Describe the impact of climate-related risks and
opportunities the organisation has identified over the short,
medium and long term.
The Former Investment Manager
coordinated a transition risk analysis, with external specialist
support using ERM's Climate Risk and Impacts Solutions Platform,
based on transition scenarios from the International Energy Agency
(the "IEA") and aligned with Intergovernmental Panel on Climate
Change (the "IPCC") scenarios under three time-horizons: 2025, 2030
and 2040. The IEA Announced Pledges Scenario ("APS") was used as
the low-carbon scenario, and assumes that all climate commitments
made by governments around the world will be met in full and on
time. APS assumes global warming will reach 1.7oC by 2100. The IEA
Stated Policies Scenario ("STEPS") was used as the
business-as-usual carbon scenario which reflects current
sector-by-sector and country-by-country assessment of the existing
policies that are in place. STEPS assumes global warming will reach
2.5⁰C by 2100. The transition assessment considered transition
indicators including eight opportunity indicators (carbon price,
national decarbonisation plans, per capita emissions, annual
investment in renewables, solar PV power generation, biomass power
generation, battery storage capacity and reputation) and one risk
indicator (increase in critical metals demand). The choice of these
indicators was driven by the IEA model used to support the
transition risk assessment.
Physical climate risk analysis was
performed for each of the investee company sites using the external
specialist's proprietary physical risk screening tool. Using the
IPCC's 2021 Sixth Assessment Report scenarios, a low and high
greenhouse gas emissions scenarios (SSP1-2.6 and SSP5-8.5) were
selected under three time-horizons: baseline, 2030 and 2050. These
time-horizons were selected to cover the portfolio's asset
lifetime. On this basis, five key hazards that are expected to
increase in the medium (2030) and long (2050) term were identified:
tropical cyclones, water stress and drought, wildfire weather,
extreme heat, and extreme rainfall flooding. A potential impact
from these hazard types could include increased costs for energy
and water resources. The combined
conditions of high temperature, high wind speed and low humidity
may also increase the risk of wildfires.
b) Describe the impact of climate-related risks and
opportunities on the organisation's businesses, strategy and
financial planning.
The tables below are a summary of
the key material risks and opportunities that are likely to affect
portfolio investments, the investment strategy and financial
planning in the short, medium and long term. Risks included are
those that the Investment Manager estimate to be potentially
significant (for example, significant revenue decrease, cost
increases, NAV decrease and increased cost of
capital).
Climate-related risks
|
Time horizon
|
Risk type
|
Impact
|
|
Short-term (2025)
|
Policy change and power
price volatility: Climate and
sustainable energy policies are evolving and dynamic in core target
markets. These changes are monitored closely as increased efforts
to increase energy supply and the share of renewables in the grid
could present itself as a competition risk. Increased competition
for investments may lead to a reduction in financial returns of new
projects. In countries with dynamic markets, there is a risk of
renewable energy cannibalisation.
|
Financial planning
|
|
|
Grid capacity
limitations: The capacity of local
grids in target economies to accommodate large increases in
intermittent energy supply is a concern, given current technical
specifications and management capacities. This may impact the
project's ability to sell its maximum energy generation
potential.
|
Strategy, financial planning
|
|
|
Supply chain
risk: More copper for grids,
silicon for solar panels and lithium for battery storage is
required to transition to low-emissions power systems. Rapidly
growing critical mineral demand for clean energy technologies is
resulting in supply chain competition, increases in costs, and
supply chain sustainability risk management issues.
|
Strategy, financial planning
|
|
Medium-term (2030)
|
Climate-related
hazards: Risks associated with
tropical cyclones are already high, and factored into asset design
in most cases, but may increase. High wind speeds can cause
physical damage to sites, equipment, and vehicles and can lead to
increased expenditure for reparations. Extreme heat could cause a
health and safety risk for personnel and could overheat electrical
equipment. Flooding can also lead to physical damage of the assets
that will require additional expenditure for reparations and lost
revenue during the reparations period.
|
Portfolio investments, financial planning
|
|
|
Construction
risk: Climate-related physical
risks may also affect construction projects, including inaccurate
assessment of the opportunity, and changes in market conditions
linked to climate-related disruptions.
|
Portfolio investments
|
|
|
Technology obsolescence
risk: As more resources and
scientific research are dedicated to achieving net zero goals, new
technologies may emerge that could replace current renewables or
environmental infrastructure technologies.
|
Strategy
|
|
|
Price
uncertainty: A faster than forecast
transition to a global renewable energy supply would increase the
penetration of zero marginal cost electricity leading to 'price
cannibalisation' and could result in generating assets without
long-term PPAs selling their power for less than forecast at
investment.
|
Financial planning
|
|
Long-term (2050)
|
Climate-related physical
risks: As climate change worsens,
portfolio investments could face a higher likelihood of
experiencing extreme weather events, both chronic (for example,
altered rainfall patterns, wildfires, and extreme heat) and acute
(for example, more frequent and severe tropical cyclones, storms,
heat waves, droughts, and floods), potentially resulting in more
physical damage to on-site infrastructure and off-site transmission
and distribution systems.
|
Portfolio investments
|
Climate-related opportunities
|
Time horizon
|
Opportunity
type
|
Impact
|
|
Short-term (2025)
|
National decarbonisation
plans: Governments in target
countries remain committed to climate action and increasing the
share of renewable energy in the energy mix. Governments in target
countries continue to offer incentives to invest in the focus
technologies, notably solar energy, but also in wind.
|
Strategy
|
|
Demand for renewable
energy: There is a growing demand
for renewable energy, and pressure on businesses and corporations
to decarbonise and purchase renewable energy through both
regulatory and climate-related commitments is growing. The
investment strategy targets fast-growing economies in Asia, with
expanding populations. This increased demand creates short-term
opportunities to sell renewable energy at a premium. An increase in
public support for decarbonisation is also poised to increase
demand for impact-focused investment in public markets.
|
Financial planning, strategy
|
|
Integration of new energy
technologies including those that address intermittency
issues: Energy storage
technologies, such as lithium-ion batteries, are becoming more
widely adopted and efficient, making it possible to store solar
energy for later use. This presents short-term opportunities to
provide more reliable and consistent solar supply.
|
Portfolio investments
|
|
Medium-term (2030)
|
Technological
advancements: Can further reduce
the levelised cost of energy, and create attractive new pipeline
opportunities. For example, the use of higher-efficiency solar
cells can increase the energy output of solar panels, while
reducing the cost per unit of energy produced.
|
Financial planning
|
|
Carbon pricing and
taxation: Could help direct capital
towards renewable technologies and away from carbon-intensive
sources.
|
Strategy
|
|
Long-term (2050)
|
Continued commitment to
decarbonisation and technology innovation:
As the viability and cost effectiveness of
low-carbon sustainable energy solutions become mainstream in
emerging Asia, so will the business model. These may provide
opportunities to broaden the Company's investment mandate,
including by taking on different approaches and
technologies.
|
Strategy
|
The Transitional Investment
Manager has carried out a high-level analysis of the potential
financial impact of the climate‑related hazards and physical risks
identified in the Company's scenario planning. In each of the
scenarios, limited changes to risks were identified for NIPSI and
VSS and therefore mitigations for high risks are already built into
the way these assets were designed and managed. For India, changes
in severity of risks are seen in the different scenarios, with some
risks becoming higher risk. As a result, financial impact scenarios
are based on weighted averages from the SolarArise
portfolio.
|
Category
|
Details
|
|
Wildfire risk
|
The sites TT, TT1, TT2, TT4, TT5,
TT6 and TT9 are high risk.
|
|
Financial impact
scenario
|
Illustrative cost implications
without insurance (total cost of US$831,600)
· Damage limited to 2 inverters (central inverter at US$251,000
each), although extent of damage could be influenced by proximity
to local services.
· Business interruption: Limited to 30 days, equivalent to
US$329,600 revenue loss based on weighted average of India
portfolio.
Illustrative cost implications
with insurance (total cost of US$285,700)
· Insurance deductible (business interruption): 21 days,
equivalent to US$230,700 revenue loss based on weighted average of
India portfolio.
· Insurance deductible (material damage): US$55,000
|
|
Mitigation Measures
|
· Existing measures include onsite fire protection measures
(water, sand, extinguishers), an emergency response plan and
vegetation management and established fire breaks.
· Infrastructure manager to explore opportunities to enhance
existing fire prevention protocols (for example, implementing more
frequent audit of existing protections, carrying out fire safety
drills, increasing grass cutting management). These mitigations are
expected to have negligible impact to operating costs
|
|
Category
|
Details
|
|
Extreme heat risk
|
TT, TT1, TT2, TT4, TT5, TT6, TT9,
Islasol II, Islasol III, VSS Viet Hong and Hoang Thong are high
risk.
|
|
Financial impact
scenario
|
Baseline level of extreme heat is
already high and so do not expect any material financial
impact.
|
|
Mitigation Measures
|
· Existing management practices in place to ensure work
continuation
· Workers to carry shade with them.
· Avoiding times of day which are too hot.
|
|
Category
|
Details
|
|
Water scarcity
|
TT, TT1, TT2, TT4, TT6, TT9, VSS
Viet Hong, and Hoang Thong are high risk.
|
|
Financial impact
scenario
|
· Reduced access to water for fire prevention measures and
panel cleaning however, with existing site bore holes it is not
expected to happen so financial impact is low.
|
|
Mitigation Measures
|
· Access to bore holes on sites.
|
|
Category
|
Details
|
|
Cyclone risk
|
All NISPI assets, TT and TT6 are
high risk.
|
|
Financial impact
scenario
|
Illustrative cost implications
without insurance: (total: $417,200)
· Damage limited to minor module damage (equivalent to 5% or
2,000 panels at a cost estimate of $87,600).
· Business interruption: 30 days due to spares held on site and
considering lead time on panels and replacing structure (equivalent
to $329,600 revenue loss based on weighted average of India
portfolio).
Illustrative cost implications
with insurance: (total: $285,700)
· Insurance deductible: 21 days (equivalent to $230,700 revenue
loss based on weighted average of India portfolio).
· Insurance Premium: $55,000.
|
|
Mitigation measures
|
· NISPI
sites have risk identified in the baseline scenario. As such,
mitigants would have been considered in the design of the
structures.
· Only
an increase of risk from moderate to high was identified for TT and
TT6. Currently, insurance would cover the damage and business
interruption. In case insurance will no longer cover this - the
Investment Manager would look to review structural design at these
sites and consider reinforce measures where necessary.
|
|
Category
|
Details
|
|
Flood risk
|
TT5, TT4, TT, TT6, and Islasol II
& III are high risk.
Note, TT9 was also identified as
high risk, but given the site is on a hill with good drainage and
stable soil this has been concluded as N/A.
|
|
Financial Impact
Scenario
|
Illustrative cost implications
without insurance: (total: $831,600)
· Damage limited to: 2 inverters (central inverter at $251,000
each).
· Business interruption: Limited to 30 days (equivalent to
$329,600 revenue loss based on weighted average of India
portfolio).
Illustrative cost implications
with insurance: (total: $285,700)
· Insurance deductible (business interruption): 21 days
(equivalent to $230,700 revenue loss based on weighted average of
India portfolio).
· Insurance deductible (material damage): $55,000.
|
|
Mitigation Measures
|
· TT5
has an existing stormwater drainage system installed in 2021, which
will require ongoing maintenance.
· TT4
has a drainage system not specifically designed for stormwater,
with no erosion or trapped water observed; improvements are advised
post-hydrological study at an estimated cost of $65,000.
· TT
(including TT6) lack proper stormwater drainage systems, with
evidence of erosion, necessitating a hydrology study and the design
and implementation of stormwater drainage systems at an estimated
cost of $130,000 for each site.
· Flooding concerns at Islasol II and III solar sites are
considered non-material. These projects were classified with a
'high' flood risk in the baseline scenario and were designed to
withstand conditions up to Category 2 on the Saffir-Simpson scale.
With adequate storm water drainage systems and no flooding
incidents reported on-site, the incremental risk up to 2040 is not
expected to materially impact the sites.
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c) Describe the resilience of the organisation's strategy,
taking into consideration different future climate scenarios,
including a 2°C or lower scenario.
Overall, the Company is well
positioned to take advantage of the investment opportunities that
arise from this transition over the short-, medium- and long-term.
The speed and efficiency of the transition will have a notable
effect on the performance of the Company. If global temperature
change is to be limited to a 2°C increase from pre-industrial
levels by 2100, it is expected there will need to be significant
intervention from governments, regulators and the market. Given the
current investment mandate, there is a direct correlation between
the transition to a low-carbon future and the size of the
investment opportunity over the long-term. If temperatures increase
beyond 2°C, the physical effects of climate change will be more
severe, creating additional risks for the Company's portfolio.
Climate-related risks and opportunities on balance provide more
opportunities to the Company than risks to the Company, which is
likely to benefit from an APS scenario more than the STEPS scenario
pathway.
Risk management
a) Describe the organisation's processes for identifying and
assessing climate-related risks.
With the support of ERM and its
software and proprietary tools, the Former Investment Manager
completed an exercise whereby climate-related risks and
opportunities to the Company were identified and assessed. All
principal risks are integrated into the Company's risk register and
management frameworks.
b. Describe the organisation's processes for managing
climate-related risks.
There are a number of risk
mitigation strategies the Company can utilise to mitigate
climate-related risk:
· Diversify the investment portfolio across technologies,
geographies and development stage.
· Carry out diligence and analysis to understand latest trends
and dynamics and status of policy, using external experts where
appropriate
· Work
with policy makers and regulators to educate and influence policy
and frameworks that accelerate the transition to a clean energy
future, and actively engage with stakeholders and communities to
mitigate resistance to renewable energy assets.
· Actively manage and engage with investee companies on
climate-related issues, risks and opportunities, encouraging
asset-level adaptation plans that mitigate
most material risks (for example, ensuring effective insurance
cover, diversified supply chains, and equipment spares)
For example, while the NISPI
facilities were not damaged by Super Typhoon Rai in December 2021,
continuing severe rain tested the adequacy of the site drainage
system. In response, increased maintenance of the drainage system
was introduced to avoid potential flooding. This paid off during
the 2022 typhoon season in Negros when, despite severe rains,
NISPI's sites were not disrupted.
c. Describe how processes for identifying, assessing and
managing climate-related risks are integrated into the
organisation's overall risk management.
In 2022, the Former Investment
Manager completed comprehensive physical climate risk assessments
for all AEIT's infrastructure assets to capture any potential
climate-related risks not already considered in existing
risk-management frameworks. These assessments were carried out with
an external specialist in line with EU Taxonomy Do No Significant
Harm requirements, using its proprietary assessment and data tool.
The resulting report used best-in-class open-source climate data
and highlighted relevant natural hazards that may have an impact
under present day climate conditions, as well as in the future
climate scenario. This analysis was also complemented by additional
reports generated by the Climate Scale tool.
Further monitoring of how severe
weather events may affect the operations of AEIT's investee
companies and opportunities to reduce service interruptions will
continue to build portfolio resilience against climate change and
help manage risks going forward.
Metrics and targets
a) Disclose the metrics used by the organisation to assess
climate-related risks and opportunities.
The Transitional Investment
Manager continues to develop the framework for assessing
climate-related risks and opportunities.
Opportunity metrics:
The investment strategy is aligned
to climate mitigation. Therefore, the metrics presented below
measure the contribution made through generating clean energy and
driving a transition to net zero. These metrics measure the scale
of the climate-related opportunities the Company has taken
advantage of. The following KPIs track this contribution and are
included in this report:
· installed operational capacity - MW;
· clean energy generated - MWh;
· EU
Taxonomy alignment - %; and
· GHG
emissions avoided -
tCO2e.
Risk metrics:
In 2022, the Former Investment
Manager undertook a review of 100% of infrastructure assets which
were screened for physical and transition-related climate change
risks. Portfolio diversification is also a core metric to monitor
climate-related risk.
b. Disclose Scope 1, Scope 2, and if appropriate, Scope 3
greenhouse gas emissions, and the related risks.
Efforts to measure and manage the
Company's GHG footprint complement the focus on avoiding GHG
emissions by investing in sustainable energy in fast-growing and
carbon intensive economies in Asia where demand for energy
continues to soar, as well as its adherence with the highest
standards of good practice for financial products with a
sustainability objective under the EU Sustainable Finance
Disclosure Regulation. The transition risks associated with future
constraints on emissions, whilst not expected to be a high risk for
a low-carbon portfolio, can also be monitored through carbon
measurement.
The Transitional Investment
Manager worked with all investee companies and Altruistiq, to
account for GHG emissions. Altruistiq are an environmental data
platform, helping organisations and funds measure, manage and share
their carbon and environmental impact. Disclosure of Scope 1, 2 and
3 emissions, and methodology taken can be found in this
report.
c. Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance against
targets.
The Transitional Investment Manager
has set a climate-related risk management target to maintain the
investment portfolio's current status of 100% of infrastructure
assets screened for climate-related risks.
The metrics set out in this report
set an initial GHG footprint for the Company using the updated
methodology. Most investee companies are poised to grow their
renewable energy asset base. As a result, at this stage,
quantitative GHG emission reduction targets which would address any
risks in relation to future constraints on emissions are not being
specified. As the infrastructure investment portfolio becomes more
established, the Company will explore the viability and value
addition of setting portfolio level targets given these risks are
not expected to be high for the portfolio. This is expected to
occur in 2024. In the meantime, the Transitional Investment Manager
has set a qualitative target to continue to work with investee
companies to improve key elements of GHG measurement related to
operations and maintenance service providers.
A climate-related opportunity
management target has already been set as part of AEIT's SFDR
disclosures. AEIT has a target of 100% alignment of sustainable
investments with the EU Taxonomy.
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Target
|
2022
|
2023
|
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100% of infrastructure assets
screened for climate-related risks.
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100%
|
100%
|
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Improve key elements of GHG
measurement related to operations and maintenance service
providers.
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First carbon footprinting exercise
completed with guidance from a carbon consultant. Large proportion
of data based on spend data.
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Second carbon footprinting
exercise completed with guidance from Altruistiq. Significant
improvement in quality of data received, with reduction of
proportion of data based on spend data (26%), the majority of which
is in relation to Scope 3 category "Purchased goods and
services".
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100% alignment of sustainable
investments with the EU taxonomy alignment.36
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100%
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100%
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36 This calculation excludes cash held
that is committed and is awaiting deployment.
Stakeholder Engagement
The Board is aware of the need to
foster the Company's business relationships with suppliers,
customers and other key stakeholders through its stakeholder
management activities as described below. The Board believes that
positive relationships with each of the Company's stakeholders are
important to support the Company's long-term success. The table
below outlines the stakeholders that the Board has identified as
key, the specific engagement methods used and key activities within
the reporting period.
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Key stakeholders
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How we engage
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Key activities
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Shareholders of AEIT
The Board looks to attract long-term investors in the Company
and, in doing so, it has sought out regular opportunities to
communicate with shareholders
The Board seeks to engage with shareholders to obtain their
feedback and views on their perspectives, concerns, priorities and
expectations which the Board uses to inform its discussions and
decisions
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The Company has a broad range of
shareholders, comprising both professional and retail investors,
and has developed various ways of engaging with them,
including:
· Regulatory announcements and
publications: The Company issues
regulatory announcements via the London Stock Exchange in respect
of routine reporting obligations, periodic financial and portfolio
information updates and in response to other material events. The
Company's Annual and Interim Reports and associated presentations,
as well as quarterly factsheets and shareholder circulars, are made
available on the Company's website. Their availability is announced
via London Stock Exchange regulatory announcements and they are
available via 'Regulatory News Service' section under 'Investor
Centre' on the Company's website.
· Website
(www.asianenergyimpact.com): This
includes information on strategy, performance, investment
portfolio, share price and other relevant information to enhance
investors' understanding of the Company and its
strategy.
· Direct investor meetings and
engagement: The Investment Manager,
on behalf of the Board and with the assistance of AEIT's corporate
brokers, undertakes a programme of investor engagement throughout
the year. AEIT's corporate brokers also maintain a dialogue with
shareholders. The Board receives feedback from the Investment
Manager's and corporate brokers' investor engagement and agrees any
follow-up actions. The Chair also meets with individual
shareholders at relevant times during the year. Shareholders may
contact the Company via its corporate brokers or by post or email
(AEIT.cosec@jtcgroup.com) via the Company Secretary on any matters
that they wish to discuss with the Board and the corporate brokers
or Company Secretary will arrange for the relevant Board member to
contact them.
· Annual General
Meetings: The Annual General
Meeting of the Company provides a forum for shareholders to meet,
ask questions and discuss issues with the Directors and Investment
Manager. The next Annual General Meeting is expected to be held in
Q2 2024.
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The Board sought to actively and
transparently communicate in a timely manner with investors
throughout the year in response to the challenges faced by the
Company and the temporary share suspension.
A list of the key Board
communications to shareholders during the year (through regulatory
announcements and other publications) are outlined in the timeline
of key events.
The Chair attended more than 90
one-on-one shareholder meetings during the year, discussing the
challenges faced by the Company and shareholders' perspectives,
concerns, priorities and expectations. Shareholder feedback from
these meetings was used by the Board to inform its discussions and
decisions, including its discussions during the strategic review
and its decisions to appoint a transitional Investment Manager in
place of the Former Investment Manager, proceed with the RUMS
project and change the investment policy to ensure that proceeding
with the RUMS project would not breach that policy.
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Service providers including the Investment Manager, AIFM,
Administrator and other corporate service
providers
The Investment Manager's specialist knowledge and experience
is vital to implementing AEIT's investment strategy successfully
and achieving its investment objective
The Administrator provides accounting, company secretarial
and other administrative services that are critical to the
effective running of AEIT's day-to-day operations
The Board relies on the AIFM and other key service providers
for essential services and for advice, support and, in the case of
the AIFM, risk management and valuation oversight, to help ensure
the Company operates effectively
The Board seeks to build trusted relationships with key
service providers through constructive and transparent ongoing
two-way communication and aligned objectives for growth and
development
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The Board engages with the
Investment Manager, AIFM, Administrator and other service providers
in numerous ways, including:
· Regular
reporting: The Board receives
regular reports from the Investment Manager, AIFM, Administrator,
corporate brokers and, as required, other service
providers.
· Scheduled
meetings: Representatives of the
Investment Manager and Administrator attend Board, Committee and
valuation meetings and representatives of the AIFM attend Audit and
Risk Committee, valuation and, as required, Board meetings. The
Company's Auditor is invited to attend all Audit and Risk Committee
meetings as well as valuation meetings. The Company's independent
valuation expert also attends the valuation meetings. To build and
maintain strong working relationships, the Company's other key
service providers are invited to attend quarterly Board meetings to
present their respective reports.
· Ongoing
dialogue: The Board also engages
with the AIFM, Investment Manager, Administrator and other key
service providers outside of scheduled meetings to develop its
working relationship with those service providers and ensure the
smooth operational function of the Company. This includes weekly
meetings between the Chair and the Investment Manager and the Chair
of the Audit and Risk Committee maintaining regular contact with
the Auditor, Investment Manager and Administrator to oversee the
audit process.
This active engagement with the
Company's key service providers aims to enable the Board to
exercise effective oversight of the Company's activities, but
effective oversight is heavily dependent on accurate, transparent
and timely provision of material information by key service
providers to the Board. The Board also has in place a Management
Engagement Committee that meets annually to review service provider
performance. Further information on the Management Engagement
Committee can be found in its report.
The Company's whistleblowing
framework allows employees of key service providers to
confidentially raise any concerns or issues with the
Board.
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Due to a breakdown in the trusted
relationship between the Board and the Former Investment Manager
resulting from the events that led to the temporary share
suspension and other matters that came to light following that
suspension (including new information received under the
protections of the Company's whistleblowing policy regarding key
information being withheld from the Board, and misleading
information being given to it, by the Former Investment Manager
over a protracted period of time, the Company terminated the Former
Investment Manager's appointment with effect from 31 October
2023 and without any compensation being payable to the Former
Investment Manager.
Before terminating the Former
Investment Manager's appointment, the Board undertook a competitive
tender process for the appointment of a Transitional Investment
Manager whose immediate priorities would be finalising the
31 December 2022, 30 June 2023 and 30 September 2023
valuations, 2022 audit and accounts and 2023 interim report and a
deep dive into the Company's assets. As a result of that process,
Octopus Energy Generation was appointed as the transitional
Investment Manager with effect from 1 November 2023.
Board members used their
individual experience to support the Investment Manager in the
performance of its responsibilities to the Company throughout the
year. In particular, the Board was heavily involved in getting the
Transitional Investment Manager quickly 'up-to- speed' on the
Company's history, portfolio and challenges, enabling the
Transitional Investment Manager to promptly and efficiently prepare
the portfolio valuations required for the 30 September 2023 NAV
(announced on 13 December 2023) and assist the completion of the
2022 audit and the portfolio valuations and financial reporting for
the periods ended 31 December 2022 and the six months ended 30
June 2023. The 2022 Annual Report and 2023 Interim Report were
published on 22 January 2024, achieving a key milestone towards
lifting the temporary share suspension, which took place on 6 March
2024.
In conjunction with the
appointment of the Transitional Investment Manager, the Board
appointed a new independent valuation expert to support the
finalisation of all outstanding valuations and to reassure
shareholders of the robustness of the valuation process.
The Board maintained constant
communication with the Company's Auditor following the temporary
share suspension, making it aware of the steps taken to rectify
historic issues and updated timelines.
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Asset level service providers
Building trusted partnerships through shared learnings and an
ongoing dialogue and aligned objectives for growth and
development
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The Investment Manager actively
manages asset level service providers, including third-party asset
managers, operations and maintenance ("O&M") contractors,
construction managers, owner's engineers, suppliers, HSE (health,
safety, and environment) contractors and landowners.
Communications with service
providers are managed across a variety of platforms to ensure focus
on day-to-day operational performance of the assets. The Investment
Manager undertakes quarterly meetings with external asset managers
to review performance against service level provisions, weekly
calls with all operators and formal annual contract
reviews.
The Investment Manager's
whistleblowing framework allows employees supported by the investee
companies to confidentially raise any concerns or
issues.
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A key focus for the Transitional
Investment Manager was to commence a review of all contractual and
governance provisions of the local asset managers to ensure they
are working within delegated authority frameworks. Having
identified some deficiencies, the Transitional Investment Manager
is working to remedy these and improve the overall governance at
the local asset management level.
Updated technical due diligence
has been conducted across all operational sites and the
Transitional Investment Manager is feeding these findings back
through to the valuations. This should ensure that the assumptions
used in the valuations accurately reflect historical performance,
any continuing deficiencies in performance and any optimisation
plans.
The Transitional Investment
Manager is building relationships across material service providers
to the investee companies and has been appointed to the Boards of
investee companies for NISPI and VSS.
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Local communities
Making a meaningful contribution in the communities where we
invest advances AEIT's impact objective
|
Local asset managers facilitate
impact initiatives in the surrounding area of the solar assets the
Company is invested into.
The Investment Manager engages
with local asset managers to ensure active dialogue with key
stakeholders within the community and resolution of any
issues.
The Investment Manager ensures
active maintenance of grievance mechanisms at investee companies
that enable communities to engage around any complaints.
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Social responsibility engagement
by investee companies is featured in regular impact reporting and
highlighted in the Impact Report.
With regard to the recent
land-related issues with local farmers affecting the construction
of the RUMS project, the Transitional Investment Manager has been
actively monitoring the situation and the local asset manager
applied pressure on the landowner for a positive resolution to the
dispute. The dispute appears to have been resolved.
The Investment Manager received no
complaints through the grievance mechanisms and a key focus of the
Transitional Investment Manager in 2024 will be to review the
existing impact initiatives on sites which benefit the local
communities to see if there are any more opportunities for
enhancement.
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Section 172(1) statement
The Company provides disclosures
relevant to the requirements of section 172(1) (a) to (f) ("S172")
throughout the Strategic Report. As an externally managed
investment trust, the Company has no employees.
The Board has a clear framework
for determining the matters within its remit and has approved Terms
of Reference for the matters delegated to its Committees. When
making decisions, each Director confirms that they act in the way
they consider, in good faith, would most likely promote the
Company's success for the benefit of its members as a whole, and in
doing so have regard (among other matters) to section 172(1) (a) to
(f) as described below.
(a) The likely consequences of any decision in the long
term.
The Company was launched with a
long-term triple return investment objective which consists of: (i)
financial return; (ii) environmental return; and (iii) social
return. In view of the issues that arose during the reporting
period (see the timeline of key events), the Board commenced
strategic review of the options for the Company's long-term
future. After consultation with its advisers and taking into
account feedback from investors representing a significant
proportion of AEIT's issued share capital, the Board has concluded
that it is in the best interests of shareholders as a whole to put
forward a proposal for the orderly realisation of AEIT's assets, to
be effected in a manner that seeks to achieve a balance between
maximising the value of its investments and progressively returning
cash to shareholders in a timely manner. Details of this proposal,
which is subject to shareholder approval at a general meeting of
the Company expected to be held in Q2 2024, will be set out in a
separate circular to shareholders and will be made available on the
Company's website in due course.
The Directors recognise there have
been significant complexities in relation to Board decision-making,
in particular with reference to the challenges faced by the Company
over the last 12 months as outlined in the timeline of key events
in the Strategic Report.
In their discussions,
decision-making and reporting, the Directors have considered S172
and acted in good faith having regard to the long-term sustainable
success of the Company.
(b) The interests of the company's
employees.
The Company does not have any
direct employees. However, the Directors seek to ensure that the
Company's renewable assets provide decent work and jobs through its
social return objective.
The Board monitors this through
people-related KPIs, collecting gender pay gap, diversity and other
statistics from the employees and contractors of the investee
companies within the investment portfolio. The outcome of this
monitoring is reported which outlines the social return impact
KPIs. Additional KPIs can be found in the Principle Adverse Impact
Statement.
(c) The need to foster the company's business relationships
with suppliers, customers and others.
As the Company has no direct
employees, all activities of the Company are delivered through its
service providers. The Board actively monitors its relationships
with its direct service providers as well as the performance of
those service providers and this is outlined in the Management
Engagement Committee Report.
Further information can be found
in the 'Stakeholder Engagement' section of the Strategic
Report.
(d) The impact of the company's operations on the community
and the environment.
The Board has in place an ESG
Committee which monitors the social and environment returns for the
Company and further information can be found in the ESG Committee
Report.
The outcomes of the Board's focus
in this area can be found in the Impact Report.
(e) The desirability of the company maintaining a reputation
for high standards of business conduct.
The Board appoints an Investment
Manager who ensures that the Company's
investments are managed to a high standard of business conduct. The
Investment Manager has in place a Responsible Investment Policy
which ensures clear governance frameworks, such as a supplier code
of conduct, code of ethics, whistleblowing policies and modern
slavery statements, to ensure that high standards are maintained in
investee companies. The Board has taken steps through the
Investment Manager to combat modern slavery and human
trafficking.
Through the Investment Manager,
the Board is informed and monitors ethics and compliance with
relevant governance standards. This helps to ensure that Board
decisions and the actions of the Company promote and maintain high
standards of business conduct.
(f) The need to act fairly between members of the
company.
Throughout the year and following
the year end, the Board has actively engaged in open dialogues and
consultations with shareholders, both those voting in line with and
those voting against the Board's recommendations, to understand
their perspectives, concerns and expectations. This engagement is
facilitated through regular shareholder meetings ensuring that the
Board remains responsive to the needs and interests of all members
and can act in the best interests of members as a whole.
To further meet the requirements
of section 172(1)(f) the Board has also adopted a transparent
decision-making process. This includes the publication of detailed
explanations behind major decisions, highlighting how these
decisions serve the best interests of the Company and its members
collectively.
Non-financial Information Statement
The Board reviews ongoing
progress, issues and any updates as part of the quarterly Board
meetings through updates from the Investment Manager and the
corporate brokers. The Investment Manager provides updates on
relationships with stakeholders such as co-shareholders, O&M
providers and EPC contractors, where relevant. The corporate
brokers provide updates on communications with shareholders and the
Management Engagement Committee reviews the Company's relationships
with key suppliers. The Company's risk review framework also
facilitates the identification of items relevant to the S172
statement. During the annual review of the strategy, objectives and
processes, the Board assesses the longer-term factors relating to
the Company's decisions and the implications for the communities
and environments in which we invest and operate.
As an investment trust
specialising in sustainable energy in emerging markets, we are
committed to advancing sustainable energy solutions while
delivering value to our investors and contributing positively to
the communities and environments in which we operate. Our
non-financial information statement reflects our dedication to
environmental stewardship, social responsibility and governance
("ESG") practices, underpinning our strategic decisions and
operations.
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Non-financial information area
|
Statement and references
|
|
Environmental matters (including
the impact of the Company's business on the environment)
|
Our investment in solar farms is
at the core of our environmental commitment, significantly
contributing to the reduction of carbon emissions and supporting
the transition to a low-carbon economy. We rigorously assess the
environmental impact of our investments, focusing on the
conservation of biodiversity, the responsible use of natural
resources and the implementation of innovative technologies to
maximise energy efficiency and minimise environmental
footprints.
For further information, please
see the 'Environmental return' section of the Impact
Report.
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|
The Company's employees
|
As a closed-ended investment
company, the Company has no direct employees.
Information on indirect employees
can be found in the 'Social return' section of the Impact
Report.
|
|
Social matters
|
The social impact of our
investments is core to our investment objective. By financing
renewable energy projects, we not only generate renewable energy
but also create jobs, foster local economic development and provide
communities with clean and affordable energy sources. Our
investment in NISPI is a great example of how our investments
enable us to actively engage with local communities to ensure that
our projects align with their needs and contribute positively to
their well-being.
For further information, please
see the 'Social return' section of the Impact Report.
|
|
Respect for human
rights
|
Our commitment to human rights is
reflected in our rigorous due diligence processes, which identify
and assess any potential human rights impacts associated with our
investments. In particular, the solar sector has higher risk of
human rights supply chain risk. We strive to ensure that our
projects do not contribute to human rights abuses and actively work
to prevent any such occurrences. These policies are aligned with
international human rights standards and principles, including the
United Nations Guiding Principles on Business and Human Rights, and
are a core component of being categorised as an Article 9
fund.
|
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Anti-corruption and anti-bribery
matters
|
It is the Company's policy to
conduct all of its business in an honest and ethical manner. The
Company takes a zero-tolerance approach to bribery and corruption
and is committed to acting professionally, fairly and with
integrity in all its business dealings and relationships wherever
it operates.
Further information is outlined in
the 'Anti-bribery, anti-corruption and tax evasion' section of the
Directors' Report.
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This Strategic Report has been
approved by the Board of Directors and signed on its behalf
by:
Sue Inglis
Chair
13 May 2024
Statement of Directors' Responsibilities
The Directors are responsible for
preparing the Annual Report, including this Financial Statements,
in accordance with applicable law and regulations, including the
FCA's Listing Rules and Disclosure Guidance and Transparency
Rules.
UK company law requires the
Directors to prepare financial statements for each financial year.
Under UK company law:
· the
Directors are required to prepare financial statements in
accordance with UK-adopted international accounting standards
("IFRS"); 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 of the Company for
that period.
In preparing the Financial
Statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable IFRS have been followed, subject to
any material departures disclosed and explained in the Financial
Statements;
· make
judgements and accounting estimates that are reasonable and
prudent; and
· prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for
keeping 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
Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and, hence, for taking reasonable steps for
the prevention and detection of fraud and other
irregularities.
The Directors are responsible for
ensuring that the Annual Report, including the 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 this Annual Report, including 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 Directors. The Directors'
responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Responsibility statement
Each of the Directors confirms
that, to the best of their knowledge:
· the
Financial Statements, which have been prepared in accordance with
IFRS, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company;
· the
Strategic 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; and
· this
Annual Report, including the Financial Statements, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
This responsibility statement was
approved by the Board and is signed on its behalf by:
Sue Inglis
Chair
13 May 2024
Independent Auditor's Report to the Members of Asian Energy
Impact Trust plc
Report on the audit of the financial
statements
1. Opinion
In our opinion the financial
statements of Asian Energy Impact Trust plc (the
'company'):
· give
a true and fair view of the state of the company's affairs as at 31
December 2023 and of its loss for the year then ended;
· have
been properly prepared in accordance with United Kingdom adopted
international accounting standards; and
· have
been prepared in accordance with the requirements of the Companies
Act 2006.
We have audited the financial
statements which comprise:
· the
statement of comprehensive income;
· the
statement of financial position;
· the
statement of changes in equity;
· the
statement of cash flows; and
· the
related notes 1 to 22.
The financial reporting framework
that has been applied in their preparation is applicable law and
United Kingdom adopted international accounting
standards.
2. Basis for opinion
We conducted our audit in
accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor's responsibilities
for the audit of the financial statements section of our
report.
We are independent of the company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
Financial Reporting Council's (the 'FRC's') Ethical Standard as
applied to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We confirm that we have not provided any non-audit
services prohibited by the FRC's Ethical Standard to the
company.
We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis
for our opinion.
3. Summary of our audit approach
|
Key audit matters
|
The key audit matters that we
identified in the current year were:
· Valuation of investments at fair value through profit or loss;
and
· Going
concern.
|
|
Materiality
|
Materiality was set at $1.7
million determined based on 2% of net assets.
|
|
Scoping
|
All audit work to address the risk
of material misstatements was carried out by the audit engagement
team.
|
|
Significant changes in our approach
|
In the prior year we identified a key
audit matter relating to an onerous
contract for the commitment to acquire a further 57% investment in
SolarArise for $38.5m. The acquisition completed in January 2023
and the onerous contract was fully settled. On acquisition, the
investment was immediately fair valued to $nil. We therefore no
longer identify a key audit matter in relation to the onerous
contract provision.
|
4. Key audit matters
Key audit matters are those
matters that, in our professional judgement, are of most
significance in our audit of the financial statements of the
current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest
effect on the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement
team.
These key audit matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
4.1. Valuation of investments at fair value through profit or
loss
|
Key audit matter description
|
As at 31 December 2023, the company
held three principal investments being a 40% economic interest in
NISPI, a 100% interest in SolarArise and a 99.8% interest in Viet
Solar System Company Limited and its subsidiaries
("VSS").
Each investment is measured at fair
value through profit and loss. As described in note 18, at 31
December 2023, NISPI was valued at $12.7m (2022: $11.5m),
SolarArise at $25.5m (2022: $nil) and VSS at $2.4m (2022: no
investment). The company engaged an independent valuation firm to
review the valuation of each investment as prepared by the
investment manager, Octopus Energy Generation.
As described in the significant
accounting policies in note 2 and in note 9 (investments at fair
value through profit or loss) of the financial statements, the fair
value of each investment is determined using a discounted cash flow
methodology, which corresponds to the income approach under IFRS13
'Fair value
measurement'.
The fair value of each investment
is based on several significant assumptions, the most critical of
which are set out below. The focus of our work and the key audit
matter relates to the investment in NISPI and SolarArise as these
investments constitute 91% of the total investment
balance.
· The
forecast power prices adopted in valuing NISPI, as the asset has
not entered into a power purchase arrangement ('PPA') and
consequently sells its output on the Philippines spot market.
SolarArise has fixed price PPA's and consequently power price risk
is limited. The directors engaged a range of third party providers
to provide power price forecasts to aid them in their selection of
power price forecasts for NISPI.
· The
discount rate used in valuing the investments in both NISPI and
SolarArise.
· Forecast energy generation within SolarArise. In the
year the company obtained a range of updated generation forecasts
from an external independent party. Judgement is needed in
determining which generation forecast is the most acceptable to use
within the valuation. Octopus as investment manager have taken the
mid-point of the best and worse case generation
forecasts.
· The
valuation of the RUMS asset within SolarArise. The asset is now
valued using a discounted cash flow methodology following the
decision made in 2023 to proceed with construction of the
asset.
Other key assumptions include
forecast energy generation (NISPI), the timing of dividends and the
availability of distributable reserves, and inflation.
The company has identified the
valuation of investments as a key source of estimation uncertainty,
with further details provided in note 2 and note 9 to the financial
statements. Note 9 also provides disclosure on the sensitivity of
the valuation of investments to a change in the above assumptions.
The significant assumptions adopted in valuing each investment is
also referred to within the Audit and Risk Committee
report.
Given the inherent subjectivity in
the above assumptions, and the risk of bias in the assumptions
adopted, in particular the discount rate, forecast energy
generation, the valuation of RUMS and forward power prices, we
identified a risk of fraud in the adoption of the discount rate
(NISPI and SolarArise), forward power prices (NISPI only), forecast
energy generation (SolarArise only) and the valuation of the Rewa
Ultra Mega Solar Park (the "RUMS project") within
SolarArise.
|
|
How the scope of our audit responded to the key audit
matter
|
Procedures to
address the risk around future power prices, the discount rates and
forecast energy generation adopted included:
· obtaining an understanding of relevant controls established
around the valuation of investments and the selection of key
assumptions;
· holding discussions with the board's valuation expert to
understand and challenge their work including assessing their
competence, capabilities and objectivity;
· agreeing the power prices adopted in valuing NISPI to the
external forecasts obtained by the directors and Investment Manager
(Octopus Energy Generation) and assessing whether the forecasts
adopted were within a reasonable range and whether there was
evidence of bias in the forecasts adopted. We also assessed the
competence, capability and objectivity of the providers of those
forecasts;
· working with our valuation specialist, we calculated an
independent discount rate range for each investment. We assessed
whether the discount rate adopted by the directors fell within this
range; and
· agreeing the initial generation profile adopted in valuing
SolarArise to the technical reports obtained from the independent
third party. We checked the computational accuracy of calculating
the mid-point of these forecasts and checked that they had been
appropriately incorporated into the valuation model. We also
assessed historic generation and forecasting accuracy.
Procedures to address the risk around
the valuation of 'RUMS' in SolarArise included:
· assessing the accuracy of the RUMS valuation model including
agreeing key inputs such as prices to the power purchase agreement
and costs back to agreements;
· recomputing the overall accuracy of the valuation;
· agreeing construction costs back to the relevant agreements;
and
·
understanding progress on construction completion
post year end and the implications for the valuation of any delays
which also included information on construction progress subsequent
to the balance sheet date.
Procedures to address other aspects
of the valuation included:
· recomputing the valuation, assess the mechanical accuracy of
the models and check the foreign exchange rates adopted to external
data;
· evaluating the macroeconomic assumptions included in the
forecasts with reference to observable market data and external
forecasts;
· assessing historic generation and assess forecasting
accuracy, while benchmarking average annual degradation to external
data;
· benchmarking the inflation assumptions to external,
independent forecasts;
· checked the modelling of dividends and distributable reserves
in the model;
· agreeing the power price rate used in the SolarArise
valuation to the PPAs; and
· assessing the appropriateness of the disclosures made in the
financial statements including the key assumptions, sensitivities
applied and challenging whether these reflect a reasonable possible
range.
|
|
Key observations
|
Based on the audit procedures
performed and our benchmarking of assumptions, we identified
differences within the valuations which we reported to the Audit
and Risk Committee. However these differences were not
material.
|
5.2. Going concern
|
Key audit matter description
|
As set out in note 2 to the
financial statements, in April 2024, the Board completed the
strategic review of the options for the Company's future. Having
consulted shareholders, the Board concluded that a proposed
realisation strategy is in the best interests of shareholders as a
whole. This realisation strategy would consist of an orderly
realisation of the Company's assets and winding up of the Company,
balancing maximising the value from existing investments and
progressively returning cash to shareholders in a timely manner.
This realisation strategy will be subject to a shareholder vote
later in 2024.
Given the orderly realisation
proposal being recommended by the Board, the Financial Statements
have been prepared on a basis other than that of a going concern
given that the Directors have a reasonable expectation that the
shareholders will vote for the orderly realisation proposal and the
ultimate liquidation of the Company. Given the significance
of this to the financial statements, we identified a key audit
matter in respect of the going concern assessment and the
associated disclosures within the financial statements.
There has been no impact on the
presentation of the financial statements as at the balance sheet
date as a result not preparing the financial statements on a going
concern basis. Please see note 2 for further
information.
|
|
How the scope of our audit responded to the key audit
matter
|
Procedures to address this key
audit matter included;
· obtaining an understanding of the relevant controls that the
company has established regarding the drafting, review and approval
of the going concern model and going concern assessment;
· reviewing the going concern papers prepared by the investment
manager;
· understanding the mechanism and potential outcomes of the
shareholder vote later in 2024 and review of the RNS published by
the Board on the realisation proposal;
· assessing whether the decision to prepare the financial
statements on a non-going concern impacted the financial
performance and position of the company at the balance sheet date;
and
· reviewing the disclosures within the financial
statements.
|
|
Key observations
|
We concur with management's
decision to prepare the financial statements on a basis other than
a going concern.
|
5. Our application of materiality
5.1. Materiality
We define materiality as the
magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable
person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results
of our work.
Based on our professional
judgement, we determined materiality for the financial statements
as a whole as follows:
|
Materiality
|
$1.7 million (2022: $1.7
million).
For the audit of specific balances
in the income statement, materiality was limited to $0.85 million
(2022: $0.85 million).
|
|
Basis for determining
materiality
|
2% (2022: 2%) of net assets as at 31
December 2023.
We applied a lower materiality of
50% of overall materiality to specific balances in the income
statement.
|
|
Rationale for the
benchmark applied
|
We have considered the users of
the financial statements when selecting the appropriate benchmark.
Prior to the announcement of the company's realisation strategy,
the company's investment objective was to achieve long-term capital
appreciation from its investments. We therefore evaluated the
company's net assets as the most appropriate benchmark as it is one
of the principal considerations for members of the company in
assessing financial performance and represents total
shareholders' interest.
Our procedures on the income
statement (excluding fair value and exchange rate movements) were
performed to a lower level of materiality for
which we believe misstatements of lesser amounts than materiality
for the financial statements as a whole could be reasonably
expected to influence the users' assessment of the financial
performance of the company.
|
5.2. Performance materiality
We set performance materiality at a
level lower than materiality to reduce the probability that, in
aggregate, uncorrected and undetected misstatements exceed the
materiality for the financial statements as a whole. Performance
materiality was set at 50% of materiality for the 2023 audit (2022:
50%). In determining performance materiality, we considered the
following factors:
·
the increased inherent risks following the
announcement and impact of the share suspension in April
2023;
·
the complexity and the risks associated with the
valuation of the company's two principal investments;
and
·
the quality of the control environment which meant
we were not able to rely on controls.
5.3. Error reporting threshold
We agreed with the Audit and Risk
Committee that we would report to the Committee all audit
differences in excess of $88,000 (2022: $88,000), as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit and
Risk Committee on disclosure matters that we identified when
assessing the overall presentation of the financial
statements.
6. An overview of the scope of our audit
6.1. Scoping
Our audit was scoped by obtaining
an understanding of the entity and its environment, including
internal control, and assessing the risks of material misstatement.
Audit work to respond to the risks of material misstatement was
performed directly by the audit engagement team.
6.2. Our consideration of the control
environment
We have obtained an understanding
of the control environment and the relevant controls to address key
aspects of the financial statements, in particular controls over
the valuation of investments. Following the share suspension
announced in April 2023, the board appointed a new investment
manager (Octopus Energy Generation) to manage the investment
portfolio and to support the board in preparation of the Annual
Report and Accounts in both the current and prior year. As set out
in the Audit and Risk Committee report and the Risk Management
section, deficiencies were identified by the board in the overall
control environment including controls around the acquisition of,
and valuation of, investments and in assessing and valuing the RUMS
construction obligations within SolarArise.
As disclosed within the same
sections referenced above, the board continues to take steps to
improve the overall control environment including (amongst others)
appointing a new investment manager, undertaking a detailed review
of the key assumptions in valuing each of the company's investments
in conjunction with an independent valuer and the precision of
manual review controls around the valuation of
investments.
Given the matters noted above we
did not plan to test or rely on controls for our audit, and
therefore maintained a fully substantive approach.
6.3. Our consideration of climate-related
risks
Climate change and the transition
to a low carbon economy were considered in our audit where they
have the potential to directly or indirectly impact key judgements
and estimates within the financial statements, including the
valuation of investments.
The directors have disclosed their
climate risk considerations (and opportunities). This is consistent
with our evaluation of the climate-related risks facing the
company. We assessed these disclosures by performing inquiries with
the board and investment manager, and we did not identify any
climate related material risks of misstatement. We also considered
whether information included in the climate related disclosures in
the annual report were materially consistent with our understanding
of the business and the financial statements and our knowledge
obtained in the audit.
7. Other information
The other information comprises
the information included in the annual report, other than the
financial statements and our auditor's report thereon. The
directors are responsible for the other information contained
within the annual report.
Our opinion on the financial
statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the
other information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated.
If we identify such material
inconsistencies or apparent material misstatements, we are required
to determine whether this gives rise to a material misstatement in
the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of
this other information, we are required to report that
fact.
We have nothing to report in this
regard.
8. Responsibilities of directors
As explained more fully in the
directors' responsibilities statement, the directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial
statements, the directors are responsible for assessing the
company's ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic
alternative but to do so.
9. Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain
reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our
responsibilities for the audit of the financial statements is
located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor's report.
10. Extent to which the audit was considered capable of
detecting irregularities, including fraud
Irregularities, including fraud,
are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud is
detailed below.
10.1. Identifying and assessing potential risks related to
irregularities
In identifying and assessing risks of
material misstatement in respect of irregularities, including fraud
and non-compliance with laws and regulations, we considered the
following:
· the
nature of the industry and sector, control environment and business
performance including the design of the company's remuneration
policies, key drivers for directors' remuneration, bonus levels and
performance targets;
· results of our enquiries of the investment manager, the
directors and the Audit and Risk Committee about their own
identification and assessment of the risks of irregularities,
including those that are specific to the company's
sector;
· any
matters we identified having obtained and reviewed the company's
documentation of their policies and procedures relating
to:
o identifying, evaluating and complying with laws and
regulations and whether they were aware of any instances of
non-compliance;
o detecting and responding to the risks of fraud and whether
they have knowledge of any actual, suspected or alleged
fraud;
o the internal controls established to mitigate risks of fraud
or non-compliance with laws and regulations;
· the
matters discussed among the audit engagement team and relevant
internal specialists, including tax and valuations specialists
regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud
As a result of these procedures,
we considered the opportunities and incentives that may exist
within the organisation for fraud and identified the greatest
potential for fraud in the valuation of investments at fair value
through profit or loss. In common with all audits under ISAs (UK),
we are also required to perform specific procedures to respond to
the risk of management override.
We also obtained an understanding
of the legal and regulatory framework that the company operates in,
focusing on provisions of those laws and regulations that had a
direct effect on the determination of material amounts and
disclosures in the financial statements. The key laws and
regulations we considered in this context included the UK Companies
Act, Listing Rules, the Investment Trust SORP and UK tax
legislation, given the company's qualification as an investment
trust.
In addition, we considered
provisions of other laws and regulations that do not have a direct
effect on the financial statements but compliance with which may be
fundamental to the company's ability to operate or to avoid a
material penalty.
10.2. Audit response to risks identified
As a result of performing the
above, we identified the valuation of investments at fair value
through profit and loss as a key audit matter related to the
potential risk of fraud. The key audit matters section of our
report explains the matter in more detail and also describes the
specific procedures we performed in response to that key audit
matter.
In addition to the above, our
procedures to respond to risks identified included the
following:
· reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect
on the financial statements;
· enquiring of the board of directors, investment manager, the
Audit and Risk Committee and legal counsel concerning actual and
potential litigation and claims;
· performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
· reading minutes of meetings of those charged with governance;
and
· in
addressing the risk of fraud through management override of
controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions
that are unusual or outside the normal course of
business.
We also communicated relevant
identified laws and regulations and potential fraud risks to all
engagement team members including internal specialists, and
remained alert to any indications of fraud or non-compliance with
laws and regulations throughout the audit.
Report on other legal and regulatory
requirements
11. Opinions on other matters prescribed by the Companies Act
2006
In our opinion the part of the
directors' remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
In our opinion, based on the work
undertaken in the course of the audit:
· the
information given in the strategic report and the directors' report
for the financial year for which the financial statements are
prepared is consistent with the financial statements;
and
· the
strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and
understanding of the company and its environment obtained in the
course of the audit, we have not identified any material
misstatements in the strategic report or the directors'
report.
12. Corporate Governance Statement
The Listing Rules require us to
review the directors' statement in relation to going concern,
longer-term viability and that part of the Corporate governance
statement relating to the company's compliance with the provisions
of the UK Corporate Governance Code specified for our
review.
Based on the work undertaken as
part of our audit, we have concluded that each of the following
elements of the Corporate Governance Statement is materially
consistent with the financial statements and our knowledge obtained
during the audit:
· the
directors' statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material
uncertainties identified;
· the
directors' explanation as to its assessment of the company's
prospects, the period this assessment covers and why the period is
appropriate;
· the
directors' statement on fair, balanced and
understandable;
· the
board's confirmation that it has carried out a robust assessment of
the emerging and principal risks;
· the
section of the annual report that describes the review of
effectiveness of risk management and internal control systems;
and
· the
section describing the work of the Audit & Risk
Committee.
13. Matters on which we are required to report by
exception
13.1. Adequacy of explanations received and accounting
records
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
· we
have not received all the information and explanations we require
for our audit; or
· adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
· the
financial statements are not in agreement with the accounting
records and returns.
We have nothing to report in
respect of these matters.
13.2. Directors' remuneration
Under the Companies Act 2006 we
are also required to report if in our opinion certain disclosures
of directors' remuneration have not been made or the part of the
directors' remuneration report to be audited is not in agreement
with the accounting records and returns.
We have nothing to report in
respect of these matters.
14. Other matters which we are required to
address
14.1. Auditor tenure
Following the recommendation of
the Audit and Risk Committee, we were appointed by the board of
directors on 28 October 2021 to audit the financial statements for
the period ending 31 October 2021 and subsequent financial periods.
The Company decided to change its financial year end to 31
December, with the period ending 31 December 2022 being a 14-month
period of account. The period of total uninterrupted engagement
including previous renewals and reappointments of the firm is three
accounting periods, covering the periods ending 31 October 2021, 31
December 2022 and 31 December 2023.
14.2. Consistency of the audit report with the additional
report to the audit committee
Our audit opinion is consistent
with the additional report to the Audit & Risk Committee we are
required to provide in accordance with ISAs (UK).
15. Use of our report
This report is made solely to the
company's members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken so
that we might state to the company's members those matters we are
required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company and the
company's members as a body, for our audit work, for this report,
or for the opinions we have formed.
Daryl Winstone FCA (Senior Statutory
Auditor)
For and on behalf of Deloitte
LLP
Statutory Auditor
London, United Kingdom
13 May 2024
Financial Statements
Statement of Comprehensive Income
|
|
|
For the year ended
31 December 2023
|
For the period from 1
November 2021
to 31 December 2022
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
Notes
|
US$'000s
|
US$'000s
|
US$'000s
|
US$'000s
|
US$'000s
|
US$'000s
|
|
Investment income
|
9
|
752
|
-
|
752
|
-
|
-
|
-
|
|
Movement in fair value of
investments
|
9
|
-
|
4,988
|
4,988
|
-
|
(46,993)
|
(46,993)
|
|
Onerous contract
provision
|
13
|
-
|
-
|
-
|
-
|
(38,500)
|
(38,500)
|
|
Total revenue
|
|
752
|
4,988
|
5,740
|
-
|
(85,493)
|
(85,493)
|
|
Investment management
fees
|
3e
|
(701)
|
(701)
|
(1,402)
|
(712)
|
(712)
|
(1,424)
|
|
Administration and professional
fees - exceptional
|
4
|
(4,183)
|
-
|
(4,183)
|
(1,192)
|
-
|
(1,192)
|
|
Administration and professional
fees - other
|
4
|
(1,703)
|
-
|
(1,703)
|
(2,048)
|
(296)
|
(2,344)
|
|
Administration and professional
fees - total
|
4
|
(5,886)
|
-
|
(5,886)
|
(3,240)
|
(296)
|
(3,536)
|
|
Net finance income
|
5
|
622
|
-
|
622
|
-
|
-
|
-
|
|
Net foreign exchange
gains
|
5
|
287
|
-
|
287
|
1,669
|
-
|
1,669
|
|
(Loss)/profit before taxation
|
|
(4,926)
|
4,287
|
(639)
|
(2,283)
|
(86,501)
|
(88,784)
|
|
Taxation
|
6
|
-
|
-
|
-
|
-
|
-
|
-
|
|
(Loss)/profit for the year/period
|
|
(4,926)
|
4,287
|
(639)
|
(2,283)
|
(86,501)
|
(88,784)
|
|
(Loss)/profit per ordinary share
(cents) - basic and diluted
|
8
|
(2.80)
|
2.44
|
(0.36)
|
(1.98)
|
(75.14)
|
(77.13)
|
The total column of the above
statement of comprehensive income is the profit and loss account of
the Company.
All revenue and capital items in
the above statement derive from continuing operations.
There are no items of other
comprehensive income in the current year or prior period, other
than the profit/(loss) for the year or period, and therefore no
separate income statement has been presented.
The accompanying notes are an
integral part of these Financial Statements.
Statement of Financial Position
|
|
|
As at
|
As at
|
|
|
|
31 December
2023
|
31 December
2022
|
|
|
Notes
|
US$'000s
|
US$'000s
|
|
Non-current assets
|
|
|
|
|
Investments at fair value through
profit or loss
|
9
|
42,065
|
11,491
|
|
Current assets
|
|
|
|
|
Trade and other
receivables
|
10
|
2,370
|
633
|
|
Cash and cash
equivalents
|
11
|
41,170
|
115,819
|
|
|
|
43,540
|
116,452
|
|
Current liabilities: amounts falling due within one
year
|
|
|
|
|
Trade and other
payables
|
12
|
(4,056)
|
(2,863)
|
|
Onerous contract
provision
|
13
|
-
|
(38,500)
|
|
|
|
(4,056)
|
(41,363)
|
|
Net current assets
|
|
39,484
|
75,089
|
|
Net assets
|
|
81,549
|
86,580
|
|
Capital and reserves: equity
|
|
|
|
|
Ordinary share capital
|
14
|
1,757
|
1,757
|
|
Share premium
|
14
|
63,518
|
63,518
|
|
Special distributable
reserve
|
15
|
105,697
|
110,089
|
|
Revenue reserve
|
3i
|
(7,209)
|
(2,283)
|
|
Capital reserve
|
3i
|
(82,214)
|
(86,501)
|
|
Shareholders' funds
|
|
81,549
|
86,580
|
|
Net assets per share
(cents)
|
16
|
46.42
|
49.28
|
The Financial Statements were
approved by the Board of Directors and authorised for issue on 13
May 2024 and were signed on its behalf by:
Sue Inglis
Clifford
Tompsett
Chair of the
Board
Director
The accompanying notes are an
integral part of these Financial Statements.
Incorporated in England and Wales
with registered number 13605841
Statement of Changes in Equity
For the period from 1 November 2021 to 31 December
2023
|
|
|
Share
capital
|
Preference
shares
|
Share
premium
|
Special distributable
reserve
|
Capital
reserve
|
Revenue
reserve
|
Total
|
|
|
Notes
|
US$'000s
|
US$'000s
|
US$'000s
|
US$'000s
|
US$'000s
|
US$'000s
|
US$'000s
|
|
At 1 November 2021
|
|
-
|
66
|
-
|
-
|
-
|
-
|
66
|
|
Shares issues in the
period
|
14
|
1,757
|
-
|
179,128
|
-
|
-
|
-
|
180,885
|
|
Share issue costs
|
14
|
-
|
-
|
(3,618)
|
-
|
-
|
-
|
(3,618)
|
|
Transfer to special distributable
reserve
|
15
|
-
|
-
|
(111,992)
|
111,992
|
-
|
-
|
-
|
|
Cancellation of share
capital
|
14
|
-
|
(66)
|
-
|
-
|
-
|
-
|
(66)
|
|
Loss and comprehensive income for
the period
|
|
-
|
-
|
-
|
-
|
(86,501)
|
(2,283)
|
(88,784)
|
|
Dividends paid
|
7
|
-
|
-
|
-
|
(1,903)
|
-
|
-
|
(1,903)
|
|
Closing equity as at 31 December 2022
|
|
1,757
|
-
|
63,518
|
110,089
|
(86,501)
|
(2,283)
|
86,580
|
|
Loss and comprehensive income for
the year
|
|
-
|
-
|
-
|
-
|
4,287
|
(4,926)
|
(639)
|
|
Dividends paid
|
7
|
-
|
-
|
-
|
(4,392)
|
-
|
-
|
(4,392)
|
|
Closing equity as at 31 December 2023
|
|
1,757
|
-
|
63,518
|
105,697
|
(82,214)
|
(7,209)
|
81,549
|
The accompanying notes are an
integral part of these Financial Statements.
Statement of Cash Flows
|
|
|
For the year
ended
|
For the period from
1 November 2021 to
|
|
|
|
31 December
2023
|
31 December
2022
|
|
|
Notes
|
US$'000s
|
US$'000s
|
|
Operating activities cash flows
|
|
|
|
|
Loss before taxation
|
|
(639)
|
(88,784)
|
|
Adjustments for:
|
|
|
|
|
Movement in fair value of
investments
|
9
|
(4,988)
|
46,993
|
|
Investment income
|
9
|
(752)
|
-
|
|
Increase in provisions
|
13
|
-
|
38,500
|
|
Foreign exchange gains
|
|
(287)
|
(1,669)
|
|
Operating cash flow before movements in working
capital*
|
|
(6,666)
|
(4,960)
|
|
Changes in working capital:
|
|
|
|
|
Increase in trade and other
receivables
|
10
|
(1,737)
|
(633)
|
|
Increase in trade and other
payables
|
12
|
1,193
|
2,863
|
|
Net cash flow used in operating activities
|
|
(7,210)
|
(2,730)
|
|
Investing activities cash flows
|
|
|
|
|
Acquisition of and cash injections
into investments
|
9
|
(63,334)
|
(28,298)
|
|
Net cash flow used in investing activities
|
|
(63,334)
|
(28,298)
|
|
Financing activities cash flows
|
|
|
|
|
Dividends paid to
shareholders
|
7
|
(4,392)
|
(1,903)
|
|
Proceeds from issue of share
capital during the year/period
|
14
|
-
|
150,699
|
|
Costs in relation to issue of
shares
|
14
|
-
|
(3,618)
|
|
Net cash flow from financing activities
|
|
(4,392)
|
145,178
|
|
Cash and cash equivalents at start of
year/period
|
|
115,819
|
-
|
|
Net (decrease)/Increase in cash
and cash equivalents
|
|
(74,936)
|
114,150
|
|
Foreign exchange gains on cash or
cash equivalents
|
|
287
|
1,669
|
|
Cash and cash equivalents at end of
year/period
|
11
|
41,170
|
115,819
|
*This includes the payment of
costs presented as exceptional of US$4.2 million (2022: US$1.2
million).
The accompanying notes are an
integral part of these Financial Statements.
Notes to the Financial Statements
For the year ended 31 December 2023
1. General information
Asian Energy Impact Trust plc
("AEIT" or the "Company") is a public company limited by shares
incorporated in England and Wales on 6 September 2021 with
registered number 13605841. The Company changed its name from
ThomasLloyd Energy Impact Trust plc on 27 October 2023. The Company
is a closed-ended investment company with an indefinite life. The
Company commenced its operations on 14 December 2021 when the
Company's ordinary shares were admitted to trading on the premium
segment of the London Stock Exchange's Main Market (the "IPO"). The
Directors intend, at all times, to conduct the affairs of the
Company as to enable it to qualify as an investment trust for the
purposes of section 1158 of the Corporation Tax Act 2010, as
amended.
The registered office and
principal place of business of the Company is The Scalpel, 18th
Floor, 52 Lime Street, London, EC3M 7AF, United Kingdom.
The Company's principal activity
is to invest in a diversified investment portfolio of sustainable
energy infrastructure assets in fast-growing and emerging economies
in Asia.
The audited financial statements
of the Company (the "Financial Statements") are for the period from
1 January 2023 to 31 December 2023 and comprise only the results of
the Company as the Company is determined to be an investment entity
and, therefore, its subsidiaries are measured at fair value and are
not consolidated (see note 2). The comparative period is the period
from 1 November 2021 to 31 December 2022.
The Company has appointed Adepa
Asset Management S.A to be the alternative investment fund manager
of the Company (the "AIFM") for the purposes of Directive
2011/61/EU of the European Parliament and of the Council on
Alternative Investment Fund Managers as incorporated into UK law.
Accordingly, the AIFM is responsible for the portfolio management
of the Company and for exercising the risk management function in
respect of the Company.
The AIFM, with the agreement of
the Company, has delegated the portfolio management of the Company
to the Investment Manager. For the period from IPO to 31 October
2023, the Investment Manager was ThomasLloyd Global Asset
Management (Americas) LLC (the "Former Investment Manager"). Under
the relevant investment management agreement between the AIFM,
Company and Former Investment Manager (the "IMA") the Former
Investment Manager was entitled to a management fee, details of
which are included in note 19 to the Financial Statements. On 15
September 2023, the Board served notice on the Former Investment
Manager terminating the IMA with effect from 31 October 2023. From
1 November 2023, Octopus Energy Generation ("OEGEN" or the
"Transitional Investment Manager") was appointed as transitional
Investment Manager to cover an initial period through to 30 April
2024. For this initial term, the Company will pay OEGEN a
management fee of US$1.35 million. At the end of the term, at the
discretion of the Board, there is scope for OEGEN to earn an
additional management fee of up to US$550k for its services during
the transitional period.
JTC Limited (the "Administrator")
provides administrative and company secretarial services to the
Company under the terms of the Administration Agreement between the
Company and the Administrator.
2. Basis of preparation
The Financial Statements have been
prepared in accordance with United Kingdom adopted international
accounting standards and the applicable legal requirements of the
Companies Act 2006.
The Financial Statements have also
been prepared as far as is relevant and applicable to the Company
in accordance with the Statement of Recommended Practice: Financial
Statements of Investment Trust Companies and Venture Capital Trusts
("SORP") issued in July 2022 by the Association of Investment
Companies (the "AIC"). In line with the AIC SORP, the statement of
comprehensive income differentiates between the 'revenue' account
and the 'capital' account, and the sum of both items equals the
Company's profit for the year. Items classified as capital in
nature either relate directly to the Company's investment portfolio
or are costs deemed attributable to the long-term capital growth of
the Company.
The Financial Statements are
prepared on the historical cost basis but as the Company qualifies
as an investment entity under the amendments to IFRS10, all
investments in subsidiaries, associates and joint ventures are
measured at fair value through profit or loss. They have been
prepared on the basis of the accounting policies, significant
judgements, key assumptions and estimates as set out in notes 2 and
3. These policies are consistently applied.
The Financial Statements are
presented in US Dollar ('US$'), which is the Company's functional
currency, and are rounded to the nearest thousand, unless otherwise
stated. On 14 December 2021, the date of the IPO, the Company
changed its functional and presentation currency to the US Dollar
from the Great British Pound ("GBP"), with the change in functional
currency being applied prospectively.
Going concern
In April 2024, the Board completed
the strategic review of the options for the Company's future and
having consulted shareholders, the Board concluded that a proposed
realisation strategy is in the best interests of shareholders as a
whole. This realisation strategy would consist of an orderly
realisation of the Company's assets and winding up of the Company,
balancing maximising the value from existing investments and
progressively returning cash to shareholders in a timely
manner.
Details of this proposal, which is
subject to shareholder approval at a general meeting of the Company
expected to be held in Q2 2024, will be set out in a separate
circular to shareholders. However, while the outcome of the
shareholders vote is uncertain, it is the Board's expectation,
based on shareholder interactions to date, that shareholders will
vote for the realisation strategy being proposed. This will mean
that the Company will subsequently cease to trade, following the
realisation of its investments. The Board does not intend to
declare a dividend in respect of the quarter ended 31 December
2023, nor does it intend to make any further acquisitions or
commitments to new investments prior to the shareholder vote on its
recommended proposal.
The Directors have assessed that
the Company will be able to continue to meet its liabilities in the
going concern assessment period, being a period of at least 12
months from the date the Financial Statements were authorised for
issue. In reaching this conclusion, the Directors considered the
expectation that there will be an orderly realisation of the
Company's assets, and the Company's net assets as at 31 December
2023 of US$81.5 million and its cash reserves at that date of
US$41.2 million, along with the cash reserves of AEIT Holdings of
US$1.8 million. The Directors also considered the Company's cash
reserves at the date of approval of the Financial Statements of
US$42.1 million, along with the cash reserves of AEIT Holdings of
US$1.8 million. The Directors considered the Company's recurring
operating expenditure requirements, both to date and into the
future and the commitment made post year end of up to US$4.5
million of additional funding for the construction of the RUMS
project.
The Company continues to meet its
day-to-day liquidity needs through its cash resources. Assumed
future cash inflows over the going concern assessment period
include the receipt of dividend and interest income and capital
repayments from its underlying investments and the main cash
outflows are the ongoing running costs of the Company and the
additional costs incurred in connection with the strategic review.
Were the receipt of dividend and interest income and capital
repayments from its underlying investments delayed, the Company
would still have sufficient resources to meet its liabilities. No
realisation of investments has been assumed in this assessment but
such realisations may take place in the going concern
period.
However, given the orderly
realisation proposal being recommended by the Board, whilst the
Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future, the Financial Statements have been prepared on
a basis other than that of a going concern given that the Directors
have a reasonable expectation that shareholders will vote for the
orderly realisation proposal and the ultimate liquidation of the
Company.
No adjustments arose within the
Financial Statements as a result of preparing them on a basis other
than that of a going concern. The Company was not committed to any
costs in respect of a wind-up at the balance sheet date and the
Company's investments (its principal assets other than cash) were
already held at fair value at the balance sheet date. However, the
final fair value realised on disposal of each investment as the
Company implements its realisation strategy may be materially
different to the fair value as at 31 December 2023.
Critical accounting judgements, estimates and
assumptions
The preparation of the Financial
Statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed regularly on an ongoing basis.
Revisions to accounting estimates are recognised in the period in
which the estimates are revised and in any future periods affected.
Significant estimates, judgements and assumptions for the year are
set out as follows:
Key sources of estimation uncertainty: fair value estimation
for investments at fair value
The Company's investments at fair
value are not traded in active markets. As such, the fair value of
these investments are calculated using discounted cash flow ("DCF")
models based on valuation methods and techniques generally
recognised as standard in the industry, specifically taking into
account the International Private Equity and Venture Capital
Valuation Guidelines, which include recommendations and best
practice.
The discounted cash flow models
use observable data, to the extent practicable. However, the key
inputs require management to make estimates. The key assumptions
used in the DCF models as at 31 December 2023 that the Directors
believe would have a material impact on the fair value of the
investments should they change are set out in note 9. The key
unobservable inputs, and therefore the key sources of estimation
uncertainty, are future power prices, renewable energy generation,
discount rates, construction timeline of the RUMS project and the
timing of dividends given some of the investments have capital
structures which make payment of dividends more difficult.
Sensitivities of the key inputs used in the DCF models are detailed
in note 9.
Further considerations on currency
risk, interest rate risk, power price risk, credit risk, and
liquidity risk are detailed in note 18.
Critical accounting judgment - Going
Concern
The Company has considered the
impact of preparing the financial statements on a basis other than
that of a going concern. It has been assessed that this does not
impact the fair value of its investments at the balance sheet date,
since these investments are reflected at fair value at the balance
sheet date, based on calculations using DCF models and utilising
valuations methods and techniques generally recognised as standard
within the industry plus market
assumptions that were in place at the balance sheet date. The
valuation methods, techniques and assumptions applied do not change
as a result of preparing the financial statements on a basis other
than that of a going concern. However, the
final value realised on disposal of each investment as the Company
implements its realisation strategy may be materially different to
the fair value as at 31 December 2023.
As at 31 December 2023, the
Company assessed that there were no additional costs required to be
shown in respect of the orderly realisation proposal, since there
had been no commitments made at the balance sheet date, and the
strategic review was ongoing, at this date and the subsequent
outcome of the strategic review remains subject to shareholder
approval.
Critical accounting judgement: Equity and loan
investments
The Company considers its equity
and loan investments to share the same investment characteristics
and risks and they are therefore treated as a single unit of
account for fair value purposes (IFRS 13) and a single class for
financial instrument disclosure purposes (IFRS 9). As a result, the
evaluation of the performance of the
Company's investments is done for the entire portfolio on a fair
value basis, as is the reporting to the key management personnel
and to the investors.
Critical accounting judgement: Basis of
non-consolidation
The Company has adopted the
amendments to IFRS 10 which states that investment entities should
measure all of their subsidiaries that are themselves investment
entities at fair value (in accordance with IFRS 9 Financial
Instruments: Recognition and Measurement and IFRS 13 Fair Value
Measurement). Under the definition of an investment entity, the
Company should satisfy all three of the following tests:
i. the Company
obtains funds from one or more investors for the purpose of
providing those investors with investment management
services;
ii. the Company
commits to its investors that its business purpose is to invest
funds solely for returns from capital appreciation, investment
income or both; and
iii. the 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:
i. the Company
has multiple investors and obtains funds from a diverse group of
shareholders who would otherwise not have access individually to
invest in renewable energy infrastructure investments due to high
barriers to entry and capital requirements;
ii. the Company
intends to hold its investments for the remainder of their useful
lives for the purpose of capital appreciation and investment income
in line with the Company's stated strategy and the Directors
believe the Company is able to generate returns to the investors
during that period39; and
iii. 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 use fair value information as a primary
measurement to evaluate the performance of all of the investments
and in decision making.
The Directors are of the opinion
that the Company meets all the typical characteristics of an
investment entity and therefore meets the definition set out in
IFRS 10. The Directors are satisfied that investment entity
accounting treatment appropriately reflects the Company's
activities as an investment trust.
39
Having undertaken a strategic review of the
options for the Company's future, the Board is recommending a
proposal for the orderly realisation of assets and liquidation of
the Company. Details of this proposal, which is subject to
shareholder approval at a general meeting of the Company expected
to be held in Q2 2024, will be set out in a circular to
shareholders and will be made available on the Company's website in
due course.
New and amended standards and
interpretations
There are no new or amended
accounting standards or interpretations adopted during the year
that have a significant or material impact on the Financial
Statements. The Company notes the following standards and
interpretations which were in issue and effective at the date of
the Financial Statements.
· IFRS
17 including Amendments to IFRS 17: Insurance Contracts (effective
for accounting periods beginning on or after 1 January
2023)
· Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure
of Accounting Policies (effective for accounting periods beginning
on or after 1 January 2023)
· Amendments to IAS 8: Definition of Accounting Estimate
(effective for accounting periods beginning on or after
1 January 2023)
· Amendments to IAS 12: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (effective for
accounting periods beginning on or after 1 January 2023)
· Amendments to IAS 12: International Tax Reform - Pillar Two
Model Rules (issued on 23 May 2023 with immediate
effectiveness)
The Company also notes the
following standards and interpretations which were in issue but not
effective at the date of the Financial Statements. They are not
expected to have a material impact on the Company's financial
statements.
· Amendments to IAS 1: Classification of Liabilities as Current
or Non-current (effective date of 1 January 2024)
· Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements
(effective date of 1 January 2024)
· Amendments to IFRS 16: Lease Liability in a Sale and
Leaseback (effective date of 1 January 2024)
3. Significant accounting policies
a) Financial instruments
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 are derecognised
when the contractual rights to the cash flows from the instrument
expire or the asset is transferred and the transfer qualifies for
derecognition in accordance with IFRS 9 Financial
Instruments.
Financial assets
As an investment entity, the
Company is required to measure its investments in its wholly owned
direct subsidiaries, joint ventures and associates at fair value
through profit or loss ("FVTPL"). As explained in note 2, the
Company has made a judgement to fair value both the equity and debt
investments in its subsidiaries, joint ventures and associates
together. Subsequent to initial recognition, the Company measures
its investments on a combined basis at fair value in accordance
with IFRS 9 Financial Instruments.
Recognition and measurement and IFRS 13 fair value
measurement
Trade receivables, loans and other
receivables that are non-derivative financial assets and that have
fixed or determinable payments that are not quoted in an active
market are classified as financial assets at amortised cost. These
assets are measured at amortised cost using the effective interest
method, less allowance for expected credit losses. The Company has
assessed IFRS 9's expected credit loss model and does not consider
there to be any material impact on the Financial
Statements.
Trade receivables, loans and other
receivables are included in current assets, except where maturities
are greater than 12 months after the year end date in which
case they are classified as non-current assets.
Regular purchases and sales of
investments are recognised on the trade date - the date on which
the Company commits to purchase or sell the investment. Financial
assets at FVTPL are initially recognised at fair value. Transaction
costs are expensed as incurred within the Statement of
Comprehensive Income. 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.
Subsequent to initial recognition,
all financial assets and financial liabilities at FVTPL are
measured at fair value.
Gains and losses arising from
changes in the fair value of the 'financial assets at FVTPL'
category are presented in the Statement of Comprehensive Income
within investment income in the period in which they
arise.
Income from financial assets at
FVTPL is recognised in the Statement of Comprehensive Income within
investment income when the Company's right to receive payments is
established.
Financial liabilities and equity
Debt and equity instruments are
classified as either financial liabilities or as equity in
accordance with the substance of the contractual
arrangement.
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 and measurement and IFRS 13 fair value
measurement
Financial liabilities are measured
at amortised cost using the effective interest method, with
interest expense recognised on an effective interest rate
method.
The Company derecognises financial
liabilities when, and only when, the Company's obligations are
discharged, cancelled or expire.
Ordinary shares are classified as
equity. An equity instrument is any contract that evidences a
residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
Direct issue costs are charged against the value of ordinary share
premium.
b) Taxation
Investment trusts which have
approval under section 1158 of the Corporation Tax Act 2010 are not
liable for taxation on capital gains. The Company has successfully
applied and has been granted approval as an Investment Trust by
HMRC.
Irrecoverable withholding tax is
recognised on any overseas income on an accrual basis using the
applicable rate of taxation for the country of origin.
The underlying intermediate
holding companies and project companies in which the Company
invests provide for and pay taxation at the appropriate rates in
the countries in which they operate. This is taken into account
when assessing the value of the subsidiaries, joint ventures and
associates.
c) Segmental reporting
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. The financial information used by the Board to
manage the Company presents the business as a single
segment.
d) Investment income
Investment income comprises
interest income and dividend income received from the Company's
investments. Interest income is recognised in the Statement of
Comprehensive Income using the effective interest method. Dividend
income is recognised when the Company's entitlement to receive
payment is established.
e) Expenses
All expenses are accounted for on
an accrual basis. In accordance with the AIC SORP, the Statement of
Comprehensive Income differentiates between the 'revenue' account
and the 'capital' account, and the sum of both items equals the
Company's profit for the period. In respect of the analysis between
revenue and capital items presented within the Statement of
Comprehensive Income, expenses directly attributable to the
long-term capital growth of the Company are presented as capital
items. See below for specific examples:
· Investment management
fees: As per the Company's
investment objective at the balance sheet
date and until the proposed realisation strategy has been approved
by shareholders, it was expected that income returns made up 50% of
the Company's long-term return. Therefore, based on the estimated
split of future returns, 50% of the investment management fee is
charged as a capital item within the Statement of Comprehensive
Income.
· Transaction
costs: Transaction costs incurred
on completed transactions are charged as capital items within the
Statement of Comprehensive Income.
f) Foreign currency
Foreign currency transactions are
translated into the functional currency using the exchange rates
prevailing at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated into
the functional currency using the exchange rate prevailing at the
Statement of Financial Position date. Foreign exchange gains and
losses arising from translation are included in the Statement of
Comprehensive Income. Foreign exchange gains and losses relating to
the financial assets carried at fair value through profit or loss
are presented in the Statement of Comprehensive Income.
g) Cash and cash equivalents
Cash and cash equivalents includes
deposits held with banks and other short-term deposits with
original maturities of three months or less.
h) Dividends payable
Final dividends payable to equity
shareholders are recognised in the Financial Statements when they
have been approved by shareholders and become a liability of the
Company. Interim dividends payable are recognised in the period in
which they are paid.
i) Reserves
The Company's capital is
represented by the ordinary shares, share premium, the special
distributable reserve, retained losses and other comprehensive
income.
· Share premium:
Share premium includes the premium above nominal
value received by the Company on issuing shares, net of issue
costs, to the extent not subsequently cancelled and transferred to
another reserve.
· Special distributable
reserve: This reserve is
distributable and may be used, where the Board considers it
appropriate, by the Company for the purposes of paying dividends to
shareholders (and, in particular, augmenting or smoothing payments
of dividends to shareholders) or buying back shares. There is no
guarantee that the Board will make use of this reserve for such
purposes. See note 15 for further information.
· Retained
losses: Retained losses are split
between revenue and capital reserves as follows:
· Revenue
reserve: This reserve reflects all
income and costs which are recognised in the revenue column of the
statement of comprehensive income. This reserve is distributable by
way of dividend.
· Capital
reserve: This reserve includes
gains and losses on disposal of investments and changes in fair
values of investments, foreign exchange differences determined to
be of a capital nature and the capital element of the management
fee. Any associated tax relief is also credited to this reserve.
This reserve is distributable by way of dividend.
j) Onerous contract provision
Present obligations arising under
onerous contracts are recognised and measured as provisions. An
onerous contract is considered to exist where the Company or its
subsidiaries has a contract under which the unavoidable costs of
meeting the obligations under the contract exceed the economic
benefits expected to be received under it. Please refer to note 13
for further detail.
4. Administration and professional
fees
|
|
For the year ended 31
December 2023
|
For the period ended 31
December 2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Administration fees
|
166
|
-
|
166
|
146
|
-
|
146
|
|
AIFM fees
|
122
|
-
|
122
|
94
|
-
|
94
|
|
Legal and professional
fees
|
3,805
|
-
|
3,805
|
693
|
-
|
693
|
|
Transaction costs
|
-
|
-
|
-
|
-
|
296
|
296
|
|
Compliance and regulatory
fees
|
102
|
-
|
102
|
157
|
-
|
157
|
|
Directors' fees
|
294
|
-
|
294
|
267
|
-
|
267
|
|
Valuation fees
|
742
|
-
|
742
|
842
|
-
|
842
|
|
Company's audit and non-audit
fees:
|
|
|
|
|
|
|
|
- in
respect of audit services
|
357
|
-
|
357
|
445
|
-
|
445
|
|
- in
respect of non-audit related services
|
-
|
-
|
-
|
207
|
-
|
207
|
|
Other operating
expenses
|
298
|
-
|
298
|
389
|
-
|
389
|
|
|
5,886
|
-
|
5,886
|
3,240
|
296
|
3,536
|
Analysed as:
|
|
For the
year ended
31 December 2023
|
For the
period ended
31 December 2022
|
|
|
Total
US$'000
|
Total
US$'000
|
|
Ongoing and recurring costs of the
Company
|
1,703
|
1,508
|
|
Exceptional costs incurred
following the temporary share suspension
|
4,183
|
1,192
|
|
Other one-off costs
|
-
|
836
|
|
Total
|
5,886
|
3,536
|
Fees payable to the Company's
Auditor during the year/period were:
|
|
For the
year ended
|
For the
period ended
|
|
|
31 December
2023
|
31 December
2022
|
|
|
Total
|
Total
|
|
|
US$'000
|
US$'000
|
|
Fees payable to the Company's
Auditor for the audit of the Company's
Financial Statements
|
357
|
445
|
|
Fees payable to the Company's
Auditor for other services:
|
|
|
|
Audit-related services
|
-
|
43
|
|
Non-audit related
services
|
-
|
446
|
|
Total
|
357
|
934
|
The audit-related services
provided in the period ended 31 December 2022 relate to the review
of the 2022 interim financial statements. During the prior period,
the Company's Auditor was also paid £215,000 (US$282,000
equivalent) for its role as reporting accountant and £136,000
(US$164,000 equivalent) for tax structuring advice in connection
with the IPO. The reporting accountant fee was recognised directly
in equity as a cost associated with the initial capital raising of
the Company.
In addition to the fees disclosed
above, US$3,350 (2022: US$3,350) is payable to the Company's
Auditor in respect of audit services provided to the Company's
unconsolidated subsidiary, AEIT Holdings, that is not included in
the Company's expenses above.
The Company has no employees. Full
detail on Directors' fees is provided in note 19. Directors' fees
in the table above include employer social security contributions
of US$25,266 (2022: US$11,000).
5. Investment income, net foreign exchange gains and net
finance income
Investment income relates to
interest receivable in respect of the investment portfolio held by
the Company.
Net foreign exchange gains relate
to foreign exchange gains realised on the cash balances held in
currencies other than US$ and exchange differences arising due to
the timing between receipt of supplier invoices in GBP and the
payment date of these invoices.
Net finance income relates to
interest receivable in respect of cash which has been placed in
interest bearing deposit accounts.
6. Taxation
(a) Analysis of charge in the year/period
|
|
For the year ended 31
December 2023
|
For the period ended 31
December 2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Corporation tax
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Tax charge for the year/period
|
-
|
-
|
-
|
-
|
-
|
-
|
(b) Factors affecting total tax charge for the
year/period
The effective UK corporation tax
rate applicable to the Company for the year is 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:
|
|
For the year ended 31
December 2023
|
For the period ended 31
December 2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
(Loss)/profit before taxation
|
(4,926)
|
4,287
|
(639)
|
(2,283)
|
(86,501)
|
(88,784)
|
|
Corporation tax at
23.5%
|
(1,158)
|
1,007
|
(151)
|
(434)
|
(16,435)
|
(16,869)
|
|
(2022: 19%)
|
|
|
|
|
|
|
|
Effects of:
|
|
|
|
|
|
|
|
Non-taxable capital
gains
|
-
|
(1,172)
|
(1,172)
|
|
|
|
|
Non-deductible capital
losses
|
-
|
-
|
-
|
-
|
16,244
|
16,244
|
|
Unutilised losses carried
forward
|
1,158
|
165
|
1,323
|
434
|
191
|
625
|
|
Total tax charge/(credit) for the
year/period
|
-
|
-
|
-
|
-
|
-
|
-
|
The Directors are of the opinion
that the Company has complied with the requirements for maintaining
investment trust status for the purposes of section 1158 of the
Corporation Tax Act 2010. This allows certain capital profits of
the Company to be exempt from UK tax. Additionally, the Company may
designate dividends payable wholly or partly as interest
distributions for UK tax purposes. Interest distributions are
treated as tax deductions against taxable income of the Company so
that investors do not suffer double taxation on their
returns.
The Financial Statements do not
directly include the tax charges for any of the Company's
subsidiaries as these are held at fair value. Each of these
companies is subject to taxes in the country in which it
operates.
The Company has an unrecognised
deferred tax asset of $2.2 million (2022: US$0.8 million) based on
the excess unutilised operating expenses of US$8.9 million (2022:
US$3.3 million) at the prospective UK corporation tax rate of 25%.
A deferred tax asset has not been recognised in respect of these
operating expenses and will be recoverable only to the extent that
the Company has sufficient future taxable revenue.
7. Dividends
The dividends reflected in the
Financial Statements for the period are as follows:
|
|
For the year ended
31 December 2023
|
For the period ended
31 December 2022
|
|
|
Cents per ordinary
share
|
Total
US$'000
|
Cents per ordinary
share
|
Total
US$'000
|
|
Q4 2022 dividend - paid on 23 May
2023)
|
1.18
|
2,073
|
-
|
-
|
|
Q1 dividend - paid on 19 July 2023
(2022: 24 June 2022)
|
0.44
|
773
|
0.44
|
508
|
|
Q2 dividend - paid on 11 September
2023 (2022: 30 September 2022)
|
0.44
|
773
|
0.44
|
622
|
|
Q3 dividend - paid on 11 December
2023 (2022: 2 December 2022)
|
0.44
|
773
|
0.44
|
773
|
|
Total
|
2.50
|
4,392
|
1.32
|
1,903
|
The dividends relating to the year
ended 31 December 2023 and period ended 31 December 2022, which is
the basis on which the requirements of section
115940 of the Corporation Tax Act 2010 are considered, are detailed
below:
|
|
For the year ended
31 December 2023
|
For the period ended
31 December 2022
|
|
|
Cents per ordinary
share
|
Total
US$'000
|
Cents per ordinary
share
|
Total
US$'000
|
|
Q1 dividend
|
0.44
|
773
|
0.44
|
508
|
|
Q2 dividend
|
0.44
|
773
|
0.44
|
622
|
|
Q3 dividend
|
0.44
|
773
|
0.44
|
773
|
|
Q4 dividend
|
-
|
-
|
1.18
|
2,073
|
|
Total
|
1.32
|
2,319
|
2.50
|
3,976
|
A dividend has not been paid or
proposed in respect of the quarter ended 31 December 2023 and,
subject to shareholders approving the orderly realisation proposal
at a general meeting of the Company expected to be held in Q2 2024,
the Company's priority will be to achieve a balance between
maximising the value of its investments and progressively returning
cash to shareholders in a timely manner.
It is currently expected that
surplus cash will be returned from time to time in the form of
capital rather than dividends and that any dividends will be paid
on an ad hoc basis.
40 The requirement for an investment
trust to pay out 85% of revenue profits generated in the year as
dividends
8. Earnings per ordinary share
Earnings per ordinary share is
calculated by dividing the profit or loss attributable to equity
holders of the Company by the weighted average number of ordinary
shares in issue during the year/period.
|
|
For the year ended
31 December 2023
|
For the period ended
31 December 2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
(Loss)/profit attributable to the
equity holders of the Company (US$'000)
|
(4,926)
|
4,287
|
(639)
|
(2,283)
|
(86,501)
|
(88,784)
|
|
Weighted average number of
ordinary shares in issue (000s)
|
175,685
|
175,685
|
175,685
|
115,177
|
115,177
|
115,177
|
|
Earnings per ordinary share (cents) - basic and
diluted
|
(2.80)
|
2.44
|
(0.36)
|
(1.98)
|
(75.14)
|
(77.13)
|
9. Investments at fair value through profit or
loss
As set out in note 2, the Company
accounts for its interest in its investments at fair value through
profit or loss.
|
|
31 December
2023
|
31 December
2022
|
|
|
US$'000
|
US$'000
|
|
Amount brought forward
|
11,491
|
-
|
|
Acquisitions/capital injections in
the year/period
|
63,334
|
58,484
|
|
Provisions utilised during the
year/period
|
(38,500)
|
|
|
Investment income
|
752
|
-
|
|
Movement in fair value of
portfolio (excluding investment income)
|
4,988
|
(46,993)
|
|
Total investments at FVTPL
|
42,065
|
11,491
|
|
Movements in the period net of acquisitions/capital
injections:
|
|
|
|
Discount rate unwind
|
4,097
|
2,833
|
|
Changes to inflation
|
(356)
|
2,789
|
|
Change in FX
|
(272)
|
(3,391)
|
|
Revaluation of RUMS
project
|
5,412
|
(14,071)
|
|
Changes to capital structure and
timing of cash extraction
|
(3,243)
|
(12,410)
|
|
Changes to power prices
|
(2,167)
|
(9,036)
|
|
Changes to generation
profile
|
(1,694)
|
(3,328)
|
|
Changes in discount
rates
|
94
|
(826)
|
|
Removal of carbon credit revenues
(SolarArise)
|
-
|
(2,033)
|
|
Inclusion of residual land
value
|
1,965
|
-
|
|
Other movements in fair value of
investments
|
1,904
|
(7,520)
|
|
Movement in the fair value of the Company's investments in
the year/period
|
5,740
|
(46,993)
|
|
Analysed as:
|
|
|
|
Investment income
|
752
|
-
|
|
Movement in fair value of
Company's investments taken to the P&L in the
year/period
|
4,988
|
(46,993)
|
|
Movement in the fair value of the Company's investments in
the year/period
|
5,740
|
(46,993)
|
Acquisitions and capital injections during the
year
On 13 January 2023, the Company
acquired a 57% shareholding in SolarArise for a cash consideration
of US$38.5 million, increasing its overall shareholding in
SolarArise to 100%. This acquisition crystallised the utilisation
of the onerous contract provision of US$38.5 million that was
recognised in the prior period. See note 13 to the Financial
Statements for further information.
During the year, a total amount of
US$5.0 million was invested into AEIT Holdings Limited, a wholly
owned subsidiary. This funding was used to acquire a 99.8%
shareholding in VSS, with the excess being held as cash in the bank
of AEIT Holdings Limited.
On 18 October 2023, funding of
US$19.8 million was invested in SolarArise through an
INR-denominated external commercial borrowings loan from the
Company to enable the construction activities for the RUMS
project.
Fair value of the investment portfolio
The Transitional Investment
Manager has carried out a fair market valuation of the investments
as at 31 December 2023. These valuations have been
reviewed by the Company's independent valuation
expert and AIFM.
The Directors have satisfied
themselves as to the methodology used, the discount rates applied
and the valuation. All investments are in renewable energy assets
and are valued using a discounted cash flow methodology, with the
exception of the development project within SolarArise (the "TT8
project") as discussed further below.
The key assumptions used in the
DCF models at 31 December 2023 that the Directors believe would
have a material impact on the fair value of the investments should
they change are set out in the table below. The key and most
material unobservable inputs, and therefore the key sources of
estimation uncertainty, are future power prices, renewable energy
generation, ability and timing of cash extraction, the timing for
completion of the RUMS project and discount rates. The table below
also includes other assumptions that the Transitional Investment
Manager considers to be key to the valuation of each investment
including inflation and foreign exchange rates.
Whilst the Company holds its
investments at fair value, the final value realised on disposal of
each investment as the Company implements its orderly realisation
strategy may be materially different to its fair value as at 31
December 2023.
|
Key assumption
|
Philippines
|
India
|
Vietnam
|
Description
|
|
Power prices
|
Forecast
WESM41 prices are based on a blend of two
WESM price curves as prepared
by independent market
advisors that are reputable in this
market.
|
Fixed price PPA
|
Forecast retail electricity
tariff42 prices are based on a blend of
two wholesale energy price
curves as prepared by
independent market advisors that
are reputable in this market.
|
All assets in the Indian portfolio
have long- term fixed price power purchase agreements
and therefore market forecasts are not
required. The Philippine portfolio
generates revenue through the sale of power
to the grid at the WESM price and is fully
exposed to volatility in wholesale energy
price curves. All assets in the Vietnamese
portfolio have long- term fixed price
power purchase agreements, with exposure
to upside from a proportion of power sold
to tenants of each rooftop location priced
at the applicable retail electricity tariff as set by Electricity Vietnam and updated periodically. Therefore this investment is
exposed to fluctuations in forecasted power
prices.
|
|
Energy generation
|
P50 plus a 3.3- 3.37% 'haircut'
based on
historical underperformance.
|
For operational
assets, P50 blend based
on 'best case' and 'worst case'
yield assessments from
the technical advisor reports. For
the RUMS project, a 'haircut' is applied based on the
historic underperformance of
the wider SolarArise portfolio.
|
P50 less a haircut
for one of the assets based on historical underperformance.
|
Electricity output is based on
specifically commissioned yield assessments
prepared by technical advisors. Each
asset's valuation assumes a 'P50' level of
electricity output, which is the estimated
annual amount of electricity generation
that has a 50% probability of being
exceeded - both in any single year and over
the long term - and a 50% probability of
being underachieved. The P50 provides an
expected level of generation over the long
term. Adjustments are made to the P50
forecasts where actual performance falls below the P50.
|
|
Discount rate
|
The discount rate used in each DCF
model reflects the current market assessment of the time value of
money and the risks specific to each investment. Key inputs to the
discount rates have been reviewed by PwC, the independent valuation
expert.
The discount rates used in the
valuation models are within the range of 10.0-12.5%.
|
|
FX rate
|
US$1:PHP 55.40
|
US$1:INR 83.21
|
US$1:VND 24,269
|
Underlying valuations are
calculated in local currency and converted back to USD at the spot
rate at the relevant valuation date.
|
|
Inflation
|
CPI trends downwards to a
long-term inflation rate assumption of 3%.
The Bangko Sentral ng
Pilipinas (central bank of the Philippines) target inflation
range is 2% to 4%.
|
India CPI forecasts trend
downwards in the near term to a long-term inflation rate assumption
of 4.0%. This is in line with the Reserve Bank of India target
inflation range of 2% to 6%.
|
Vietnam CPI decreases in the short
term before increasing towards a long-term rate of 3.7%.
|
Inflation assumptions used in the
model are a blend of a leading market forecaster with International
Monetary Fund CPI forecasts for all invested markets as at 31
December 2023.
|
|
Capital structure
|
Capital reduction effective on 30
June 2024
|
Capital reduction effective on
1 April 2025
|
n/a
|
The current structure of each of
these investments is not optimal for cash extraction. The DCF
models assume a degree of capital restructuring, as indicated, for
each investment to enable cash to be extracted more efficiently.
Any delay to these restructuring plans may delay the ability of the
Company to extract cash out of its underlying
investments.
|
|
Construction of the RUMS
project
|
n/a
|
Assumes commissioning occurs by 30
June 2024.
|
n/a
|
Any delay to the commissioning of
the RUMS project may impact its valuation. Post the year end,
despite initial progress, construction faced delays due to farmers
from the surrounding land temporarily restricting access to the
construction site. The assumed commissioning date of 30 June 2024
factors in the delays experienced since the year end.
|
|
|
|
|
|
|
41 Philippine Wholesale Electricity Spot
Market.
42 Forecasted applicable retail
electricity tariff, set by Electricity Vietnam.
TT8 project
The TT8 project is a 150 MW solar
project in Maharahtra currently under development within the
SolarArise portfolio. TT8 secured its PPA in August 2023 with
Maharashtra State Electricity Distribution Company Limited at a
non-inflating fixed Indian rupee tariff of Rs. 2.9/kWh for 25
years. As at 31 December 2023, the TT8 project was valued at US$1.9
million (2022: US$nil), which is equal to cost.
AEIT Holdings
On 5 May 2022, the Company
incorporated a wholly owned subsidiary, AEIT Holdings, a private
company, limited by ordinary shares. AEIT Holdings' principal
activity is to act as an investment holding company. During the
year, the Company invested cash of US$5.0 million into AEIT
Holdings, which was used to acquire a 99.8% holding in VSS in
Vietnam on 31 May 2023 for a total consideration of US$3.1 million.
As at 31 December 2023, as well as its investment in VSS, AEIT
Holdings held cash of US$1.8 million and other net liabilities of
US$0.3 million. As such, AEIT Holdings has been valued at US$1.5
million.
Valuation sensitivities
The following table presents the
results and impact of the sensitivity analysis completed on the key
inputs used in the DCF models. The sensitivities assume that the
relevant input is changed over the entire useful life of each of
the underlying renewable energy investments, while all other
variables remain constant. All sensitivities have been calculated
independently of each other.
The Directors have assessed the
sensitivity applied to each of the significant unobservable inputs
and believe that each sensitivity represents a reasonable possible
long-term movement in the significant unobservable input to which
it relates.
While the Directors believe the
changes in inputs calculated to be within a reasonable expected
range based on their understanding of market transactions, this is
not intended to imply the likelihood of change or that possible
changes in value would be restricted to the range
considered.
|
|
|
Impact of
sensitivity
|
|
Significant unobservable input
|
Relationship to fair value
|
Fair value
increase
|
Fair value
(decrease)
|
NAV per share
increase
|
NAV per share
(decrease)
|
|
Power prices
|
Power price sensitivities have
only been applied to investments whose underlying assets are
exposed to merchant prices (i.e. revenue streams which are not
tied to a fixed‑price PPA). An increase in forecast power prices
used for these revenue streams would result in an increase in fair
value.
Sensitivity:
+/- 25%
|
US$6.5
million
|
US$(7.0)
million
|
3.7
cents
|
(4.0)
cents
|
|
Renewable energy
generation
|
An increase in generation would
result in an increase in fair value.
Sensitivity:
+/- 10%
|
US$15.7
million
|
US$(18.1) million
|
9.0
cents
|
(10.3)
cents
|
|
Discount rate
|
A decrease in the discount rate
used would result in an increase in fair value.
Sensitivity:
-/+ 1%
|
US$3.3
million
|
US$(2.9)
million
|
1.9
cents
|
(1.6)
cents
|
|
Foreign exchange rate
|
Deflation of the local currencies
in which the investments are held against the US Dollar would
result in an increase in fair value.
Sensitivity:
-/+ 10%
|
US$4.7
million
|
US$(3.8)
million
|
2.7
cents
|
(2.2)
cents
|
|
Cost inflation
|
A decrease in the inflation rate
used would result in an increase in fair value.
Sensitivity:
-/+ 1%
|
US$0.3
million
|
US$(0.3)
million
|
0.2
cents
|
(0.2)
cents
|
|
Timing of cash
extraction
|
As at 31 December 2023, NISPI, the
SolarArise holding company and each of the SolarArise SPVs had
significant negative distributable reserve balances, prohibiting
the payment of dividends.
The valuations have been updated
to reflect this but assume that some measures to eliminate cash
traps (for example, capital reductions) within a reasonable
timeframe are implemented.
The sensitivity assumes that such
measures to eliminate cash traps are delayed by
c. 12 months at both NISPI and SolarArise.
Sensitivity:
Delay to assumed capital reductions +12
months
|
-
|
US$(0.9)
million
|
-
|
(0.5)
cents
|
|
RUMS construction
delays
|
As at 31 December 2023, the
valuation of the RUMS project assumed commissioning is reached by
30 June 2024. The sensitivity shows the impact on the value of the
SolarArise investment from construction delays of a further three
months.
Sensitivity:
Delay to construction schedule by three months
|
-
|
US$(0.7)
million
|
-
|
(0.4)
cents
|
10. Trade and other receivables
|
|
31 December
2023
|
31 December
2022
|
|
|
US$'000
|
US$'000
|
|
VAT receivable
|
1,698
|
541
|
|
Prepayments
|
68
|
92
|
|
Other receivables
|
354
|
-
|
|
Amounts receivable from
subsidiaries
|
250
|
-
|
|
Total
|
2,370
|
633
|
Amounts receivable from
subsidiaries relate to amounts paid by AEIT on behalf of its
directly-owned subsidiary, AEIT Holdings Limited (see note
19).
11. Cash and cash equivalents
The cash and cash equivalents were
held in the following currencies at the year/period end:
|
|
31 December
2023
|
31 December
2022
|
|
|
US$'000
|
US$'000
|
|
US$
|
41,060
|
109,024
|
|
GBP
|
61
|
6,742
|
|
Euro
|
49
|
53
|
|
Total
|
41,170
|
115,819
|
12. Trade and other payables
|
|
31 December
2023
|
31 December
2022
|
|
|
US$'000
|
US$'000
|
|
Trade payables
|
891
|
350
|
|
Accrued expenses
|
3,165
|
2,513
|
|
Total
|
4,056
|
2,863
|
Amounts payable to related parties
are included within trade payables and accrued expenses. See note
19 for further information.
13. Provisions
|
|
31 December
2023
|
31 December
2022
|
|
|
US$'000
|
US$'000
|
|
Opening balance
|
38,500
|
-
|
|
Additions in the
year/period
|
|
|
|
Onerous contract
provision
|
-
|
38,500
|
|
Amounts utilised in the
year/period (note 9)
|
(38,500)
|
-
|
|
Balance at the end of the year/period
|
-
|
38,500
|
On 20 June 2022 the Company made a
commitment to purchase the remaining 57% of SolarArise for a total
consideration of US$38.5 million. As at 31 December 2022, the
Company had identified an onerous contract and recognised a
provision of US$38.5 million in respect of this commitment as, on
completion of the acquisition in 2023, a fair value loss was
recorded which was lower than the consideration paid to acquire
this 57% investment, primarily due to potential abandonment
liabilities relating to the RUMS project. Completion of the
purchase of 57% of SolarArise occurred on 13 January 2023 and it is
at this date on which the provision was utilised. See note 9 for
further details on how the fair value of SolarArise was
determined.
14. Share capital
|
|
Number of
ordinary
|
Share
capital
|
Share
premium
|
Number of
preference
|
Preference share
capital
|
|
Allotted, issued and fully paid:
|
shares
|
US$'000
|
US$'000
|
shares
|
US$'000
|
|
At 31 October 2021
|
1
|
-
|
-
|
50,000
|
66
|
|
Issue of shares at IPO
(14 December
2021)
|
115,393,127
|
1,154
|
114,239
|
-
|
-
|
|
Cancelation of preference shares
(22 March 2022)
|
-
|
-
|
-
|
(50,000)
|
(66)
|
|
Subsequent issue of shares
(16 August
2022)
|
26,014,349
|
260
|
29,926
|
-
|
-
|
|
Subsequent issue of shares
(16 November
2022)
|
34,277,228
|
343
|
34,963
|
-
|
-
|
|
Share issue costs
|
-
|
-
|
(3,618)
|
-
|
-
|
|
Transfer to special distributable
reserve
|
-
|
-
|
(111,992)
|
-
|
-
|
|
Closing balance at 31 December 2022 and 31 December
2023
|
175,684,705
|
1,757
|
63,518
|
-
|
-
|
The Company was incorporated on 6
September 2021 with share capital of £0.01, being one ordinary
share of £0.01.
On 18 October 2021, the Company
issued US$0.01 of ordinary share capital, being one ordinary share
of US$0.01 and preference share capital of £50,000, being 50,000
preference shares of £1.00. On this date, the Company cancelled the
one ordinary share of £0.01.
On 14 December 2021, at IPO, the
Company issued 115,393,127 ordinary shares of US$0.01 each, at a
price of US$1.00 per ordinary share, raising gross proceeds of
US$115.4 million.
On 22 March 2022, the Company
effected a capital reduction process which included the
cancellation of the 50,000 preference shares and the related
reduction of an amount receivable from related parties of US$66,000
and the reduction of the share premium reserve and related transfer
to the special distributable reserve of US$111,992,000.
On 16 August 2022, the Company
issued 26,014,349 ordinary shares of US$0.01 each in consideration
for the 43% economic interest in SolarArise. SolarArise formed part
of the seed assets at the time of the IPO, with the consideration
shares forming part of the gross IPO proceeds. The shares were
issued at a price of US$1.16035 per share that was based on the
10-day average share price prior to allotment of the
shares.
On 18 November 2022, pursuant to
the subsequent placing programme, the Company issued 34,277,228
ordinary shares of US$0.01 each at a price of US$1.030 per ordinary share, raising gross proceeds of
US$35.3 million.
Expenses incurred of US$3.6
million were determined to be directly attributable to the equity
transactions and would have otherwise been avoided if the shares
had not been issued. These expenses include broker fees and
commissions, sponsor fees and amounts paid to lawyers, accountants
and other professional advisors in relation to the IPO and the
subsequent placing programme. Such expenses have been recognised
directly in share premium.
15. Special distributable reserve
In March 2022, the Company was
granted court approval for a capital reduction process to cancel
US$112.0 million of share premium which was transferred to the
special distributable reserve. During 2023, the Company paid
dividends of US$4.4 million from this reserve (2022: US$1.9
million). At 31 December 2023, the special distributable reserve
was US$105.7 million and is fully distributable.
16. Net asset value per ordinary share
|
|
As at 31
December
|
As at 31
December
|
|
|
2023
|
2022
|
|
Total shareholders' equity
(US$'000)
|
81,549
|
86,580
|
|
Number of ordinary shares in issue
(000s)
|
175,685
|
175,685
|
|
Net asset value per ordinary share (cents)
|
46
|
49.28
|
17. Financial instruments by category
The table below sets out the
classifications of the carrying amounts of the Company's financial
assets and financial liabilities into categories of financial
instruments. There are no non-recurring fair value
measurements.
|
|
As at 31 December
2023
|
|
|
Financial assets
at
amortised
cost
|
Financial
assets at
fair
value
through
profit or
loss
|
Financial
liabilities
at
amortised
cost
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Non-current assets
|
|
|
|
|
|
Investments at fair value through
profit or loss
|
-
|
42,065
|
-
|
42,065
|
|
Current assets
|
|
|
|
|
|
Cash and cash
equivalents
|
41,170
|
-
|
-
|
41,170
|
|
Total assets
|
41,170
|
42,065
|
-
|
83,235
|
|
Current liabilities
|
|
|
|
|
|
Trade payables
|
-
|
-
|
(891)
|
(891)
|
|
Total liabilities
|
-
|
-
|
(891)
|
(891)
|
|
Net assets
|
41,170
|
42,065
|
(891)
|
82,344
|
|
|
As at 31 December
2022
|
|
|
Financial assets
at
amortised
cost
|
Financial
assets at
fair
value
through
profit or
loss
|
Financial
liabilities
at
amortised
cost
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Non-current assets
|
|
|
|
|
|
Investments at fair value through
profit or loss
|
-
|
11,491
|
-
|
11,491
|
|
Current assets
|
|
|
|
|
|
Cash and cash
equivalents
|
115,819
|
-
|
-
|
115,819
|
|
Total assets
|
115,819
|
11,491
|
-
|
127,310
|
|
Current liabilities
|
|
|
|
|
|
Trade payables
|
-
|
-
|
(350)
|
(350)
|
|
Total liabilities
|
-
|
-
|
(350)
|
(350)
|
|
Net assets
|
115,819
|
11,491
|
(350)
|
126,960
|
Financial instruments are held at
carrying value as an approximation to fair value unless stated
otherwise.
IFRS 13 requires the Company to
classify its investments in a fair value hierarchy that reflects
the significance of the inputs used in making the measurements.
IFRS 13 establishes a fair value hierarchy that prioritises the
inputs to valuation techniques used to measure fair value. The
three levels of fair value hierarchy under IFRS 13 are as
follows:
Level 1: fair value
measurements are those derived from quoted
prices (unadjusted) in active markets for
identical assets or liabilities
Level 2: fair value
measurements are those derived from inputs
other than quoted prices included within
Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: fair value
measurements are those derived from
valuation techniques that include inputs
to the asset or liability that are not based on observable market data (unobservable inputs)
|
|
As at 31 December
2023
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Financial assets
|
|
|
|
|
|
Investments at fair value through
profit or loss
|
-
|
-
|
42,065
|
42,065
|
|
Total financial assets
|
-
|
-
|
42,065
|
42,065
|
|
|
As at 31 December
2022
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Financial assets
|
|
|
|
|
|
Investments at fair value through
profit or loss
|
-
|
-
|
11,491
|
11,491
|
|
Total financial assets
|
-
|
-
|
11,491
|
11,491
|
There were no Level 1 or Level 2
assets during the year/period. There were no transfers between
Level 1 and 2, Level 1 and 3 or Level 2 and 3 during
the year/period.
Reconciliation of Level 3 fair value measurement of financial
assets and liabilities
An analysis of the movement
between opening to closing balances of the investments at fair
value through profit or loss (all classified as Level 3) is given
in note 9.
The fair value of the investments
at fair value through profit or loss includes the use of Level 3
inputs. Refer to note 9 for details on the valuation
methodology.
18. Financial risk management
The Company is exposed to certain
risks through the ordinary course of business and its financial
risk management objective is to minimise the effect of these risks
on its operations. The management of risks is the responsibility of
the Board. The Investment Manager and AIFM 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 exposure to each financial
risk considered potentially material to the Company, how it arises
and the policy for managing it is summarised below.
(i) Currency risk
The Company operates
internationally and holds both monetary and non-monetary assets
denominated in currencies other than the US Dollar, the functional
currency. Foreign currency risk, as defined in IFRS 7, arises as
the value of future transactions and recognised monetary assets and
monetary liabilities denominated in other currencies fluctuate due
to changes in foreign exchange rates. IFRS 7 considers the foreign
exchange exposure relating to non-monetary assets and liabilities
to be a component of market price risk and not foreign currency
risk. However, the Investment Manager monitors the exposure on all
foreign currency-denominated assets and liabilities.
Whilst the Company will not pursue
long-term currency hedging, the Board intends to substantially
hedge future dividend payments to shareholders where those payments
are funded by non-US Dollar-denominated dividend income. This
hedging programme may cover up to a rolling two-year period. At 31
December 2023, the Company had not entered into any foreign
exchange hedging transactions for the purpose of managing its
exposure to foreign exchange movements (both monetary and
non-monetary).
In relation to local currency debt
facilities held at the investment portfolio level, these are and
should be in the same currency as the offtake agreement, which
provides a natural hedge to mitigate the currency risk. The
Investment Manager also includes prevailing assumptions on
annualised currency depreciation in its financial projections, so
that its financial models contain anticipated changes in currency
value. As at 31 December 2023, the SolarArise portfolio held debt
of US$108.6 million on a 100% basis (2022: US$106.8 million on a
100% basis and US$45.9 million on a 43% proportionate share
basis).
When the Investment Manager
formulates a view on the future direction of foreign exchange rates
and the potential impact on the Company, the Investment Manager
factors that into its investment portfolio decisions. While the
Company has direct exposure to foreign exchange rate changes on the
price of non-US Dollar-denominated investments, it may also be
indirectly affected by the impact of foreign exchange rate changes
on the earnings of certain of its investments and, therefore, the
sensitivity analysis below may not necessarily indicate the total
effect on the Company's net assets of future movements in foreign
exchange rates.
The table below summarises the
Company's assets and liabilities, both monetary and non-monetary,
denominated in the currencies the Company was exposed to, expressed in US$'000s.
As at 31 December 2023
|
|
US$
|
GBP
|
PHP
|
INR
|
VND
|
Other
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
Investments at fair value
through profit or loss
|
-
|
1,491
|
12,690
|
25,481
|
2,403
|
-
|
42,065
|
|
Trade and other
receivables
|
269
|
2,101
|
-
|
-
|
-
|
-
|
2,370
|
|
Cash and cash
equivalents
|
41,060
|
61
|
-
|
-
|
-
|
49
|
41,170
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Trade and other
payables
|
(1,402)
|
(2,654)
|
-
|
-
|
-
|
-
|
(4,056)
|
|
Net assets
|
39,927
|
999
|
12,690
|
25,481
|
2,403
|
49
|
81,549
|
|
% of NAV
|
49%
|
1%
|
16%
|
31%
|
3%
|
0%
|
100%
|
As at 31 December 2022
|
|
US$
|
GBP
|
PHP
|
INR
|
VND
|
Other
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
Investments at fair value through
profit or loss
|
-
|
-
|
11,491
|
-
|
-
|
-
|
11,491
|
|
Trade and other
receivables
|
-
|
633
|
-
|
-
|
-
|
-
|
633
|
|
Cash and cash
equivalents
|
109,024
|
6,742
|
-
|
-
|
-
|
53
|
115,819
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Trade and other
payables
|
(593)
|
(2,270)
|
-
|
-
|
-
|
-
|
(2,863)
|
|
Onerous contract
provision
|
-
|
-
|
-
|
(38,500)
|
-
|
-
|
(38,500)
|
|
Net assets
|
108,431
|
5,105
|
11,491
|
(38,500)
|
-
|
53
|
86,580
|
|
% of NAV
|
125%
|
6%
|
13%
|
(43%)
|
0%
|
0%
|
100%
|
(ii) Interest rate risk
The Company's interest and
non-interest bearing assets and liabilities (both monetary and
non-monetary) are summarised below:
As at 31 December 2023
|
|
Interest
|
Non-interest
|
|
|
|
bearing
|
bearing
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
30,564
|
10,606
|
41,170
|
|
Trade and other
receivables
|
-
|
2,370
|
2,370
|
|
Investments at fair value through
profit or loss
|
23,855
|
18,210
|
42,065
|
|
Total assets
|
54,419
|
31,186
|
85,605
|
|
Liabilities
|
|
|
|
|
Trade and other
payables
|
-
|
(4,056)
|
(4,056)
|
|
Onerous contract
provision
|
|
-
|
-
|
|
Total liabilities
|
-
|
(4,056)
|
(4,056)
|
As at 31 December 2022
|
|
Interest
bearing
|
Non-interest
bearing
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
-
|
115,819
|
115,819
|
|
Trade and other
receivables
|
-
|
633
|
633
|
|
Investments at fair value through
profit or loss
|
-
|
11,491
|
11,491
|
|
Total assets
|
-
|
127,943
|
127,943
|
|
Liabilities
|
|
|
|
|
Trade and other
payables
|
-
|
(2,863)
|
(2,863)
|
|
Onerous contract
provisions
|
-
|
(38,500)
|
(38,500)
|
|
Total liabilities
|
-
|
(41,363)
|
(41,363)
|
(iii) Power power risk
The Company is also exposed to
power price risk on its investments, primarily being future power
prices. Wholesale electricity prices tend to be volatile and are
impacted by a variety of factors, including market demand, the
electricity generation mix in a specific market and fluctuations in
the market prices of certain commodities. Whilst SolarArise
benefits from fixed priced PPAs, NISPI's revenues are based on the
wholesale electricity spot market price in the Philippines and
VSS's revenues are based on the applicable retail tariff in
Vietnam. The Investment Manager continually monitors the wholesale
electricity spot market price and forecasts and aims to put in
place mitigating strategies, such as securing fixed PPA contracts,
to reduce the exposure of the Company to this risk. The valuation
sensitivity of the investment portfolio to power prices is shown in
note 9.
The Company's policy is to manage
price risk arising from investments through diversification of its
investment portfolio and selection of investments in renewable
energy assets and other financial instruments within the specified
limits set out in the Company's investment policy, or otherwise set
by the Board. See this report for details on the Company's
Investment Policy.
(iv) Credit risk
The Company is exposed to
third-party credit risk in several instances and the possibility
that a counterparty with which the Company or its underlying
investment entities contract may fail to perform their obligations
under a commitment that it has entered into with the Company or its
underlying investment entities in the manner anticipated by the
Company.
Credit risk arises where capital
commitments are being made and is managed by diversifying exposures
among a portfolio of counterparties and through applying credit
limits to those counterparties with a lower credit
standing.
Counterparty credit risk exposure
limits are determined based on the credit rating of the
counterparty. Counterparties are assessed and monitored on the
basis of their ratings from Standard & Poor's and/or Moody's.
No financial transactions are permitted with counterparties with a
credit rating of less than BBB- from Standard & Poor's or Baa3
from Moody's, unless specifically approved by the Board.
Credit risk also arises from cash
and other assets that are required to be held in custody by banks
and other financial institutions. Cash held with banks and other
financial institutions will not be treated as client money subject
to the rules of the FCA and may be used by the bank in the ordinary
course of its own business. The Company will, therefore, be subject
to the creditworthiness of the bank or other financial institution.
In the event of insolvency of a bank or other financial
institution, the Company will rank as a general creditor in
relation thereto and may not be able to recover such cash in full,
or at all. To mitigate this risk, cash and bank deposits are only
held with major financial institutions with high credit ratings
assigned by international credit rating agencies.
The Company has assessed the
expected credit loss model in IFRS 9 and does not consider any
material impact on these Financial Statements. No balances are past
due or impaired.
(v) Liquidity risk
Liquidity risk is the risk that
the Company may not be able to meet its financial obligations as
they fall due. The objective of liquidity management is, therefore,
to ensure that all commitments which are required to be funded can
be met out of readily available and secure sources of
funding.
At 31 December 2023, the Company's
financial liabilities were trade payables. The Company intends to
hold sufficient cash to meet its working capital needs over a
horizon of at least the next 12 months from the signing of these
Financial Statements. The Company held cash and cash equivalents of
US$41.2 million at 31 December 2023, with total financial and
non-financial liabilities of US$4.1 million.
Cash flow forecasts are prepared
by the Investment Manager on a quarterly basis for a rolling
six-month period to assist in the ongoing analysis of short-term
cash flow, and for at least 12 months to cover the Company's going
concern assessment. The Directors monitor forecast and actual cash
flows from operating, financing and investing activities to
consider payment of trade and other payables, payment of dividends
or the funding of additional investing activities. The Company also
ensures that it maintains adequate cash reserves by monitoring the
forecast and actual cash flows.
The following table shows the
maturity analysis of financial liabilities held:
As at 31 December 2023
|
|
Less than
1 year
|
1-5 years
|
More than
5 years
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Liabilities
|
|
|
|
|
|
Trade and other
payables
|
(891)
|
-
|
-
|
(891)
|
|
|
(891)
|
-
|
-
|
(891)
|
As at 31 December 2022
|
|
Less than
1 year
|
1-5 years
|
More than
5 years
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
Liabilities
|
|
|
|
|
|
Trade and other
payables
|
(350)
|
-
|
-
|
(350)
|
|
|
(350)
|
-
|
-
|
(350)
|
Capital risk management
The Company manages its capital to
ensure that it will be able to continue as a going concern while
maximising the capital return to shareholders. The capital
structure of the Company at 31 December 2023 consists of equity
attributable to equity holders of the Company, comprising issued
share capital and reserves, including accumulated losses. The Board
continues to monitor the balance of the overall capital structure
so as to maintain investor and market confidence. The Company is
not subject to any external capital requirements.
The Company does not have any
debt. However, it is permitted to have debt within its underlying
investments. Per the Company's investment policy, gearing should
not exceed 65% of the Adjusted GAV (measured at the time the
facility is entered into), with the Company targeting gearing of
below 50% in the medium term. External debt financing as at
31 December 2023 is comprised of outstanding principal amounts
of US$109.8 million, representing a leverage ratio
of 57%.
19. Related party transactions
AIFM
The Company is classified as an
Alternative Investment Fund under the EU Alternative Investment
Fund Managers' Directive as incorporated into UK law and is,
therefore, required to have an AIFM. The Company's AIFM is Adepa
Asset Management S.A.
The AIFM is entitled to an annual
management fee at the following rates, subject to a minimum fee of
US$75,000, based on the NAV and payable quarterly in
arrears:
|
|
Fee based on
NAV
|
|
Up to US$200 million
|
0.055%
|
|
Between US&200-400
million
|
0.045%
|
|
Between US&400-1,000
million
|
0.035%
|
|
Above US$1 billion
|
0.025%
|
The AIFM is also entitled to an
annual risk management fee of EUR14,500.
During the year, the AIFM was
entitled to management fees of US$122,384 (2022: US$94,000). Of
this total, no amounts remained outstanding at the
balance sheet date (31 December 2022: US$34,000
included in trade payables).
Investment Manager
The AIFM, with the agreement of
the Company, has delegated the portfolio management of the Company
to the Investment Manager. For the period from IPO to 31 October
2023, the Investment Manager was ThomasLloyd Global Asset
Management (Americas) LLC (the "Former Investment
Manager").
Management fees to the Former
Investment Manager were payable quarterly in arrears and calculated
at the following rates, based on the NAV on the last business day
of the relevant quarter:
|
|
Fee based on
NAV
|
|
Up to US$700 million
|
1.3%
|
|
US$700 million to US$2.0
billion
|
1.1%
|
|
Over US$2.0 billion
|
1.0%
|
For the period from 1 January 2023
to 31 October 2023, management fees of US$1.0 million (2022: US$1.4
million) may be claimed by the Former Investment Manager. Of this
total, US$1.0 million (31 December 2022: US$0.2 million) remained
outstanding at the balance sheet date (and is not being paid to the
Former Investment Manager whilst the Board evaluates all available
options).
The Investment Management
Agreement between the AIFM, Company and Former Investment Manager
(the "IMA") was terminated with effect from 31 October 2023. From 1
November 2023, Octopus Energy Generation were appointed as
transitional Investment Manager to cover an initial period through
to 30 April 2024. For this initial term, the Company will pay OEGEN
a management fee of US$1.35 million. At the end of the term, at the
discretion of the Board, there is scope for OEGEN to earn an
additional management fee of up to US$0.55 million for its services
during the initial period. As at 31 December 2023, investment
management fees of US$0.5 million remained outstanding and payable
to OEGEN.
Transactions with the Former Investment
Manager
Acquisition of SolarArise
The Company acquired its 43%
economic interest in SolarArise from ThomasLloyd SICAV, ThomasLloyd
Cleantech Infrastructure Fund SICAV and ThomasLloyd Cleantech
Infrastructure Holding GmbH, all related parties of the Former
Investment Manager. The acquisition agreement signed in November
2021 was amended prior to completion in August 2022 to provide for
the consideration to be changed from a fixed number of ordinary
shares to a variable number of shares based on an average 10-day
share price prior to the date of allotment, to update the fair
value to that at 30 June 2022 as opined on by an independent
third-party and to provide for the number of ordinary shares to be
issued as consideration to be net of withholding tax of US$2.7
million, which was required to be withheld and remitted by the
Company to the tax authorities on behalf of the sellers.
At November 2021, the
consideration payable was US$34.6 million, which was to be settled
by the issue of 34,606,872 ordinary shares in the Company
(equivalent to an issue price of US$1.00 per share). Following the
amendments referred to above and on completion of the acquisition
of 43% of SolarArise, the aggregate consideration was US$32.9
million, settled net of a withholding tax payable of US$2.7
million, through the issue of 26,014,349 ordinary shares at an
issue price US$1.16035 per share.
Acquisition of NISPI
On 17 December 2021 the Company
acquired its 40% economic interest in NISPI from ThomasLloyd CTI
Asia Holdings Pte Ltd, which is a related party of the Former
Investment Manager and shares an ultimate beneficial owner with the
Former Investment Manager. Under the acquisition agreement, the
Company paid an initial cash consideration of US$25.4 million and
may have been required to pay an additional contingent cash
consideration of up to US$22.0 million if NISPI, prior to June
2023, was awarded a power purchase agreement pursuant to a Green
Auction carried out by the Department of Energy of the Philippines.
If such contingent consideration was payable, the consideration
would have been settled 10 business days after the Green Auction
purchase price agreement is awarded. On 10 June 2022, the Company
and ThomasLloyd CTI Asia Holdings Pte Ltd agreed to extend the date
for payment of any contingent consideration to the earlier of (i)
31 December 2026 and (ii) 10 business days after a further capital
raise by the Company, the purpose of which includes funding payment
of contingent consideration (or, if the updated valuation has not
been received prior to such fund raise, 10 business days after the
updated valuation has been received).
NISPI was not awarded a PPA prior
to June 2023 and therefore no further consideration is payable for
the acquisition of NISPI.
Directors
The Company has four non-executive
Directors. The standard Director's fee is set at £50,000 per annum
(2022: £50,000), with the remuneration for the Chair of the Board
set at £65,000 per annum (2022: £50,000) and for the Chair of the
Audit and Risk Committee at £55,000 per annum (2022: £50,000).
Total Directors' fees of US$261,314, (2022: US$255,000) with
associated payroll taxes of US$25,266 (2022: US$11,000), have been
incurred in respect of the year. Total expenses of US$4,203 (2022:
US$6,000) were also paid to the Directors in the year, of which
none was outstanding at the year end (31 December 2022:
US$1,000).
The Directors had the following
shareholdings in the Company, all of which were beneficially
owned.
|
|
Ordinary shares held as
at
date of
this report
|
Ordinary shares held as
at
31 December
2023
|
|
Sue Inglis
|
65,000
|
65,000
|
|
Kirstine Damkjaer
|
-
|
-
|
|
Mukesh Rajani
|
33,000
|
33,000
|
|
Clifford Tompsett
|
33,000
|
33,000
|
20. Subsidiaries, joint ventures and
associates
As a result of applying Investment
Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), no
subsidiaries have been consolidated in these Financial Statements.
AEIT has control of AEIT Holdings Limited, SolarArise, VSS and
their subsidiaries, either directly or indirectly, and therefore
the transfer of dividends is dependent on there being suitable
distributable reserves. The Company does not have a controlling
stake in NISPI and, therefore, the transfer of dividends is
dependent on both the availability of sufficient distributable
reserves and the approval of co-shareholders. For those
subsidiaries with external debt, all debt agreements are complied
with. The Company's subsidiaries and associates are listed
below:
|
|
|
Place of
|
Registered
|
Ownership
|
|
Name
|
Category
|
business
|
Office*
|
interest
|
|
AEIT Holdings Limited
|
Intermediate Holdings
|
UK
|
A
|
100%
|
|
Negros Island Solar Power Inc.
("NISPI")
|
Project company
|
Philippines
|
B
|
34%43
|
|
SolarArise India Projects Private
Ltd ("SolarArise")
|
Intermediate Holdings
|
India
|
C
|
100%
|
|
Talettutayi Solar Projects Private
Limited
|
Project company
|
India
|
D
|
100%
|
|
Talettutayi Solar Projects One
Private Limited
|
Project company
|
India
|
D
|
100%
|
|
Talettutayi Solar Projects Two
Private Limited
|
Project company
|
India
|
D
|
100%
|
|
Talettutayi Solar Projects Four
Private Limited
|
Project company
|
India
|
D
|
100%
|
|
Talettutayi Solar Projects Five
Private Limited
|
Project company
|
India
|
D
|
100%
|
|
Talettutayi Solar Projects Six
Private Limited
|
Project company
|
India
|
D
|
100%
|
|
Talettutayi Solar Projects Eight
Private Limited
|
Project company
|
India
|
D
|
100%
|
|
Talettutayi Solar Projects Nine
Private Limited
|
Project company
|
India
|
D
|
100%
|
|
Talettutayi Solar Projects Ten
Private Limited
|
Project company
|
India
|
D
|
100%
|
|
Viet Solar System Company Limited
("VSS")
|
Intermediate holdings and project
company
|
Vietnam
|
E
|
99.8%
|
|
VSS Ba Ria Co., Limited
|
Project company
|
Vietnam
|
E
|
99.8%
|
|
VSS Vung Tau Co.,
Limited
|
Project company
|
Vietnam
|
E
|
99.8%
|
|
Vtech Chau Duc Co.,
Limited
|
Project company
|
Vietnam
|
E
|
99.8%
|
|
Vtech Vung Tau Co.,
Limited
|
Project company
|
Vietnam
|
E
|
99.8%
|
* Registered
offices:
A - The Scalpel, 18th Floor, 52
Lime Street, London, EC3M 7AF, United Kingdom
B - Emerald Arcade, F.e. Ledesma
8t., San Carlos, Negros Island, Philippines
C - A-39, LGF, Lajpat Nagar,
Part-1 New Delhi-110024, India.
D - Unit No. 1004, 10th Floor,
BPTP Park Centra, Sector 30, NH-8, Gurugram-122001, Haryana,
India.
E - Lot 21, Road D.02, Chau Duc
Industrial Area, Quang Tay Hamlet, Nghia Thanh Commune, Chau Duc
District, Ba Ria - Vung Tau Province, Vietnam.
As at 31 December 2023,
investments into AEIT Holdings, NISPI and SolarArise were held
directly. All other investments were held indirectly.
21. Guarantees, contingent liabilities and other
commitments
As at 31 December 2023, the
Company has no financial guarantees or other commitments into which
it has entered.
As at 31 December 2022, the
Company had the following financial guarantees, contingent
liabilities and other commitments:
NISPI - contingent consideration
The sale and purchase agreement
for the acquisition of the 40% economic interest in NISPI provided
for an initial cash consideration of US$25.4 million and
potentially an additional contingent cash consideration of up to
US$22.0 million. As at 31 December 2022, this contingent cash
consideration was dependent upon NISPI being awarded a PPA, prior
to June 2023, by the Philippine's Department of Energy under their
Green Auction process. At 31 December 2022 any payment was
considered remote and therefore was fair valued at US$nil. NISPI
was not awarded a PPA under a Green Auction prior to June
2023.
AEIT Holdings - funding
As at 31 December 2022, the
Company committed to provide US$5.0 million of funding to AEIT
Holdings to acquire a 99.8% interest in VSS, a privately owned
company which holds 6.12 MWp of rooftop solar assets. The funding
was provided through the issue of shares by AEIT Holdings to the
Company for cash. The funding was provided on 20 April 2023 and the
acquisition of VSS completed on 31 May 2023 for US$3.1
million.
SolarArise - acquisition of additional 57% economic
stake
On 20 June 2022 the Company made a
commitment to purchase the remaining 57% of SolarArise for a total
consideration of US$38.5 million. As at 31 December 2022, the
Company had identified an onerous contract and recognised a
provision of US$38.5 million in respect of this commitment. This
provision represents the Company's best estimate of the fair value
of 57% of SolarArise (which was US$nil after factoring in the
liabilities associated with the RUMS project) less the
consideration payable as of 31 December 2022. Completion of the
purchase of 57% of SolarArise occurred on 13 January 2023. There is
no remaining commitment as at 31 December 2023.
22. Post year end events
In March 2024, the Board approved
additional cash funding of up to US$4.5 million to fund project
delays and additional costs for the RUMS project.
In April 2024, having undertaken a
comprehensive strategic review of the options for the Company's
future and after consultation with its advisers and having taken
into account feedback from investors representing a significant
proportion of AEIT's issued share capital, the Board concluded that
it is in the best interests of shareholders as a whole to put
forward a proposal for the orderly realisation of AEIT's assets.
The proposal will seek to achieve a balance between maximising the
value of AEIT's investments and progressively returning cash to
shareholders in a timely manner. Details of this proposal, which is
subject to shareholder approval at a general meeting of the Company
expected to be held in Q2 2024, will be set out in a separate
circular to shareholders and will be made available on the
Company's website in due course. For this
reason these financial statements have been prepared on a basis
other than that of a going concern. Please see Note 2 for further
details.
On 1 May 2024 the Company
announced a temporary share suspension. Due to a small number of
outstanding points in respect of the Company's Annual Report and
audit for the year ended 31 December 2023 the Company was not able
to publish the Annual Report by the required regulatory deadline of
30 April 2024, resulting in the suspension of the listing of and
trading in the Company's shares. Now that the Annual Report has
been published in accordance with the Company's obligations, the
Board will move expeditiously to apply to the FCA for a restoration
of the Company's listing.
On 2 May 2024 the Company received
US$5.6 million from its investment in NISPI. The monies received
arise after successful collaboration with the joint owners to
approve a partial redemption of shares in NISPI. Following this
cash return, the level of economic ownership and percentage of
voting rights that AEIT holds in NISPI remains unchanged. On a pro
forma basis, the return is broadly NAV neutral for the
Company.
43 The Company's economic interest in
NISPI is 40%.
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 Directors assess the Company's
performance against a range of criteria which are viewed as
particularly relevant for listed closed-ended investment companies.
The APMs presented in this Annual Report are shown
below:
NAV per share
A measure of the value of the
Company attributable to each share, at the reporting date. The
calculation of NAV per share is shown in note 16 to the Financial
Statements.
NAV total return
A measure of success of the
Company's investment strategy. The NAV total return per share
includes both income and capital returns by taking into account any
increase or decrease in the NAV per share over the relevant period
and assuming that dividends paid to shareholders during the
relevant period are reinvested at the NAV per share on the dividend
payment date.
|
31 December 2023 (since IPO)
|
|
NAV
|
|
NAV per share at IPO (14 December
2021) - cents
|
a
|
98.00
|
|
NAV per share at 31 December 2023
- cents
|
b
|
46.42
|
|
Dividends paid since IPO -
cents
|
c
|
3.82
|
|
Benefits of reinvesting dividends
- cents44
|
d
|
(2.74)
|
|
Total return (expressed as a percentage)
|
((b+c+d)÷a)-1
|
-51.5%
|
|
31 December 2022 (since IPO)
|
|
NAV
|
|
NAV per share at IPO (14 December
2021) - cents
|
a
|
98.00
|
|
NAV per share at 31 December 2022
- cents
|
b
|
49.28
|
|
Dividends paid in the year -
cents
|
c
|
1.32
|
|
Benefits of reinvesting dividends
- cents44
|
d
|
(0.78)
|
|
Total return (expressed as a percentage)
|
((b+c+d)÷a)-1
|
-49.2%
|
|
31 December 2023 (reporting period)
|
|
NAV Return
|
|
NAV per share at 31 December 2022
- cents
|
a
|
49.28
|
|
NAV per share at 31 December 2023
- cents
|
b
|
46.42
|
|
Dividends paid in the year -
cents
|
c
|
2.50
|
|
Benefits of reinvesting dividends
- cents44
|
d
|
(1.42)
|
|
Total return (expressed as a percentage)
|
((b+c+d)÷a)-1
|
-3.6%
|
GAV, Adjusted GAV and gearing
GAV is a measure of the total size
of the Company and is the total value of the assets of the Company,
being the aggregate of the fair value of its investment portfolio
and any cash and cash equivalents. Leverage is not employed at the
Company level but may be employed within investment portfolio.
Adjusted GAV is a measure of the total size of the Company,
including, on a look through basis, its proportionate share of any
leverage within its investment portfolio, and forms the basis on
which the gearing restriction in the Company's investment policy is
calculated. Gearing is a measure of the potential financial risk to
which the Company is exposed and is its proportionate share of any
leverage within its investment portfolio expressed as a percentage
of Adjusted GAV.
|
|
|
31 December
2023
|
31 December
2022
|
|
|
|
US$
million
|
US$
million
|
|
Value of investment
portfolio
|
a
|
42.1
|
11.5
|
|
Cash and cash equivalents of the
Company
|
b
|
41.2
|
115.8
|
|
GAV
|
a+b=c
|
83.3
|
127.3
|
|
Debt in underlying
SPVs45
|
d
|
109.8
|
45.9
|
|
Adjusted GAV
|
c+d=e
|
193.1
|
173.3
|
|
Gearing
|
d÷e
|
57%
|
27%
|
44
Calculated by taking the dividend per share and
assuming it is invested at the prevailing NAV per share on the
dividend payment date.
45
Pro-rated for economic ownership where
applicable.
Net operational asset value
The value of the Company's
operational asset investments, excluding construction and
development projects. This provides a measure of the value of the
investment portfolio that is revenue generating and makes a
positive contribution to the Company's dividend cover.
|
|
|
As at
|
As at
|
|
|
|
31 December
2023
|
31 December
2022
|
|
|
|
US$
million
|
US$
million
|
|
Value of investment
portfolio
|
a
|
42.1
|
11.5
|
|
Value of construction
projects
|
b
|
0.7
|
(12.0)
|
|
Value of development
projects
|
c
|
1.9
|
-
|
|
Total operational asset value
|
a-b-c
|
39.5
|
23.5
|
Market capitalisation
Market capitalisation is a measure
of the value of the Company as determined by the stock market and
is the total value of all outstanding shares at the prevailing
market price.
As at 31 December 2023, the shares
of the Company were suspending from trading and as such no
calculation is shown at this date.
|
|
|
As at
|
|
|
|
31 December
2022
|
|
|
|
US$
million
|
|
Share price (US$ per
share)
|
a
|
1.18
|
|
Shares in issue at period
end
|
b
|
175,685
|
|
Market capitalisation
|
axb
|
207.3
|
Ongoing charges ratio
The ongoing charges ratio is a
measure of the recurring annual costs of running the Company based
on historical data. It is calculated using the AIC methodology and
is the Company's recurring operating expenses for the last 12
months expressed as a percentage of the average published net
assets for that period. Recurring operating expenses exclude the
costs of buying and selling investments, any non-recurring costs
and the costs of issuing shares.
|
As at 31 December 2023
|
|
US$
million
|
|
NAV
|
|
|
|
Q1 202346
|
a
|
86.6
|
|
Q2 2023
|
b
|
89.9
|
|
Q3 2023
|
c
|
88.5
|
|
Q4 2023
|
d
|
81.5
|
|
Average NAV
|
(a+b+c+d)/4=e
|
86.6
|
|
Total expenses
|
f
|
6.4
|
|
Transaction costs
|
g
|
-
|
|
Other non-recurring
expenses
|
h
|
(4.2)
|
|
Add realised FX gains
|
i
|
0.3
|
|
Add net finance income
|
j
|
0.6
|
|
Annualised expenses
|
f-g-h+i+j=k
|
3.1
|
|
Ongoing charges ratio (expressed as a
percentage)
|
k÷e
|
3.58%
|
46
Since there was no published or available NAV for
Q1 2023, the Q4 2022 NAV has been used instead.
|
Period ended 31 December 2022
|
|
US$
million
|
|
Reported NAV
|
|
|
|
Q1 2022
|
a
|
106.2
|
|
Q2 2022
|
b
|
115.2
|
|
Q3 2022
|
c
|
142.5
|
|
Q4 2022
|
d
|
86.6
|
|
Average NAV
|
(a+b+c+d)/4=e
|
112.7
|
|
Total expenses
|
f
|
3.3
|
|
Less transaction costs
|
g
|
(0.3)
|
|
Less non-audit related
services
|
h
|
(0.2)
|
|
Less other non-recurring
expenses
|
i
|
(1.5)
|
|
Add realised FX gains
|
j
|
1.7
|
|
Annualised expenses
|
(f+g+h+i+j)/12.5*12=k
|
2.9
|
|
Ongoing charges ratio (expressed as a
percentage)
|
k÷e
|
2.50%
|
%
of sustainable investments
The proportion of the Company's
sustainability-related investments after classifying the Company's
cash as 'unsustainable'. This is disclosed in the SFDR periodic
disclosures.
|
|
|
As at 31
December
|
As at 31
December
|
|
|
|
2023
|
2022
|
|
|
|
US$
million
|
US$
million
|
|
Fair value of
investments
|
a
|
42.1
|
11.5
|
|
Net assets of the
Company
|
b
|
81.5
|
88.8
|
|
Onerous contract
provision
|
c
|
-
|
38.5
|
|
Adjusted net assets of the Company
|
b+c=d
|
81.5
|
127.3
|
|
%
of sustainable investments
|
a÷d
|
51.6%
|
9.0%
|
|
Committed for 57% of
SolarArise
|
e
|
-
|
38.5
|
|
Committed for 99.8% of
VSS
|
f
|
-
|
3.1
|
|
Total commitments
|
e+f=g
|
-
|
41.6
|
|
%
of sustainable investments (including
commitments)
|
(a+g)÷d
|
51.6%
|
41.7%
|
Excluding cash, 100% of the
Company's investments are sustainable.
SFDR Principle Adverse Impacts Statement for financial
products (Unaudited)
SFDR Principle Adverse Impacts Statement for financial
products (Article 7 of SFDR)
Financial market participant: Asian Energy Impact Trust
Summary
Asian Energy Impact Trust plc
(AEIT) LEI 254900V23329JCBR9G82 through its Investment Manager
during the period, ThomasLloyd Global Asset Management (Americas)
LLC, the "Former Investment Manager", for the period to 31 October
2023. Octopus Renewables Limited, trading as Octopus Energy
Generation, the "Transitional Investment Manager" for the period to
31 December 2023), considered principal adverse impacts of its
investment decisions on sustainability factors. The present
statement is the consolidated statement on principal adverse
impacts on sustainability factors of AEIT. This statement on
principal adverse impacts on sustainability factors covers the
reference period from 1 January 2023 to 31 December 2023. The
indicators presented are based on data directly provided by
investee companies and reviewed by the Transitional Investment
Manager. This statement considers SolarArise's Q2 current value for
its Q1 current value. Without doing so, this results in the
SolarArise being valued at zero due to material negative value of
the RUMS project at that time. A value of 0 at Q1 would mean all
data pertaining to SolarArise, would not have been considered due
to the mathematical calculations. Applying the Q2 value ensures
that SolarArise reflects a non-zero value and PAIs are more
reflective of the assets. To complete a comprehensive assessment of
Scope 1, 2 and 3 assessments, the Transitional Investment Manager
engaged with Altruistiq to identify the most appropriate emissions
factors to both activity related data and financial expenditures.
On climate and environment related indicators: the GHG emissions
associated with the AEIT portfolio are a small fraction of the
avoided emissions associated with the clean energy generation it
has financed, even when all three scopes are accounted for. The
Transitional Investment Manager will continue to work with investee
companies to explore opportunities to further reduce this
footprint, in order to improve carbon footprint, carbon intensity,
and reduce non-renewable energy consumption PAIs wherever possible.
Portfolio emissions or intensity targets are not yet proposed. No
investments had negative impacts on biodiversity sensitive areas,
and emissions to water and hazardous waste were small across the
portfolio. On social and employee issues, respect for human rights,
anti-corruption and anti-bribery matters, no major issues related
to the UN Global Compact or OECD Guidelines for Multinational
Enterprises were reported, and grievance mechanisms were in place.
Further engagement with investee companies will strengthen the
practical implementation of existing policies and effectiveness of
grievance mechanisms. The data presented in this PAI statement for
AEIT has been reviewed by the Board.
Indicators applicable to investments in investee companies
(AEIT investment portfolio including commitment to
SolarArise)
|
Adverse sustainability indicator
|
Metric
|
Impact 2023
|
Impact 2022
|
Explanation
|
Actions taken, and actions planned and targets set for the
next reference period
|
|
Climate and other environment-related
indicators
|
|
Greenhouse gas (GHG) emissions
|
1. GHG emissions
|
Scope 1 GHG Emissions
|
7.1 tCO2e
|
23.0 tCO2e
|
The Transitional Investment Manager
used Altruistiq, to complete its GHG footprint. GHG emissions were
calculated in line with the iCI and ERM Greenhouse Gas Accounting
and Reporting Guide for the Private Equity Sector (2022), using the
operational control boundary approach.
The increase in GHG emissions
compared to 2022 can be explained by the carbon emissions generated
through the construction activities at TT9.
|
In 2023, the Transitional
Investment Manager engaged with investee companies to better
capture their GHG emissions. The Transitional Investment Manager
will continue to engage with Investee companies to also look for
innovative ways to reduce their carbon footprint, especially in
relation to construction activities. At this stage, GHG emission
reduction targets are not being set.
The Transitional Investment
Manager's ESG policies excluded investment in coal or nuclear fired
power, and oil and gas projects.
|
|
|
Scope 2 GHG Emissions
|
295.9 tCO2e
|
68.2 tCO2e
|
|
|
Scope 3 GHG Emissions
|
18,668.2
tCO2e
|
598.7 tCO2e
|
|
|
Total GHG Emissions
|
18,971.2
tCO2e
|
689.9 tCO2e
|
|
2. Carbon footprint
|
Carbon footprint
|
749.24
tCO2e/
EUR m
|
22.2 tCO2e/EUR
m
|
|
3. GHG intensity of investee
companies
|
GHG intensity of investee
companies
|
4,795.57 tCO2e/ EUR m
revenue
|
213.6 tCO2e/EUR m
revenue
|
|
4. Exposure to companies active in
the fossil fuel sector
|
Share of investments in companies
active in the fossil fuel sector
|
0
|
0
|
|
5. Share of nonrenewable
energy
|
Share of non-renewable energy
consumption and non-renewable energy production of investee
companies from non-renewable energy sources compared to renewable
energy sources, expressed as a percentage of total energy
sources
|
a) 57% (note, all energy
consumption was from non renewable sources))
b) 0% (all production from
renewable sources)
|
a) 100% (all consumption from
nonrenewable sources)
b) 0% (all production from
renewable sources)
|
Calculating the proportion of
non-renewable energy consumption to renewable energy consumption
was not possible across all investee companies and quarters owing
to periods of no energy consumption. This limitation in the
calculation approach has skewed the share percentage to 58%. In
actuality, all recorded energy consumption across the investee
companies originated from non-renewable energy sources.
The investment portfolio is focused
on renewable energy production. However, some non-renewable energy
is used through diesel generator sets for backup power and
purchasing electricity from the grid to support overnight functions
for the solar portfolio.
|
The Transitional Investment Manager
will continue to work with companies to explore opportunities to
reduce their consumption of non-renewable energy and improve energy
efficiency.
|
|
6. Energy consumption intensity per
high impact climate sector
|
Energy consumption in GWh per
million EUR of revenue of investee companies, per high impact
climate sector
|
0.055 GWh/ EURm
|
0.075GWh/ EURm
|
Renewable energy generation is
allocated to the NACE sector "electricity, gas, steam and air
conditioning supply" (NACE code D/35) classified in total as high
impact climate sector. For the purposes of this PAI indicator
regulation 2022/1288 does not differentiate between renewable
energy generation and other forms of energy generation which have a
high climate impact.
|
|
|
Biodiversity
|
7. Activities negatively affecting
biodiversity - sensitive areas
|
Share of investments in investee
companies with sites/operations located in or near to
biodiversity-sensitive areas where activities of those investee
companies negatively affect those areas
|
0%
|
0%
|
None.
|
To ensure no significant harm to
biodiversity and ecosystems, environmental screening is conducted
for all investments.
|
|
Water
|
8. Emissions to Water
|
Tonnes of emissions to water
generated by investee companies per million EUR invested, expressed
as a weighted average
|
0.000 tonnes
|
0.002 tonnes
|
As the current portfolio comprises
entirely of solar plants, these emissions are not associated with
their operations.
|
The Transitional investment Manager
will continue to monitor this critical issue.
|
|
Waste
|
9. Hazardous waste and radioactive
waste ratio
|
Tonnes of hazardous waste and
radioactive waste generated by investee companies per million EUR
invested, expressed as a weighted average
|
0.03 tonnes
|
0.04 tonnes
|
Small amounts of waste generated as
part of normal site maintenance and/or construction activities.
Contractors on site dispose of the hazardous waste responsibly in
line with waste management policies, where applicable.
|
The Transitional Investment Manager
will continue to explore opportunities to reduce the production of
hazardous waste and promote circular economy approaches.
|
|
Indicators for Social and Employee, Respect for Human Rights,
Anti-Corruption and Anti-Bribery Matters
|
|
Social and Employee
Matters
|
10. Violations of UN Global Compact
principles and Organisation for Economic Cooperation and
Development (OECD) Guidelines for Multinational
Enterprises
|
Share of investments in investee
companies that have been involved in violations of the UNGC
principles or OECD Guidelines for Multinational
Enterprises
|
0%
|
0%
|
No violations have been
reported.
|
Further engagement with investee
companies will strengthen their implementation of the OECD
Guidelines for Multinational Enterprises and the effectiveness of
grievance mechanisms.
|
|
11. Lack of processes and
compliance mechanisms to monitor compliance with UN Global Compact
principles and OECD Guidelines for Multinational
Enterprises
|
Share of investments in investee
companies without policies to monitor compliance with the UNGC
principles or OECD Guidelines for Multinational Enterprises or
grievance /complaints handling mechanisms to address violations of
the UNGC principles or OECD Guidelines for Multinational
Enterprises
|
0%
|
0%
|
All investee companies have
grievance mechanisms in place through which any stakeholder can
raise concerns about their project implementation frameworks, and
complaints lodged through these mechanisms are reported to the
Transitional Investment Manager.
|
The Transitional Investment Manager
will continue to work closely with the investee companies to
identify and action areas where implementation of these frameworks
can be further enhanced, make information about the functioning of
these mechanisms more readily available, and establish appropriate
policies to promote respect for human rights in all activities,
including with their suppliers.
|
|
12. Unadjusted gender pay
gap
|
Average unadjusted gender pay gap
of investee companies
|
14%
|
37%
|
Gender pay-gap analysis was not
possible at SolarArise and VSS given no employees. At NISPI the
gender pay gap was 32%.
|
The Transitional Investment Manager
will continue to monitor and encourage investee companies to
consider diversity and equality in their operating priorities,
local culture and needs.
|
|
13. Board gender
diversity
|
Average ratio of female to male
board members in investee companies, expressed as a percentage of
all board members
|
91%
|
74%
|
The increase in ratio from the
previous year can be attributed to the acquisition of VSS portfolio
that only has male board members.
|
The Transitional Investment Manager
will look to advocate for gender equality across investee company
governance.
|
|
14. Amount of accumulated earnings
in noncooperative tax jurisdictions
|
Amount of accumulated earnings at
the end of the relevant financial year from investee companies
where the total consolidated revenue on their balance sheet date
for each of the last two consecutive financial years exceeds total
EUR 750M in jurisdictions that appear on the revised EU list of
noncooperative jurisdictions for tax purposes
|
0
|
N/A - new for 2023
|
The Company does not have any
investments in non-cooperative tax jurisdictions.
|
|
|
15. Exposure to controversial
weapons (antipersonnel mines, cluster munitions, chemical weapons
and biological weapons)
|
Share of investments in investee
companies involved in the manufacture or selling of controversial
weapons
|
0%
|
0%
|
Not applicable due to
exclusion.
|
Not applicable. These sectors are
excluded.
|
|
16. Exposure to companies involved
in the cultivation and production of tobacco
|
Share of investments in investee
companies involved in the cultivation or production of
tobacco
|
0%
|
N/A - new for 2023
|
Not applicable due to
exclusion.
|
Not applicable. These sectors are
excluded.
|
|
17. Interference in the formation
of trade unions or elections of worker representatives
|
Share of investments in investee
companies without commitments on their non-interference in the
formation of trade unions or election of worker
representatives
|
0%
|
N/A - new for 2023
|
The Transitional Investment
manager's Supplier Code of Conduct considers freedom of association
and the right to collective bargaining.
|
The Transitional Investment Manager
will continue to monitor alignment of investee companies to its
Supplier Code of Conduct.
|
|
18. Share of employees in investee
companies earning less than adequate wage
|
Average percentage of employees in
investee companies earning less than the adequate wage
|
0%
|
N/A - new for 2023
|
The majority of investee companies
do not have employees. The investee company with employees had 0%
of employees earning less than adequate wage.
|
N/A
|
|
Additional climate and other environment-related
Indicators
|
|
Water
|
6. Water Usage
|
(a) Average amount of water
consumed by the investee companies (in cubic meters) per million
EUR of revenue of investee companies (b) percentage of water
recycled and reused by investee companies
|
a) 1,107.6 m3/EURm
b) 0.19%
|
(a) 751.7 m3/ EUR
m
(b) 0%
|
Water consumption at investee
companies fluctuated over the course of 2023, with less consumption
during rainy periods, and substantially higher consumption during
periods of high pollution that result in a greater need for solar
panel cleaning. A nearby cement factory emitted significant
pollution, necessitating increased cleaning of the solar panels at
one of AEIT's assets. Water recycling and reuse started to be
tracked during the period, however the rate was low.
|
Efforts to improve water
consumption efficiency reflecting the level of water scarcity at
site level are needed at all sites. The Transitional Investment
Manager will continue to engage with investee companies to explore
site appropriate responses. The Transitional Investment Manager
will encourage higher rates of water recycling and
reuse.
|
|
Additional social and employee, respect for human rights,
anti-corruption and anti-bribery matters
indicator
|
|
Social and employee
matters
|
3. Number of days lost to injuries,
accidents, fatalities or illness
|
Number of workdays lost to
injuries, accidents, fatalities or illness of investee companies
expressed as a weighted average
|
0
|
0
|
Investee companies reported no
workdays lost to health and safety related issues.
|
Continued vigilance in monitoring
incidents at managed sites is needed, and sustained efforts to
maintain high health and safety standards are required.
|
|
4. Lack of a supplier code of
conduct
|
Share of investments in investee
companies without any supplier code of conduct (against unsafe
working conditions, precarious work, child labour and forced
labour)
|
0%
|
N/A - new for 2023
|
The Transitional Investment Manager
has a Supplier Code of Conduct and requires the Company's investee
companies to either adhere to the Transitional Investment Manager's
Supplier Code of Conduct or adopt one that is equally
robust.
|
|
|
Anti-corruption and anti-bribery
|
20. Lack of anti-corruption and
anti-bribery policies
|
Share of investments in entities
without policies on anti-corruption and anti-bribery consistent
with the United Nations Convention against Corruption
|
0%
|
N/A - new for 2023
|
The Transitional Investment Manager
has an anti-bribery policy and all investee companies either align
to the Transitional Investment Manager's or have adopted their own
policy.
|
The Transitional Investment manager
will continue to formalise its approach in assessing the alignment
of key portfolio service providers to these standards.
|
|
Other indicators used to identify and assess additional
principal adverse impacts on a sustainability
factor
|
|
Other
|
Number of community
complaints
|
Number of community complaints
received by investee companies
|
0
|
N/A - new for 2023
|
|
The Transitional Investment Manager
will continue to engage with community stakeholders and find
innovative ways to realise benefits for the community.
|
Description of policies to identify and prioritise principal
adverse impacts on sustainability factors
The Transitional Investment
Manager has a
Responsible Investment Policy that sets out the approach to identifying and managing
environmental, social and governance ("ESG") matters and the
principles that they adopt. These principles are in line with the
UN Principles for Responsible Investment (UN PRI) to which the
Transitional Investment Manager is a signatory. These policies
outline risks and mitigations aligned to potential adverse impacts
on sustainability factors.
The Transitional Investment
Manager seeks is embedding the principles set out in the
Responsible Investment Policy into investment decisions and ongoing
management of investments to actively manage sustainability risks.
In addition to having a no fossil fuel or nuclear energy-related
investments policy, ESG risk management is ingrained in the way the
Transitional Investment Manager originates and executes investment
decisions, as well as in ongoing portfolio and asset management.
AEIT's approach is based on a triple-return approach that considers
social and environmental objectives alongside the financial returns
of the Company.
The Company is currently
undertaking a strategic review and at this time, no new investments
will be made. The outcome of the strategic review will determine
the appointment of a long-term Investment Manager and the
investment processes and polices that will be put in place to
manage sustainability factors during the investment
cycle.
The principle adverse impacts,
those that are most likely to be material to renewable energy
investments, are outlined in the table above. No PAI indicators
were available within the SFDR RTS for community relations,
therefore a bespoke metric has been included on a voluntary basis
as communities form an important backbone to energy
investments.
Ongoing data collection in line
with the PAI Indicators is requested either directly from investee
companies or as part of counterparty contracts from operations and
maintenance providers, HSE providers, and/or external asset
managers. Ongoing management and oversight of principle adverse
impacts is the responsibility of the Asset Management or
Development Team. Any issues are escalated to the Octopus Energy Generation Asset Board
before being escalated to the Company's ESG committee as appropriate.
All data is consolidated, reviewed, and signed off by the ESG team
before being put forward to the AEIT ESG Board Committee for
approval.
The Transitional Investment
Manager obtains information concerning the PAIs directly from
investee companies. To ensure the reliability and accuracy of the
data, the Transitional Investment Manager works closely with
specialised external advisors, particularly carbon consultants.
These advisors thoroughly review the Transitional Investment
Managerʼs methodologies in regards to GHG emission PAIs and offer
valuable insights based on industry best practices.
The data collection
process:
· KPI
data is primarily sourced directly from the Investee Companies or
the third party service providers that help manage them. This
information is then complemented, as needed and where relevant, by
the expertise of the Transitional Investment Manager's own asset
managers and ESG team and by the carbon consultants. This
information is sourced from the periodic reports from Company's
Operations and Maintenance (O&M) service providers, Asset
Managers or other service providers. These reports consist of a
standardised set of KPIs, as well as qualitative factors like
health and safety, adherence to applicable laws and regulations,
engagement with local communities, and biodiversity metrics,
whenever relevant.
· Carbon footprint indicators are measured in line with the iCI
and ERM Greenhouse Gas Accounting and Reporting Guide for the
Private Equity Sector (2022). This methodology was developed to
complement both the World Resources Institute's Greenhouse Gas
Protocol Standards and the Partnership for Carbon Accounting
Financials' Standard for the financial industry. This approach
consolidates the organisational boundary according to the
operational control approach. For more information on the carbon
footprint methodology and definitions, see the carbon footprint
section of the Impact report. The calculations of emissions are
verified by third-party consultants.
· The
Transitional Investment Manager may need to resort to estimates or
proxy data where data is unavailable. The proportion of estimates
and proxies used varies depending on investee company but overall,
use of estimates and proxies are infrequent and constitute only a
minority of the data used. When estimated data is used, it is based
on reasonable assumptions and appropriate comparators.
Engagement policies
The Company recognises the
importance of active stewardship in responsible investment and is
dedicated to engaging with stakeholders relevant to its portfolio,
ensuring the Company continues to contribute to its financial,
environmental and social return objectives. The Transitional
Investment Manager seeks to establish long-term value for the
Company and its portfolio of relevant stakeholders through active
management of its assets. The Transitional Investment Manager has
published its Engagement and Stewardship Policy outlining their
approach. This can be viewed on the website here:
https://a.storyblok.com/f/154679/x/5eeb87e6d3/oegen-engagement-and-stewardship-policy-june-2023-vf.pdf.
The majority of the Company's
renewable energy assets under management are wholly owned
subsidiaries of the Company. Where investee companies are fully
owned subsidiaries, directorship services are either provided by
the Transitional Investment Manager or through AEIT nominee
directors ensuring consistency in governance and in the application
of the ESG Policy which applies to investee companies. Due to this,
the Company does not put in place investee company engagement
policies. There are no voting matters to report on as the
Transitional Investment Manager actively manages and make decisions
as directors of the investee companies. The Transitional Investment
Manager directly controls the investee companies' strategy,
financial and non-financial performance and risk, capital
structures, social and environmental impact and corporate
governance on behalf of the Company as well as appointment of
3rd party operators of the assets who are actively engaged with
to ensure appropriate decision-making oversight. Conflicts of
interest are governed by the Transitional Investment Manager's
Conflicts of Interest policy.
In circumstances where the Company
does not hold a controlling interest in the relevant investee
company, the Company will secure shareholder rights through
contractual and other arrangements, to, inter alia, ensure that the
renewable energy asset is operated and managed in a manner that is
consistent with the Company's investment and ESG Policy. In this
case, the Transitional Investment Manager will always take up Board
seats and attend Board meetings. Regular reporting data is provided
to the Board on investee performance, including any environmental
or social issues or risks. The Transitional Investment Manager will
directly use their influence to monitor and support investee
companies on relevant matters including strategy, financial and
non-financial performance and risk, capital structuring and social
and environmental impact. They look to galvanise other shareholders
in line with the Company's ESG Policies and minimise the Company's
principle adverse impacts.
The Transitional Investment Manager
works with a range of external service providers to manage the
portfolio of investments, for example construction managers,
operations and maintenance providers, and external asset managers.
To address any adverse impacts on a continuous basis, the
Transitional Investment Manager actively engages with service
providers, provide decision making oversight and carry out an
annual ESG review on each material third-party service provider and
this includes reviewing policies in relation to human rights,
anti-corruption and anti-bribery. This seeks to ensure that
strategies to reduce any new adverse impacts are put in place in a
timely manner. Adverse impacts associated with health and safety
are assessed and monitored continuously by the Asset Management
Directors and/or HSE consultants.
References to international standards
In line with AEIT's triple return
investment objective, which aim to provide financial, environmental
and social returns, the investments support the environmental
objective of climate change mitigation as set out in Article 9 of
the EU Taxonomy by generating, transmitting, storing, distributing
or using renewable energy. AEIT's investments in sustainable energy
target countries where greenhouse gas (GHG) emissions are growing
rapidly. The investments address the climate change mitigation
priorities set out in those countries' Nationally Determined
Contributions under the Paris Agreement on Climate Change, as well
as their efforts to achieve the Sustainable Development Goals
(SDGs), by avoiding GHG emissions and having a positive effect on
the communities in which they work. The Transitional Investment
Manager has also signed up to achieve net zero by 2050 and are in
the process of validating targets in line with the Science Based
Targets Initiative (SBTi).
The Transitional Investment
Manager maintains a list of relevant responsible investment partner
organisations and memberships which create potential synergies and
provide valuable insights and benefits for the Company. The
Transitional Investment Manager is currently a member or supporter
of the following organisations:
· United Nations Principles for Responsible Investment ("UN
PRI")
· The
Institutional Investors Group on Climate Change (IIGCC)
· UN
Sustainable Development Goals
· Science Based Targets Initiative (SBTi)
· Taskforce of climate-related financial disclosure
(TCFD)
The Transitional Investment
Manager also utilises the following data sources:
· EU
Taxonomy
· Transparency International (corruption index)
· Climate Scale (climate change risk assessments)
The Transitional Investment
Manager also uses a number of partner organisations to support due
diligence on investments including legal and technical
advisors.
As part of the Transitional
Investment Manager's due diligence, alignment to the EU Taxonomy is
evaluated, and climate change risk assessments are carried out on
all investments. This is performed either by technical advisors, or
through utilising Climate Scale, which provides high resolution
climate data in a 2- and 4-degree scenario for climate change risk
assessments. PAI data is collected directly from the investee
companies, reviewed and challenged by the ESG team before being
consolidated.
Historical comparison
The year-on-year comparison
indicates consistent performance across the portfolio, with only
significant variations observed in carbon emissions, water
consumption, gender pay gap, and board diversity. Construction
activities at TT9 were the primary source of the portfolio's carbon
emissions, leading to a significant rise in AEIT's emissions. In
response to the increased water consumption and to underscore the
importance of sustainable water use, the Transitional Investment
Manager has requested the asset manager to start monitoring the
recyclability rate of water used by the assets. Through proactive
engagement in this area, the aim is to explore avenues for
minimising water dependency. Although the gender pay gap has
narrowed, the acquisition of a company with an exclusively male
board has impacted gender diversity at the board level negatively.
This development highlights an area for potential enhancement in
the future. Meanwhile, a notable rise in renewable energy
consumption represents an accomplishment for the portfolio,
emphasising the Company's dedication to moving away from
non-renewable energy sources.
Appendix 2: SFDR Periodic Disclosure
Template periodic disclosure for the financial products
referred to in Article 9, paragraphs 1 to 4a, of Regulation (EU)
2019/2088 and Article 5, first paragraph, of Regulation (EU)
2020/852
Product name:
Asian Energy Investment Trust plc
Legal entity identifier:
254900V23329JCBR9G82
Sustainable investment means
an investment in an economic activity that
contributes to an environmental or social objective, provided that
the investment does not significantly harm any environmental or
social objective and that the investee companies follow good
governance practices.
The EU Taxonomy is a classification system
laid down in Regulation (EU) 2020/852 establishing a list of
environmentally sustainable
economic activities. That
Regulation does not include a list of socially sustainable economic
activities. Sustainable investments with an environmental objective
might be aligned with the Taxonomy or not.
Sustainable investment objective
|
Does this financial product have a sustainable investment
objective?
|
|
●● x Yes
|
●●o No
|
|
x
|
It made sustainable investments with an environmental
objective: 100%
x in economic activities that qualify as environmentally
sustainable under the EU Taxonomy
o in economic activities
that do not qualify as environmentally sustainable under the EU
Taxonomy
|
o
|
It promoted Environmental/Social (E/S)
characteristics and while it did not have as its objective a
sustainable investment, it had a proportion of ___% of sustainable
investments
o with an environmental
objective in economic activities that qualify as environmentally
sustainable under the EU Taxonomy
o with an environmental
objective in economic activities that do not qualify as
environmentally sustainable under the EU Taxonomy
o with a social objective
|
|
o
|
It made sustainable investments with a social
objective: ___%
|
o
|
It promoted E/S characteristics,
but did not make any sustainable
investments
|
To what extent was the sustainable investment objective of
this financial product met?
Asian Energy Infrastructure Trust
plc ("AEIT") is a renewable energy investment trust providing
direct access to sustainable energy infrastructure in fast-growing
and emerging economies in Asia. In line with AEIT's triple return
objectives, which aim to provide financial, environmental and
social returns, the investments support the environmental objective
of climate change mitigation as set out in Article 9 of the EU
Taxonomy by generating, transmitting, storing, distributing or
using renewable energy. AEIT's investments in sustainable energy
target countries where greenhouse gas (GHG) emissions are growing
rapidly. The investments address the climate change mitigation
priorities set out in those countries' Nationally Determined
Contributions under the Paris Agreement on Climate Change, as well
as their efforts to achieve the Sustainable Development Goals
(SDGs), by avoiding GHG emissions and having a positive effect on
the communities in which they work. In the year ended 31 December
2023, investments were made in 233 MW of operating solar capacity
in India and 6 MW in Vietnam, and 200 MW of in construction solar
capacity in India.
Sustainability indicators measure how the sustainable objectives of this financial
product are attained.
How did the sustainability indicators
perform?
AEIT's investments substantially
contributed to climate change mitigation as reflected in the
technical screening criteria listed in section 4 Annex 1 regulation
2021/2139. The construction and operation of new renewable energy
infrastructure in Asia helped improve energy access and security,
create jobs, and avoid GHG emissions. These positive impacts were
measured using the following key performance indicators, which
align with SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate
Action):
|
Installed renewable capacity -
MW
|
271
|
|
Renewable energy generated -
MWh
|
391,683
|
|
CO2 emissions avoided -
CO2e tonnes
|
311,752
|
Note: Figures are based on
AEIT's proportional share of the investment portfolio as at 31
December 2023.
and compared to previous periods?
|
Sustainability indicator
|
2022
|
2023
|
|
Installed renewable capacity -
MW
|
132
|
271
|
|
Renewable energy generated -
MWh
|
85,199
|
391,683
|
|
CO2 emissions avoided -
tCO2e
|
62,770
|
311,752
|
In January 2023 and May 2023, AEIT
completed acquisitions of the remaining 57% of the SolarArise
portfolio and 99.8% of the VSS portfolio, respectively. These
acquisitions significantly increased the MW capacity of the
operating portfolio, resulting in increased renewable energy
generation and associated avoided emissions in 2023 compared with
2022.
How did the sustainable investments not cause significant
harm to any sustainable investment objective?
Environmental, social and
governance (ESG) considerations are integral to AEIT's investment
objective, and AEIT's Former Investment Manager during the period
had environmental and social policies that drew on the
International Finance Corporation's environmental and social
performance standards. These policies provide a framework that help
identify and manage potential significant harm to any environmental
or social objectives, including water; biodiversity and ecosystems;
circular economy; pollution prevention. From 1 November 2023,
Octopus Renewables Limited, trading as Octopus Energy Generation
("OEGEN" or "Octopus Energy Generation"), was appointed as a
transitional Investment Manager (the "Transitional Investment
Manager") for the Company and assumed all day-to-day portfolio
management responsibilities for the Company from this date. The
Former investment manger also undertook a review of the specific
renewable energy assets in relation to the EU Taxonomy screening
criteria in the period to confirm whether the investments continued
to meet the qualification criteria. AEIT's investments met the
criteria for do no significant harm.
How were the indicators for adverse impacts on sustainability
factors taken into account?
Data related to the mandatory
indicators for Principle Adverse Impacts listed under Table 1 Annex
1 of regulation 2022/1288 have been collected. These indicators are
also monitored continuously over the life of an investment. AEIT's
2023 Annual Report includes its Annual PAI Statement completed
using Annex I of regulation 2022/1288.
Were sustainable investments aligned with the OECD Guidelines
for Multinational Enterprises and the UN
Guiding Principles on Business and Human Rights?
No major controversies or
violations were reported during the period. The Transitional
Investment Manager will continue to engage with investee companies
to strengthen implementation frameworks, and enhance the practical
effectiveness of established grievance mechanisms.
Principal adverse impacts are
the most significant negative impacts of investment decisions on
sustainability factors relating to environmental, social and
employee matters, respect for human rights, anti‐corruption and
anti‐bribery
matters.
The list includes the investments
constituting the greatest
proportion of investments of the financial product during
the reference period which is: Jan 1 - December 31 2023.
Asset allocation describes
the share of investments in specific assets.
How did this financial product consider principal adverse
impacts on sustainability factors?
The issues addressed by the PAIs
were expressly covered by the Former and Transitional Investment
Manager's sustainability and responsible investment policies.
Social and environmental issues were considered during due
diligence phases of the investment process and KPIs were monitored
post-acquisition. In 2023, the Transitional Investment Manager
worked with investee companies to carry out a more robust
greenhouse gas accounting exercise, which led to higher levels of
reported activity and spend data across all three Scopes. AEIT's
2023 Annual Report includes its Annual PAI Statement containing
information on the mandatory PAI indicators in Table 1 Annex 1
regulation 2022/1288 for the AEIT investments collected using best
efforts.
What were the top investments of this financial
product?
|
Largest investments
|
Sector
|
%
|
Country
|
|
SolarArise
|
Energy
|
63
|
India
|
|
NISPI
|
Energy
|
31
|
Philippines
|
|
VSS
|
Energy
|
6
|
Vietnam
|
Note: Figures are based on
AEIT's investment portfolio's NAV as at 31 December
2023.
What was the proportion of sustainability-related
investments?
100%
AEIT invests in sustainable energy
solutions and infrastructure assets that align with the EU Green
Taxonomy environmental objective of climate change mitigation. In
2023, 100% of AEIT investments were used to meet its sustainable
investment objective, in accordance with the binding elements of
the investment strategy. Due to the unusual circumstances of the
Company whereby the Company is undergoing a strategic review that
prevents new investments being made, this calculation excludes cash
held at the PLC level held in liquid accounts which cannot
currently be invested in assets.
Given AEIT held a significant
proportion of cash during the period, AEIT decided to also disclose
the proportion of sustainability-related investments if investors
classify AEIT's cash as 'unsustainable'. This is calculated to be
51.7%47.
Should the outcome of the
strategic review be a relaunch of the Company, the cash being held
in liquid assets will be invested into assets that are expected to
meet the sustainable investment criteria as per the Investment
Strategy's mandate.
|
Investments
|
#1 Sustainable 100%
|
Environmental
|
Taxonomy-aligned 100%
|
|
|
#2 Not sustainable
|
|
|
#1 Sustainable covers
sustainable investments with environmental or social
objectives.
#2 Not sustainable includes
investments which do not qualify as sustainable
investments.
What was the asset allocation?
100% of the sustainable
investments were held indirectly through Special Purpose Vehicles
and intermediate entities.
In which economic sectors were the investments
made?
Energy - Electricity generation
using solar photovoltaic technology
47 Refer to the APM for detailed
calculations.
To comply with the EU Taxonomy,
the criteria for fossil gas
include limitations on emissions and switching to fully renewable
power or low-carbon fuels by the end of 2035. For nuclear energy, the criteria include
comprehensive safety and waste management
rules.
Enabling activities directly
enable other activities to make a substantial contribution to an
environmental objective Transitional activities are economic
activities for which
low-carbon alternatives are not yet available and
that have greenhouse gas emission levels corresponding to the best
performance.
Taxonomy-aligned activities are
expressed as a share of:
· turnover
reflecting the share of revenue from green
activities of investee companies
· capital
expenditure (Capex) showing the
green investments made by investee companies, e.g. for a transition
to a green economy.
· operational
expenditure (OpEx) reflecting green
operational activities of investee companies.
To what extent were sustainable investments with an
environmental objective aligned with the EU
Taxonomy?
100%
All investments made by AEIT in
2023 were in companies that exclusively generate solar photovoltaic
electricity, thereby meeting the substantial contribution criteria
of the technical screening criteria of the EU Taxonomy in section
4.1 Annex 1 of regulation 2021/2139 (electricity generation using
solar photovoltaic technology). The MWh produced have been reported
above and detailed in 2023 AEIT's Annual Report. To ensure no
significant harm to biodiversity and ecosystems, environmental
screening was conducted for all investments prior to acquisition,
reflecting the Former Investment Manager's ESG policies and
national law. Physical climate risk and vulnerability assessments
were completed for all existing investments in collaboration with a
third-party sustainability advisory. This screening and assessments
have been reviewed by the Transitional Investment Manager. Investee
companies have sought to use durable equipment.
The alignment of existing
investments with EU Taxonomy was not subject to an assurance
provided by an auditor. Such alignment was substantiated by
in-house experts, on the basis of inputs from third-party technical
advisors, publicly available information, information provided
directly by investee companies, as well as third-party data
sources.
Did the financial product invest in fossil gas and/or nuclear
energy related activities complying with the EU
Taxonomy48?
o
Yes
o
In fossil gas
o
In nuclear energy
x No
The graphs below show in
green the percentage of investments that were aligned with the EU
Taxonomy. As there is no appropriate methodology to determine the
taxonomy-alignment of sovereign bonds*, the first graph shows the
Taxonomy alignment in relation to all the investments of the
financial product including sovereign bonds, while the second graph
shows the Taxonomy alignment only in relation to the investments of
the financial product other than sovereign bonds.
1. Taxonomy-alignment of
investments including sovereign
bonds*
2. Taxonomy-alignment of
investments excluding sovereign
bonds*
Note: AEIT does not make any investments in Fossil gas or
Nuclear.
* For the purpose of these
graphs, 'sovereign bonds' consist of all sovereign
exposures.
48 Fossil gas and/or nuclear related
activities will only comply with the EU Taxonomy where they
contribute to limiting climate change ("climate change mitigation")
and do no significant harm to any EU Taxonomy objective - see
explanatory note in the left-hand margin. The full criteria for
fossil gas and nuclear energy economic activities that comply with
the EU Taxonomy are laid down in Commission Delegated Regulation
(EU) 2022/1214.
are sustainable investments with
an environmental objective that
do not take into account the criteria for
environmentally sustainable economic activities under the EU
Taxonomy.
Reference benchmarks are
indexes to measure whether the financial product attains the
sustainable objective.
What was the share of investments made in transitional and
enabling activities?
0%
How did the percentage of investments aligned with the EU
Taxonomy compare with previous reference periods?
Not Applicable.
What was the share of sustainable investments with an
environmental objective that were not aligned with the EU
Taxonomy?
0%
What was the share of socially sustainable
investments?
Not applicable for Article 9 SFDR
classification purposes. All AEIT investments aim to have a
positive effect on the communities in which they work and support
social development. In 2023, AEIT investments directly supported
197 full time equivalent jobs, including four full time salaried
employee positions.
What investments were included under "not sustainable", what
was their purpose and were there any minimum environmental or
social safeguards?
No investments were included under
not sustainable.
What actions have been taken to attain the sustainable
investment objective during the reference period?
The sustainability objectives
achieved are the direct result of implementation of the binding
elements of our investment strategy. AEIT invests in a diversified
portfolio of sustainable energy infrastructure assets in
fast-growing and emerging economies in Asia. The investments meet
the AEIT's aim of building a diversified portfolio of assets in the
areas of renewable energy generation. The 2023 portfolio consists
entirely of solar photovoltaic electricity generation. The
Transitional Investment Manager has worked with the investee
companies to monitor progress towards attainment of these
sustainability objectives using the key performance indicators
specified above, which align with SDG 7 (Affordable and Clean
Energy) and SDG 13 (Climate Action). Avoided emissions were
calculated using the standards of the International Financial
Institutions Joint Standards for GHG Accounting for Grid Connected
Renewable Energy Projects. The avoided emissions attributable to
the AEIT portfolio on this basis substantially exceeded the Scope
1, 2 and 3 emissions associated with operating these assets as
reported in AEIT's Annual PAI Statement which is annexed to its
2023 Annual Report. The sustainability indicators presented in this
disclosure and in the Annual Report have been reviewed by the
Board.
How did this financial product perform compared to the
reference sustainable benchmark?
Not Applicable.
How did the reference benchmark differ from a broad market
index?
Not Applicable as AEIT does not
use any reference benchmarks.
How did this financial product perform with regard to the
sustainability indicators to determine the alignment of the
reference benchmark with the sustainable investment
objective?
Not Applicable.
How did this financial product perform compared with the
reference benchmark?
Not Applicable.
How did this financial product perform compared with the
broad market index?
Not Applicable.