30 September 2023 Unaudited NAV and Company Update
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT MAY CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE UK'S MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, SUCH INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
LEI: 254900V23329JCBR9G82
13 December 2023
Asian Energy Impact Trust plc
(the "Company" or "AEIT")
30 September 2023 unaudited Net Asset Value
and COMPANY UPDATE
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 an update on its financial position and portfolio.
As previously announced, the Company and Octopus Energy Generation (the "Transitional Investment Manager") are working to complete and publish the 2022 Annual Report and 2023 Interim Report and restore share trading as soon as possible. A further update on this process is provided below. In the meantime, the Company is now publishing its net asset value ("NAV") at 30 September 2023 in order to provide investors with the most recent information at the earliest possible time.
key points
· Net assets at 30 September 2023 of US$88.5 million (NAV of 50.4 cents per share), underpinned by a robust independent valuation process.
|
|
30 September 2023 |
30 September 2022[1] |
IPO (14 December 2021) |
|
Net assets - US$ million |
88.5 |
142.5 |
113.1 |
|
NAV per share - cents |
50.4 |
100.8 |
98.0 |
|
NAV total return per share[2] |
-47.5% |
3.8% |
n/a |
· NAV as at 30 September 2023 (relative to 30 September 2022) reflects the significant reduction of US$78.9 million in the fair value of the Company's investment portfolio, in particular driven by: (i) the negative net present value ("NPV") associated with completing the 200 MW DC solar construction project in Rewa Ultra Mega Solar Park in India (the "RUMS Project"); (ii) a reduction in the Philippines wholesale electricity spot market ("WESM") price forecasts; (iii) updated generation, operating cost and tax assumptions; (iv) methodology and modelling updates; (v) removal of carbon credits; and (vi) higher discount rates across the portfolio. Further details of the movement in the fair value of the investment portfolio and of the valuation process are set out below.
· In the nine months ended 30 September 2023, after adjusting for weather-related underperformance, the operating assets held by the Company's Indian investment platform ("SolarArise") and the Company's Philippines investment platform ("NISPI") performed broadly in line with the revised generation expectations reflected in the updated valuation models. One of the recently acquired Vietnamese solar rooftop assets is significantly underperforming against expectations. Where specific asset issues exist, remediation and optimisation plans are being developed by the Transitional Investment Manager to seek to create value within the portfolios.
· At 30 September 2023, the Company had cash balances of US$63.6 million and held US$1.7 million in its UK subsidiary, AEIT Holdings Limited ("AEIT Holdings"), which is included within the fair value of the Company's investment portfolio. Since 30 September 2023, the Company has invested a further US$20.0 million in SolarArise to fund the equity required for constructing the RUMS Project (as announced on 11 October 2023).
· As at 30 September 2023, gearing in AEIT's investment portfolio represented 54.6% of the Group's Adjusted GAV. Gearing is not used at the Company level.
· The audit of the Company's financial statements for the financial period ended 31 December 2022 is progressing and the Company now expects to publish its 2022 Annual Report and 2023 Interim Report by 19 January 2024 and to apply to the FCA for the restoration of its listing as soon as possible thereafter.
Unless otherwise noted, the information provided in this announcement is unaudited.
NET ASSETS
Net assets as at 30 September 2023 were US$88.5 million, with a NAV total return since IPO of
-47.5%. NAV per share decreased to 50.4 cents at 30 September 2023. The following tables reconcile the movements from IPO and from the last published NAV as at 30 September 2022.
|
Net assets bridge - US$'000s except as noted |
IPO to |
|
IPO cash proceeds |
115,393 |
|
IPO expenses |
(2,308) |
|
Net assets at IPO |
113,085 |
|
Shares issued for acquisition of 43% interest in SolarArise |
30,186 |
|
Gross proceeds raised in November 2022 placing |
35,306 |
|
Consideration share issue and placing expenses |
(1,310) |
|
Net assets following IPO, share issuance and subsequent placing |
177,267 |
|
Change in fair value of investment portfolio |
(76,236) |
|
Dividends paid to shareholders |
(5,522) |
|
Investment management fees |
(2,296) |
|
Other PLC costs (net) |
(1,121) |
|
Additional professional fees following suspension |
(3,634) |
|
Net assets at 30 September 2023 |
88,458 |
|
Number of shares in issue |
175,684,705 |
|
NAV per share - cents |
50.4 |
|
Decrease in NAV per share since IPO[3] |
48.6% |
|
Net assets bridge - US$'000s |
30 September 2022 to 30 September 2023 |
|
Net assets at 30 September 2022 |
142,541 |
|
Gross proceeds raised in November 2022 placing |
35,306 |
|
Placing expenses |
(706) |
|
Change in fair value of investment portfolio |
(78,850) |
|
Dividends paid to shareholders |
(4,392) |
|
Investment management fees |
(1,103) |
|
Other PLC costs (net) |
(704) |
|
Additional professional fees following suspension |
(3,634) |
|
Net assets at 30 September 2023 |
88,458 |
Capital Raised
In November 2022, the Company raised US$35.3 million of additional capital from both existing and new investors. When combined with the IPO proceeds and the seed asset share capital issued, total capital raised to date is US$180.9 million.
Asset Acquisitions
Acquisitions to date total US$99.8 million comprising:
NISPI: The acquisition of a 40% economic interest in seed asset NISPI, the 80 MW Philippines investment platform with three operating solar plants, completed for a cash consideration of US$25.4 million on 17 December 2021.
SolarArise: The 43% acquisition of SolarArise, the other seed asset, completed in August 2022 for a total consideration of US$32.9 million. This comprised a cash tax payment of US$2.7 million and US$30.2 million settled through the issue of AEIT consideration shares. On 20 June 2022 the Company committed to acquire the remaining 57% interest in SolarArise from the remaining shareholders, including the founders of SolarArise, for a cash consideration of US$38.5 million. This acquisition completed on 13 January 2023 and, at 30 September 2023, the Company owned 100% of SolarArise, which comprises six operating assets with an aggregate generating capacity of 234MW, the 200 MW DC RUMS Project and a 150 MW DC solar development project with a signed PPA (the "TT8 Project").
Vietnam: On 1 November 2022, the Company, through its subsidiary AEIT Holdings, made its first investment in Vietnam through a contractual agreement to acquire for US$4.6 million Viet Solar System Company Limited ("VSS"), a privately-owned company which holds 6.12 MW of rooftop solar assets. This reported price was the total value of the investment, including the debt, and represented a net US$3.0 million equity investment. The acquisition completed on 31 May 2023 and represents a 99.8% interest in VSS.
Fair Value of Investment Portfolio
The most significant movements in the fair value from 30 September 2022 to 30 September 2023 are summarised in the table below.
|
Fair value of investments bridge - US$'000s |
30 September 2022 to 30 September 2023 |
|
Fair value of investments at 30 September 2022 |
60,496 |
|
Acquisition of 57% of SolarArise |
38,494 |
|
Acquisition of 99.8% of VSS |
3,093 |
|
Fair value of investments at 30 September 2022 and subsequent acquisitions |
102,083 |
|
Inflation, FX and discount rate unwind |
7,278 |
|
RUMS Project |
(24,737) |
|
Adjustments to modelling methodology |
(19,361) |
|
Power prices |
(23,143) |
|
Generation |
(5,858) |
|
Discount rates |
(2,275) |
|
Carbon credits |
(4,728) |
|
Other adjustments |
(3,765) |
|
Fair value at 30 September 2023 |
25,494 |
Inflation, FX and discount rate unwind: For inflation, the approach is to blend two inflation forecasts from reputable third-party sources and apply this consistently to assumptions. For FX, valuations are converted from local currency at the relevant spot rate. The discount rate unwind includes the NPV of future cashflows being brought forward from the valuation date to 30 September 2023 as well as the inclusion of actual performance figures during the period.
RUMS Project: Based on the updated model, the negative NPV associated with completing the project was US$14.6 million as at 30 September 2023. The total negative movement of US$24.7 million represents the movement from the positive value attributed to the project in the 30 September 2022 valuation of US$4.9 million plus the additional paid in capital over the period. In total, as at 30 September 2023, US$10.1 million has been invested into the RUMS Project funded from surplus cash and operational cashflow recycling within SolarArise.
Adjustments to modelling methodology: There has been a change in the SolarArise holding company valuation methodology which now uses a discounted cashflow ("DCF") methodology to reflect the ongoing liabilities and asset management fees required to operate the underlying assets which are paid from the holding company, taxation on distributions from the operating portfolio and other model corrections. Additionally, the capital structure and lack of distributable reserves in NISPI, SolarArise and VSS result in a requirement to undertake capital restructurings before cash can be extracted, negatively impacting their valuations which are based on free cashflows. These are now modelled with assumptions that action is taken to mitigate the restrictions within the next year.
Power prices: In determining the forecast for power prices, the approach taken is to blend at least two price curves as prepared by third-party independent market forecasters that are reputable in the relevant markets. Prior period valuations relied on the assumptions of the Company's former investment manager (the "Former Investment Manager"), which were not based on independent market forecasts. The Former Investment Manager's assumed price curve as at 31 December 2022 was materially higher than independent market forecasters' forecasted prices utilised, particularly in the long term. In addition, during 2023 significant further reductions in the WESM forecasts, particularly in the short term, have been observed with the independent market forecasters highlighting sharply falling commodity prices (with delivered coal and LNG being two of these major commodities) as the key drivers for the forecast decrease.
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. There is observed historical underperformance of the Company's operational assets when compared with the level of generation assumed at the time of acquisition. A technical advisor has been appointed to provide updated P50 yield assessments which are expected to be lower than these original assumptions. In lieu of receiving these, an estimated reduction has been applied.
Discount rates: To determine the reasonable ranges, the applicable cost of equity for the solar market was estimated 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. The Transitional Investment Manager compared the range to its own risk-adjusted discount rate analysis and determined the appropriate discount rates to apply. The discount rates applied are in the range of 10.0% - 12.5% (30 September 2022: range of 10.0% - 11.2%).
Carbon credits: For the SolarArise portfolio, carbon credit revenue was previously included in the base case. These revenues are now treated as an upside as opposed to a base case assumption and, therefore, have been removed.
Other adjustments: This refers to the balance of valuation movements in the period excluding the factors noted above. In addition, a number of other assumptions that were either inaccurate, or incongruent with standard market practice for the Company's assets, have been adjusted. These include updating lease and other operational costs to reflect contractual terms and inclusion of capex for inverter replacements.
Dividends
The Board has already declared a third interim dividend in respect of the year ending 31 December 2023 (the "Q3 2023 Dividend") of 0.44 cents per ordinary share in respect of the quarter ended 30 September 2023 (total cost: US$0.8 million). The Q3 2023 Dividend was paid on 11 December 2023 to shareholders on the register at the close of business on 17 November 2023. The Q3 2023 Dividend was funded out of the Company's distributable capital reserves and this outflow will be reflected in the 31 December 2023 NAV.
Total dividends declared since September 2022 through to 30 September 2023, being the dividends declared for Q3 2022, Q4 2022, Q1 2023 and Q2 2023 which were also funded out of the Company's distributable capital reserves, reduced the NAV by US$4.4 million.
Expenses
In the 12-month period ended 30 September 2023, based on the updated quarter end NAVs, fees which may be claimed by the Former Investment Manager were US$1.1 million, of which US$0.5 million had been paid in respect to the quarter ending 30 December 2022. Accrued unpaid fees are not being paid whilst the Board evaluates all available options. No fees were paid during the period to the Transitional Investment Manager, which was appointed with effect from 1 November 2023.
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 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 ongoing strategic review. Additional professional fees incurred since suspension of listing in the Company's shares total US$3.6 million. The Board is intending to investigate the Company's right to seek compensation for these additional professional fees whilst reserving all the Company's other rights.
Valuation procedure
The Company's valuation process follows International Private Equity Valuation Guidelines, typically using a DCF methodology. 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. The assets held in the Company's UK subsidiary, AEIT Holdings, substantially comprise cash and working capital balances and therefore the Directors consider the fair value of AEIT Holdings to be equal to its book value.
Following the material uncertainty surrounding the portfolio valuations as at 31 December 2022, the Board, the Transitional Investment Manager and the Company's AIFM, Adepa Asset Management S.A., have undertaken various steps to arrive at the 30 September 2023 valuation, including the following:
· PricewaterhouseCoopers LLP ("PwC") was appointed to assist the Company with a detailed review of models for the Company's operational assets in India and the Philippines which had been prepared by the Former Investment Manager for the purpose of the 31 December 2022 valuation. As previously announced, following this review, the Company identified several areas for concern, including assumptions regarding revenues, operating costs, tax projections and cash extraction which were either inaccurate or considered to be unrealistically optimistic.
· PwC was also appointed to provide tax advice on cash repatriation.
· Following the PwC review and tax report, the operational asset models have been re-worked by the Transitional Investment Manager. This included updating the basis of the macro assumptions in the models, utilising leading third-party market forecasters for power prices in the Philippines and Vietnam and a number of other material changes based on the Transitional Investment Manager's experience.
· The Transitional Investment Manager reviewed and updated the new model for the in-construction RUMS Project which had been built subsequent to the share listing suspension by an external specialist modelling firm and audited by a model audit company, all under the supervision of the Former Investment Manager.
· The holding company model was revised to accurately reflect asset management costs, cash extraction and tax assumptions in respect of SolarArise.
· An updated valuation policy reflecting the change in assumption methodologies and review process has been adopted.
PwC was engaged to provide a private independent opinion on the reasonableness of the valuations of SolarArise, NISPI and VSS as at 30 September 2023 which were prepared by the Transitional Investment Manager, and adopted by the Board and AIFM when they approved the 30 September 2023 valuations.
A similar process has been adopted in the preparation of the unreleased valuation of the Company's underlying portfolio as at 30 June 2023 and as at 31 December 2022, the latter of which is currently being audited by Deloitte LLP (audit in progress) as part of its audit of financial statements for the financial period ended 31 December 2022.
CASH BALANCE
At 30 September 2023, the Company and its UK subsidiary, AEIT Holdings, had cash balances of US$65.3 million. Since 30 September 2023, the Company has invested a further US$20.0 million in SolarArise to fund the equity required for constructing the RUMS Project.
GEARING
Gearing is not used at the Company level. As at 30 September 2023, SolarArise had external borrowings of US$102.8 million and VSS had external borrowings of US$1.3 million, whilst NISPI was ungeared. At 30 September 2023, gearing in the investment portfolio represented 54.6% of the Group's Adjusted GAV. Since 30 September 2023, there have been no amounts drawn under the US$54.9 million project finance facility for construction of the RUMS Project.
UPDATE ON OPERATING ASSETS
The Transitional Investment Manager has commenced its review of the Company's portfolio as part of the strategic review being undertaken by the Board. Operational performance data of the assets from 1 January 2023 to 30 September 2023 has been examined.
Adjusting for weather-related underperformance, the SolarArise and NISPI portfolios performed broadly in line with the revised generation expectations reflected in the valuation models used to calculate the NAV as at 30 September 2023. This supports the assumed generation reduction against the P50 yield assumptions. Where specific asset issues exist, remediation and optimisation plans are being developed to seek to create value within the portfolios.
With respect to the newly acquired VSS portfolio, one of the assets is significantly underperforming against expectations. The Transitional Investment Manager is undertaking an investigation to understand the key drivers behind the underperformance and will identify strategies to be adopted for additional value recovery. Further information will be provided as part of the Board's strategic review.
UPDATE ON CONSTRUCTION AND DEVELOPMENT PROJECTS
Construction of the RUMS Project is underway, and the first shipment of modules has arrived in India. A further update will be provided in the coming weeks.
Following its detailed review, the Transitional Investment Manager has determined that moving forward with the development of the TT8 Project may not be the best option for the Company at this particular time in light of the strategic review of the options for the Company's future. All options for this project, including offering it for sale, are being considered, subject to the terms of the signed PPA.
2022 ANNUAL REPORT, 2023 INTERIM REPORT AND LIFTING SUSPENSION
The audit of the Company's financial statements for the financial period ended 31 December 2022 is progressing. The Company now expects to publish its annual report and accounts for the financial period ended 31 December 2022 and its interim report and accounts for the six months ended 30 June 2023 by 19 January 2024 and to apply to the FCA for the restoration of its listing as soon as possible thereafter.
Q3 2023 FACTSHEET
The Company's factsheet for the quarter ended 30 September will be available shortly on its website, www.asianenergyimpact.com.
Sue Inglis, Chair of Asian Energy Impact Trust plc, said: "As a Board we are very disappointed by the results announced today. We are, however, pleased that, due to the work carried out by the Transitional Investment Manager since it was appointed, we have been able to take this step forward in updating our investors. Focus remains on completing the Company's immediate priorities, including completing the 2022 audit and publishing our 2022 Annual Report and 2023 Interim Report to enabling the lifting of the suspension of the listing of the Company's shares, and developing plans to optimise value in the Company's portfolio."
The person responsible for arranging the release of this announcement on behalf of the Company is Uloma Adighibe of JTC (UK) Limited, the Company Secretary
Enquiries
|
Asian Energy Impact Trust plc |
Tel: +44 (0)20 3757 1892 |
|
Octopus Energy Generation (Transitional Investment Manager) |
Tel: +44 (0)20 4530 8369 |
|
Shore Capital (Joint Corporate Broker) |
Tel: +44 (0)20 7408 4050 |
|
Peel Hunt LLP (Joint Corporate Broker) |
Tel: +44 (0)20 7418 8900 |
|
Smith Square Partners LLP (Financial Advisor) |
Tel: +44 (0)20 3696 7260 |
|
Camarco (PR Advisor) |
Tel: +44 (0)20 3757 4982 |
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 until 30 April 2024 (the "Transitional Investment Management Period"). The Transitional Investment Management Period will allow the Board with its advisers to complete the strategic review of options for the Company's future.
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 billion of assets under management (AUM) (as of September 2023) across 16 countries and total 3.2GW. These renewable projects generate enough green energy to power 2.3 million homes every year, the equivalent of taking over 1.2 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.
[1] 30 September 2022 is the last published NAV prior to this announcement.
[2] NAV total return per share represents the total return to shareholders, being the combined effect of the rise or fall in the NAV per share over the relevant period and assumes dividends paid in the relevant period are reinvested immediately in the Company at the prevailing NAV per share, in comparison to the NAV per share at the IPO.
[3] Based on opening NAV per share of 98.0 cents, being the IPO price net of expenses.
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