Circular and Notice of General Meeting

Aquila European Renewables PLC

12 September 2024

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

For immediate release

LEI: 213800UKH1TZIC9ZRP41

12 September 2024

Aquila European Renewables plc

Vote on the continuation and potential  Managed Wind-Down of the Company and associated adoption of the New Investment Policy and Notice of General Meeting

As outlined on 20 June 2024, the Board of Aquila European Renewables plc ("AERI" or the "Company") committed to provide a further update on its review of broader strategic options as and when appropriate and in any event before the vote on the Company's continuation at a shareholder meeting expected to be held in September 2024. The Board announces that a circular to convene a general meeting of the Company to be held at 10:00 a.m. on 30 September 2024 at the offices of CMS Cameron McKenna Nabarro Olswang LLP at Cannon Place, 78 Cannon Street, London EC4N 6AF (the "Circular") will be published today to allow Shareholders to vote on the continuation and potential Managed Wind-Down of the Company and associated adoption of the New Investment Policy.

The Circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The Circular will also be available on the Company's website at www.aquila-european-renewables-income-fund.com where further information on the Company can also be found. Capitalised terms used but not defined in this announcement will have the same meaning as set out in the Circular.

Introduction

At the Company's AGM held in 2023, Shareholders approved the continuation of the Company as a closed ended investment company for a further four years. Notwithstanding, on 30 May 2023, the Board announced that Shareholders should have a further opportunity to vote on the continuation of the Company during the course of the financial year ending 31 December 2024, with such vote expected to be held around September 2024.

Following extensive engagement by the Board and its advisers with Shareholders over the past year, the Board understands that Shareholders representing a majority of the voting rights of the Company are in favour of the discontinuation of the Company. The first resolution set out in the Notice of General Meeting therefore proposes that the Company should not continue as a closed ended investment company with its current Investment Policy (the "Discontinuation Resolution").

If the Discontinuation Resolution is approved, then the Board believe that the Company should enter into a Managed Wind-Down for the reasons set out further below.

The entry into of a Managed Wind-Down would require a material amendment of the Company's investment objective and Investment Policy, and Shareholder approval is therefore being sought at the General Meeting, in accordance with the Listing Rules, for the proposed amendment of the Company's Investment Policy (the "New Investment Policy Resolution", together with the Discontinuation Resolution the "Resolutions")).

The purpose of the Circular is to set out the background to and reasons for the Resolutions and explain why the Board unanimously recommends that you vote in favour of the Resolutions to be proposed at the General Meeting to be held at 10:00 a.m. on 30 September 2024, notice of which is set out in the Circular.

Background to the Resolutions

On 3 February 2023, in recognition of the large and sustained discount to NAV at which the Company's Shares were trading at and the Board's belief that the Company's share price did not reflect the inherent value in the Portfolio, the Board announced a package of initiatives to improve the marketability of the Company's shares. Those initiatives included:

·      a programme of share buybacks, through which the Company has returned EUR 27.8 million (excluding fees and stamp duty) to Shareholders at an average discount of 15.8 per cent to NAV, reducing the total Shares in issue by 7.4% and resulting in NAV accretion of 1.4 cents per Share;

·      the rollout of asset life extensions following the completion of due diligence by the Company's advisers across the Portfolio, resulting in a NAV uplift of 4.6 cents per Share for the financial year ended 31 December 2023. The average asset life assumptions for the solar portfolio increased from 30 years to 40 years, and those of the wind portfolio from 25 years to an average of 28 years, in line with industry standards and a reflection of the quality of the Portfolio; and

·      the successful admittance to trading of Shares on the Euronext Growth Dublin on 2 October 2023.

As required by the Articles, the Directors proposed an ordinary resolution at the AGM held in 2023 that the Company continue its business as a closed-ended investment company for a further four-year period (a "Continuation Resolution"). The Continuation Resolution was passed by Shareholders at the AGM held on 14 June 2023. A total of 73,747,364 Shares were voted against the Continuation Resolution which represents approximately 19.0 per cent. of the Shares in circulation and 25.9 per cent. of those voting at the AGM. In response, the Board committed to undertake a review of broader options if its existing initiatives failed to be reflected in the Company's share price.

In December 2023, following unsolicited proposals made privately, Octopus Renewables Infrastructure Trust plc ("ORIT") made a public announcement regarding a proposal for a possible combination by way of a section 110 scheme of reconstruction under the Insolvency Act 1986 (a "Section 110 Combination") with the Company. Following this, the Company announced that it was considering options for the future of the Company, including a Section 110 Combination. The Board announced on 26 February 2024 that, following the receipt and review of a number of indications of interest in a Section 110 Combination, a process of mutual due diligence with multiple interested parties had commenced (the "Section 110 Process").

Through the Section 110 Process, the Board received indicative non-binding offers for a Section 110 Combination from ORIT and two other investment companies. Each indicative offer proposed the issue of new shares of the listed investment company offeror as consideration, and one indicative offer included a cash exit facility of up to 10 per cent. of the total consideration. On the basis of a NAV for NAV exchange, each of the three indicative offers represented an implied look through value ranging from a small premium to a discount to the Company's share price at the time the proposals were received. On 10 May 2024 the Company announced the termination of the Section 110 Process. This decision was reached due to:

·      the discount to NAV at which the listed investment company renewables sector was trading;

·      the Boards' belief that a Section 110 Combination with another listed investment company was not value enhancing when weighed against the other potential options open to the Company; and

·      feedback obtained from Shareholders representing a majority of the total voting rights of the Company indicating that they were not supportive of a Section 110 Combination.

Notwithstanding the cessation of the Section 110 Process, the Board, along with its advisers, continued to progress the review of broader options for the future of the Company, including:

·      a Managed Wind-Down of the Company, with an orderly realisation of its assets over a period of time;

·      a potential sale of some or all of the assets of the Company for cash; and

·      the potential continuation of the Company in its present form in accordance with its current Investment Policy delivered by the Investment Adviser.

Since the Company's announcement on 22 December 2023, the Board has worked with the Company's financial adviser, Deutsche Numis, to actively explore the sale of some or all of the assets of the Company. This process included the solicitation of interest from numerous third parties representing the most likely cash offerors for the Portfolio.

One potential bidder made a proposal with respect to an acquisition of the entire issued and to be issued share capital of the Company (the "Takeover Code Offeror"). The Board determined that it was appropriate to provide the Takeover Code Offeror with access to detailed due diligence information. Having reviewed this information the Takeover Code Offeror did not make a proposal at a level which, in the Board's opinion and taking into account Shareholders' views on the value of the Company, would have been capable of recommendation to Shareholders if made as a firm offer.

The Board and its advisers have had a number of discussions with the Company's Investment Adviser since the start of 2024 with respect to a possible acquisition by an affiliate of the Investment Adviser of the assets of the Company. On 8 May 2024 the Board received an indicative proposal from funds managed by the Investment Adviser for the Portfolio and agreed to provide access to diligence information in order for the Investment Adviser to progress its offer. On 19 August 2024, following further discussions between the Investment Adviser and the Company's advisers around possible structures for a transaction, the Board received a further proposal from the Investment Adviser in respect of the purchase of the assets of the Company. The Board carefully considered the proposal with its advisers and concluded that it was not in the best interests of Shareholders to enter into an agreement based on the terms suggested at this time. The Board continues to maintain a dialogue with the Investment Adviser regarding such proposals and, in the event the Managed Wind-Down is approved, the participation of the Investment Adviser in the sale of certain assets in the Managed Wind-Down process.

The Takeover Code Offeror, the Investment Adviser, and three of the participants in the Section 110 Process are the only five parties to have made formal proposals to acquire the Company or all of the assets of the Company and to have received access to non-public diligence information on the Company. The Board and its advisers are no longer engaged in any formal discussions with offerors for the Company or for all of the assets of the Company.

Following the Section 110 Process, the engagement with the Takeover Code Offeror, the Investment Adviser and Shareholder feedback, the Board has concluded that the Resolutions are in the best interests of Shareholders. In arriving at this decision, the Board placed particular emphasis on the following factors:

·      Shareholder feedback: throughout 2024, the Company has had numerous discussions with Shareholders regarding their opinions on the future of the Company. Shareholders representing a majority of the total voting rights of the Company have expressed a preference that the Company does not continue with its current strategy and Investment Policy. Whilst many Shareholders' preferred outcome would be the sale of the Company or all of the Company's assets for cash at a price close to Net Asset Value, which the Board and its advisers have attempted to facilitate through the processes referenced above, this has to date not been possible;

·      Shareholder value maximisation: the indicative potential value which the Company may realise from the Managed Wind-Down is expected to be in excess of the net value represented by the indicative offers received during the Section 110 Process and from the Takeover Code Offeror, all of which were subject to a number of preconditions and all of which represented material discounts to the Company's current NAV. The recent announcement of an agreement to sell the Company's shareholding in Tesla at a premium to the Company's fair valuation as at 30 June 2024 demonstrates the quality of the Company's Portfolio. Whilst it is clear that different technologies in differing geographies display very variable levels of liquidity and pricing visibility, the Tesla sale demonstrates the potential demand for the Company's assets when sold on an asset or geographic portfolio level; and

·      Feedback from potential offerors: many potential offerors from the solicitation exercise referenced that the diversified nature of the Portfolio, across both geographies and technologies, limited their interest in a transaction for all of the assets of the Company. A number of potential offerors did express their interest in certain geographic portfolios of the Company's assets. In addition, the size of the Portfolio limits the number of potential acquirors for the Portfolio. The Board believe that selling the assets on an individual asset or geographic portfolio basis will result in a larger potential pool of buyers of the Company's assets.

In the event that the Resolutions are passed, it is the intention of the Board to appoint a party, other than the Investment Adviser, to oversee the sale of the Portfolio, which may comprise of a sale of all of the assets, groups of assets (such as specific geographic or technological portfolios), individual assets of the Company or a combination thereof.

Further details will be provided in due course regarding the indicative timeline of the Managed Wind-Down and the return of proceeds to Shareholders.

General Meeting

The General Meeting has been convened for 10:00 a.m. 30 September 2024 to be held at the offices of CMS Cameron McKenna Nabarro Olswang LLP at Cannon Place, 78 Cannon Street, London EC4N 6AF. The Resolutions will be voted on by way of a poll. In accordance with the Articles, all Shareholders entitled to vote and who are present in person or by proxy at the General Meeting shall have one vote in respect of every Share held.

Shareholders are strongly encouraged to appoint the Chair of the General Meeting as their proxy to vote on their behalf at the General Meeting. This should ensure that your votes are registered.

		2024
Publication of the Circular		12 September
Latest time and date for receipt of Forms of Proxy, CREST Proxy Instructions or CREST electronic proxy appointments for the General Meeting		10 a.m. 26 September
Record date for entitlement to vote at the General Meeting		26 September
General Meeting		10 a.m. 30 September
Adoption of New Investment Policy (if Resolutions are passed)		30 September
Publication of results of General Meeting		30 September

The times and dates set out in the timetable above and referred to throughout this document and any accompanying document may be adjusted by the Company by announcement through a Regulatory Information Service, in which event details of the new dates will also be notified to the FCA, the London Stock Exchange and, where appropriate, Shareholders.

All references to times in the Circular are to London times, unless otherwise stated.

Enquiries

Deutsche Numis (Financial Adviser and Broker)
David Benda		[phone]
Stuart Ord
George Shiel

Inside Information

The information contained within this announcement is deemed by Aquila European Renewables plc to constitute inside information as stipulated under the Market Abuse Regulations (EU) No.596/2014 (as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018). On the publication of this announcement via a Regulatory Information Service, such information is now considered to be in the public domain.

The person responsible for making this announcement is Jennifer Thompson of Apex Listed Companies Services (UK) Limited, the Company Secretary.

 

END