Final Results and Increase in Target Dividend

RNS Number : 6692J

Aquila European Renewables Income

28 April 2022

AQUILA EUROPEAN RENEWABLES INCOME FUND PLC

(the "Company", the "Fund" or "AERIF")

LEI Number: 213800UKH1TZIC9ZRP41

Final Results and Increase in Target Dividend

We are pleased to present the results for the year ended 31 December 2021.

HIGHLIGHTS

Investment Objective

Aquila European Renewables Income Fund Plc (the "Company", the "Fund" or "AERIF") seeks to generate stable returns, principally in the form of income distributions, by investing in a diversified portfolio of renewable energy infrastructure investments in continental Europe and the Republic of Ireland.

Highlights for the year

· During the year under review, the Company deployed further capital to investments under construction and acquired one new solar PV investment:

- On 10 June 2021, the Company increased its commitment to The Rock by a further EUR 35.6 million in order to provide bridge debt financing at the asset level

- On 30 June 2021, the Company acquired a 50.0% interest in Ourique, a Portuguese solar photovoltaic ("PV") farm which commenced operations in December 2019, with a total capacity of 62.1 MW

· The Company paid dividends of 5.0^1,2 cents per Ordinary Share during the year, thereby successfully achieving its pay-out target for 2021. These dividends were approximately 1.1 times covered³

· The portfolio has been expanded and now includes ten separate investments, with a total generating capacity of 332.3 MW (301.3 MW as at 31 December 2020)⁴

· Portfolio production was 522.3 GWh⁵ during the year (459.9 GWh for 2020) which was 8.2% below budget, largely owing to weaker than expected wind conditions in the Nordics and lower than expected irradiation levels in Portugal. However, as a result of higher than expected electricity prices and retroactive Desfina revenues, revenue was 10.2% higher than budget

· The Company's Net Asset Value ("NAV") as at 31 December 2021 was EUR 417.4 million or 102.6 cents per Ordinary Share, representing an increase of 2.6% (not including dividends) per Ordinary Share compared to 31 December 2020

· Dividend target for the 2022 year of not less than 5.25 cents per Ordinary Share, subject to the performance of the portfolio

· In 2021, the NAV total return was 7.6%⁶ per Ordinary Share including dividends (2020: 0.7%). During 2021, the total shareholder return was 0.5%⁶ including dividends (2020: 2.0%)

· The Company raised EUR 90.0 million of additional capital during the year

· The completion of the Company's first GRESB assessment, GRESB is the global ESG benchmark for financial markets, AERIF achieved a four out of a five-star rating. With an overall GRESB score of 84, the Fund scores above the GRESB average of 77 points

· The Company entered into new power purchase agreements ("PPAs") for Sagres, Holmen II, Svindbaek, Benfica III and Albeniz in order to take advantage of higher market prices, thereby increasing contracted revenue

· A successful refinancing of The Rock represented the first participation in debt capital markets for the Company. Construction of The Rock completed in December 2021. Energisation of the wind farm is currently in progess

· The current Investment Adviser fee arrangement with Aquila Capital Investmentgesellschaft mbH was extended, whereby the Investment Adviser fee is fully paid in AERIF Ordinary Shares for an additional two years until 30 June 2023

· On 19 April 2021, the Company reached a financial close in relation to a two-year revolving credit facility ("RCF"), with a facility limit of EUR 40.0 million

Financial Information⁷	As at 31 Dec 2021	As at 31 Dec 2020
Ordinary Share price (cents)	102.0	106.5
NAV per Ordinary Share (cents)	102.6	99.96
Ordinary Share price (discount)/premium to NAV	(0.6%)	6.5%
Net assets (EUR million)	417.4	316.9

Financial Information⁷	01 Jan 2021 - 31 Dec 2021	01 Jan 2020 - 31 Dec 2020
Dividends per Ordinary Share (cents)⁸	5.0	4.0
Ongoing charges⁹	1.1%	1.4%
NAV total return per Ordinary Share⁶	7.6%	0.7%
Total Shareholder return per Ordinary Share⁶	0.5%	2.0%

¹ All references to cents are in euros, unless stated otherwise

² Dividend paid corresponds to dividend declared in the fourth quarter of 2020 and the first three quarters of 2021, the dividend declared corresponding to the fourth quarter 2021 was paid in March 2022

³ The dividend cover ratio calculation is based on the operational result at special purpose vehicle ("SPV") level adjusted for fund level expenses during the period

⁴ Represents the Company's share of portfolio generating capacity (including any assets under construction, where applicable)

⁵ Proportional share

⁶ Total returns based on Ordinary Share price in euros plus dividends paid for the period. Opening share price at IPO: EUR 1.00; opening NAV at IPO after launch expenses: EUR 0.98 per Ordinary Share

⁷ This disclosure is considered to represent the Company's Alternative Performance Measures ("APM"). Definitions of these APMs and other performance measures used by the Company, together with how these measures can be found in the Annual Report.

⁸ Dividends paid and declared relating to the period

⁹ Calculation based on average NAV over the period and regular recurring annual operating costs of the Company can be found in the Annual Report.

For further details contact:

Media contacts:

Edelman Smithfield

Ged Brumby | 020 3047 2527

Kanayo Agwunobi | 020 3047 2126

Sponsor, Broker and Placing Agent

Numis Securities 020 7260 1000

Tod Davis

David Benda

Vicki Paine

CHAIRMAN'S STATEMENT

On behalf of the Board of Directors, I am pleased to present the 2021 Annual Report and financial statements for the Aquila European Renewables Income Fund.

Introduction

2021 was a frustrating year for AERIF but good progress was made in overcoming some significant challenges. As a result, we are hopefully now close to achieving the goals of the Company for the initial stage of its development, namely to have an efficiently invested balance sheet, with a diversified and resilient portfolio offering strong cash flow cover for a progressively growing dividend.

2021 Performance

During the year, and as widely observed in the European renewable energy industry, wind speeds were below expected levels in the Nordics, whilst irradiation levels were below average in Iberia. This notwithstanding, and the rising price of electricity led to our revenues being 10.2% above budget for the year.

Operationally, the business has over the last two years been very resilient to the impact of the COVID-19 epidemic. The one significant impact which we have suffered has been some delay in The Rock, construction project in northern Norway, as a result of border closures. This had the knock-on effect of taking our construction period into the winter months. Despite these challenges, The Rock finished construction in December 2021, with all 72 wind turbines now erected and energisation currently in progress. Importantly, a number of the turbines are already energised and as a result are producing electricity and revenue.

Having committed additional financing in June to bridge the final construction costs, we were pleased to have this bridge re-paid out of the proceeds of a successful Junior Nordic Green Bond ("Green Bond") and US Private Placement Bond ("USPP") issue for the project, completed in September. This issue also represented a vote of confidence in the resilience of the project to the ongoing legal challenge from the Sami. To date, the project has won all of the legal determinations and judgments in this case, with an expected final hearing scheduled for May 2022.

Subject to this outcome of the Sami court case, the Board is confident that The Rock will prove a strong and resilient asset for the portfolio, with strong and reliable cash generation contributing to our ability to cover and pay a growing dividend over time.

Equity Raise and Balance Sheet

The Board was grateful for the support of shareholders for its EUR 90.0 million capital raise in September. We anticipated an early deployment of this capital in a number of well-advanced investment opportunities but, in the event, the price and risk terms available to us proved unattractive. The resulting inefficiency of our balance sheet has been a drag on returns, but a better option than relaxing our investment discipline.

I am pleased to report that, subsequent to our year end, we signed an investment commitment in relation to Greco, a 100.0 MW Spanish solar PV construction project which will substantially utilize our existing surplus liquidity when completed. This is anticipated to be in late 2022. Greco will also re-balance our portfolio away from its existing over-dependence on relatively volatile wind assets and move it substantially towards a more balanced portfolio across wind and solar technologies, in line with our target portfolio allocation.

We have assembled the initial portfolio on a careful basis, ensuring that we buy into well-located, well-built and well managed assets, with strong PPAs for the merchant element of revenue and we have chosen assets which share
low-to-medium correlation factors, so as to reduce volatility at the portfolio level.

With the benefit of a full contribution from The Rock, Albeniz and Greco, as well as Ourique (our solar PV acquisition in Portugal, completed in June 2021), the Board is confident of the Company's ability to cover and pay a growing dividend. Accordingly, and subject to the portfolio continuing to perform in line with expectations, the Board expects to declare total dividends of not less than 5.25 cents per Ordinary Share in respect of the forthcoming year 2022.

Outlook

Despite uncertainty caused by the invasion of Ukraine, the recent increase in energy prices, along with renewed government policy focus on energy security, has redoubled the attractiveness of renewable energy as an asset class.

Your Board believes that our Investment Adviser, Aquila Capital, is well qualified to help us exploit this opportunity. As a large-scale manager of clean energy portfolios across Europe, managing over 12.0 GW in total, they bring specialist expertise and depth of knowledge to optimise asset development, construction and operation.

As new renewable energy assets increasingly depend on merchant rather than government funded revenue, Aquila Capital's specialist capability in securing and managing high quality corporate PPAs is of particular benefit. Furthermore they are beginning to use their expertise in energy trading to turn the increasing level of short term volatility in energy prices into a future incremental revenue opportunity for us.

The Board is conscious that greater scale would likely allow greater liquidity in the trading of our shares, and thereby a more attractive investment proposition.

Proving the resilience and attractiveness of our initial portfolio is therefore our key initial task for 2022. If we can achieve it, then we certainly will have a very significant opportunity to scale the portfolio, given the extensive pipeline of assets under development by our Investment Adviser, Aquila Capital. Our ambition is to use this growth opportunity to get into a virtuous circle of both growing capital value and increasing dividend payments for you, our investors.

Ian Nolan, Chairman
28 April 2022

INVESTMENT ADVISER`S REPORT

Investment Adviser Background

The Company's Alternative Investment Fund Manager ("AIFM"), Sanne Fund Management (Guernsey) Limited formerly International Fund Management Limited, has appointed Aquila Capital as its Investment Adviser in respect of the Company. Aquila Capital's key responsibilities are to originate, analyse and assess suitable renewable energy infrastructure investments, and advise the AIFM accordingly. Additionally, Aquila Capital performs asset management services in relation to the operational assets in the portfolio or, to the extent asset management is delegated to third parties, oversees and monitors such asset management.

Aquila Capital manages EUR 13.9 billion on behalf of institutional investors worldwide, making it one of the largest clean energy portfolios in Europe. As at 31 December 2021, Aquila Capital managed wind energy, solar PV, hydropower and battery storage assets with a combined capacity of more than 12.0 GW. Additionally, 1.8 million square metres of sustainable real estate and green logistics projects have been completed or are under development. Aquila Capital also invests in energy efficiency, carbon forestry and data centres.

The company's dedicated, expert investment teams draw on their sector networks and experience to screen, develop, finance, manage and operate investments along the entire value chain. As this business model requires local management teams, Aquila Capital is represented via 16 investment offices in 15 countries.

AERIF typically acquires its investments from Aquila Capital's interim vehicles. The Investment Adviser has identified a significant pipeline opportunity (over 8 GW capacity), composed of wind energy, solar PV and battery storage investments, spanning across Europe, with a special focus on Southern Europe (Iberia, Italy and Greece) and opportunities ranging from early development to those already in construction. These investments benefit from the local expertise of Aquila Capital's teams in each country. Since 2019 Aquila Capital has been building a robust pipeline of battery projects and successfully entered the storage market with the first transactions successfully closed during the year 2021.

Additionally, the in-house Markets Management Group team that is comprised of 15 experts that focus on PPA sourcing & structuring, market analysis, trading & origination and FX & interest rates, allows AERIF to maintain a proactive PPA strategy combined with operational excellence to further optimise assets and manage risk.

¹⁰ Map is shown for illustrative purposes only. Exact locations of offices and assets might deviate. Points indicate one or more assets and are not indicative of size. Data as at 31 December 2021. ESG data based on lifetime of the current portfolio

¹¹ Includes all asset acquisitions and sell-offs

¹² Methodology changes have been made from 2021 in order appreciate the development of the energy grid mix of the target regions as well as the effect of CO₂eq-emissions coming from the clean energy project itself.

MANAGEMENT

Whilst the entire Aquila Group has over 600 employees worldwide, the Company benefits from a core team that is dedicated to the management and ongoing performance of the Company.

Christine Brockwell

Head Partnerships and Portfolio Advisory

Energy & Infrastructure EMEA

Lars Meisinger

Head Client Advisory International and

Corporate Development

Michael Anderson

Senior Manager Partnerships and Portfolio Advisory

Energy & Infrastructure EMEA

Nicole Zimmerman

Manager Partnerships and Portfolio Advisory

Energy & Infrastructure EMEA

Daniel Metzger

Associate Partnerships and Portfolio Advisory

Energy & Infrastructure EMEA

Diego Escobar

Associate Partnerships and Portfolio Advisory

Energy & Infrastructure EMEA

Pascal Hermann

Analyst Partnerships and Portfolio Advisory

Energy & Infrastructure EMEA

INVESTMENT PORTFOLIO

AS AT 31 DECEMBER 2021

	1. Tesla	2. Sagres
Country	Norway	Portugal
Capacity¹³	150.0 MW	102.7 MW
Status	Operational	Operational
COD	2013-2018	1951-2006
Asset life from COD	25y	n.a.¹⁶
Equipment Manufacturer	N100, N90, N117 (Nordex)	Various
Energy offtaker¹⁴	PPA with utility / Spot	FiT / Spot
Ownership in asset	25.9%¹⁷	18.0%¹⁷
Leverage¹⁵	23.8%	42.2%
Acquisition date	Jul 2019	Jul 2019
Offtaker Counterparty	Statkraft	EDP / Renta
	3. Holmen II	4. Olhava
Country	Denmark	Finland
Capacity¹³	18.0 MW	34.6 MW
Status	Operational	Operational
COD	2018	2013-2015
Asset life from COD	25y	27.5y
Equipment Manufacturer	V126-3.6 (Vestas)	V112-3.0, V126-3.3 (Vestas)
Energy offtaker¹⁴	FiP / Spot	FiT / Spot
Ownership in asset	100.0%	100.0%
Leverage¹⁵	38.4%	46.3%
Acquisition date	Jul 2019	Sep 2019
Offtaker Counterparty	Energie.dk	Finnish Energy

	5. Svindbaek I + II	6. The Rock
Country	Denmark	Norway
Capacity¹³	32.0 MW	400.0 MW
Status	Operational	Under construction
COD	2018	2022
Asset life from COD	25y	30y
Equipment Manufacturer	SWT-3.2-101 (Siemens)	N149/5.X (Nordex)
Energy offtaker¹⁴	FiP / Spot	PPA / Spot
Ownership in asset	99.9%	13.7%¹⁷
Leverage¹⁵	17.2%	48.9%
Acquisition date	Dec 2019, Mar 2020	June 2020
Offtaker Counterparty	Energie.dk	Alcoa Norway

	7. Benfica III	8. Albeniz
Country	Portugal	Spain
Capacity¹³	19.1 MW	50.0 MW
Status	Operational	Under construction
COD	2017/2020	2022
Asset life from COD	30y	30y
Equipment Manufacturer	AstroNova	Canadian Solar
Energy offtaker¹⁴	PPA / Spot	PPA / Spot
Ownership in asset	100.0%	100.0%
Leverage¹⁵	0.0%	0.0%
Acquisition date	October 2020	December 2020
Offtaker Counterparty	Axpo	Statkraft

	9. Desfina	10. Ourique
Country	Greece	Portugal
Capacity¹³	40.0 MW	62.1 MW
Status	Operational	Operational
COD	2020	2019
Asset life from COD	25y	30y
Equipment Manufacturer	E82-2.35 & E92-2.35 (Enercon)	Suntech
Energy offtaker¹⁴	FiP	CfD
Ownership in asset	89.0%¹⁸	50.0%¹⁷
Leverage¹⁵	44.5%¹⁹	0.0%
Acquisition date	December 2020	June 2021
Offtaker Counterparty	DAPEEP	ENI

¹³ Installed capacity at 100% ownership

¹⁴ PPA = power purchase agreement; FiT = feed-in tariff; FiP = feed-in premium; CfD = contract for differences

¹⁵ Leverage drawn (AERIF share) as a percentage of investment fair value as at 31 December 2021

¹⁶ 21 individual assets; approximately 11.4 years remaining asset life when calculated using net full load years

¹⁷ Majority of remaining shares are held by entities managed and/or advised by Aquila Capital

¹⁸ Represents voting interest. Economic interest is approximately 94%

¹⁹ Calculation based on voting interest

INVESTMENTS 2021

During the year, the Company successfully completed the following investment activities.

The Rock:

In April 2021, the AERIF Board approved a further commitment of EUR 35.6 million to provide bridge debt financing for The Rock (AERIF owns a 13.7% stake in the project) given conditions in place which prevented the drawdown of existing debt facilities.

Ourique:

The Company acquired 50.0% of the Portuguese solar PV asset Ourique during June 2021, an investment located in Alentejo, Portugal. It is a 62.1 MW solar farm which has been in operation since December 2019. It benefits from having 100.0% of its production covered by a contract for differences ("CfD") until March 2026. The remaining 50.0% is owned by an investment fund managed by Aquila Capital. The project is expected to avoid 8,271 tonnes of CO₂eq emissions per annum, and an estimated 206,787 tonnes over its lifetime (on a 100% interest basis).

INVESTMENTS 2022

Greco

Country	Spain
Capacity¹³	100.0 MW
Status	Construction
COD	2022
Asset life from COD	30y
Equipment Manufacturer	Jinko
Energy offtaker	TBD
Ownership in asset	100.0%
Leverage	0.0%
Acquisition date	March 2022
Offtaker Counterparty	TBD

On 29 March 2022 the Company announced the acquisition of 100% interest in Greco, a 100.0 MWp solar PV portfolio. The Greco portfolio consists of two under construction assets located in Andalucía, south of Spain, which benefit from attractive solar irradiation yields. Construction is currently underway with fencing and earthworks activities, whilst procurement of all major equipment is now complete (including solar PV modules, trackers and inverters). Completion is contingent upon the Project receiving all of the requisite licenses and authorisations from local authorities (incl. the grid operator) and is expected by late 2022. The Project is expected to provide 184 GWh of renewable electricity annually over its lifetime, equivalent to approximately 58 kt of CO₂eq avoidance per annum.

¹³ Installed capacity at 100% ownership

PORTFOLIO CONSTRUCTION

AS AT 31 DECEMBER 2021

Capital Deployment Profile since IPO

Since its IPO in June 2019, the Company has raised EUR 411.9 million and has deployed or committed EUR 290.4 million as at 31 December 2021. During 2021, the Company further expended its Iberian solar PV footprint by acquiring a 50.0% interest in Ourique, worth EUR 28.0 million²⁰. Additionally, it deployed further capital at its two construction assets, The Rock and Albeniz, in the amounts EUR 27.3 million²¹ and EUR 25.5 million respectively. As at 31 December 2021, the Company's only remaining project commitment is at Albeniz, for approximately EUR 6.1 million, which is expected to be drawn later in 2022. Following completion of construction of The Rock in 2021, the Company does not anticipate any further equity funding requirements.

As at 31 December 2021, the Company and its subsidiary Tesseract Holdings Limited ("HoldCo") had an available cash balance of EUR 102.2 million (excluding surplus cash at the asset level) in addition to the RCF which was undrawn as at 31 December 2021.

The Company together with its Investment Adviser has identified an attractive pipeline, which should benefit the portfolio by further diversifying the technological and geographical exposure. In addition to the recently announced acquisition of Greco (100 MW), the Investment Adviser is also progressing two near-term transaction opportunities in wind and solar PV with a total production capacity of approximately 100 MW (100% interest). These investments are located in Southern Europe and Nordics, weighted towards operational investments, further supporting the dividend cover for 2022. The Company and its Investment Adviser will remain active in the market for additional opportunities that fulfil the investment policy of AERIF.

Current Portfolio Allocation²²

²⁰ Invested capital including a retained part of the acquisition price amounting to EUR 1.5 million

²¹ Capital deployment taking into account bridge financing (EUR 19.0 million) that was repaid in Q3 2021 and thus is not considered in the invested capital amount as at 31 December 2021

²² Allocation is based on asset fair value (excluding cash and any other fund level items), unless stated otherwise

Asset Status²³

During 2021, the portfolio's exposure to wind technology was reduced to 66.0% (2020: 78.5%), while its solar PV exposure was increased significantly to 29.0% (2020: 14.9%). Hydropower continued to account for the smallest share of the portfolio by technology at 5.0% (2020: 6.6%). The Company continued to reduce its exposure to the Nordics to to 53.1% (2020: 61.9%) while its Southern Europe exposure was increased to 46.9% (2020: 38.1%). Over the long-term, the goal is to achieve an asset allocation of 15.0%-25.0% hydropower, 30.0%-50.0% solar PV and 30.0%-50.0% wind.

Following further capital deployment in The Rock and Albeniz, AERIF´s construction exposure increased to 28.7% (31 December 2020: 21.7%), both construction interests are expected to achieve commissioning by the second quarter of 2022.

With the impending completion of both projects, the Company will continue to explore further construction opportunities which meet the Company's investment criteria.

As at 31 December 2021, 87.1% of the Company's investments were in countries rated at least 'BBB' by Standard and Poor's. The Company's largest country exposures are to Denmark and Norway (both over 20.0% based on fair value) and both of these countries possess the highest possible rating of 'AAA'. The portfolio benefits from little concentration risk, with the portfolio's largest single asset exposure as at 31 December 2021 was to Albeniz (14.5% based on fair value), a solar PV plant located in Spain.

Portfolio allocation continues to follow the Company's defined investment parameters at the time of its IPO, which specify diversification by technology and geography in order to minimise risks.

The strategy of maintaining a high degree of contracted revenues remains unchanged. Revenues can be hedged via fixed price PPAs or government regulated tariffs, comprising feed-in tariffs ("FiT") or feed-in premiums ("FiP"). In the Nordic region and Greece (Olhava, Holmen II, Svindbaek I and II and Desfina) FiPs offer a premium above the spot price. FiTs offer fixed prices via tariffs or subsidies (Tesla, The Rock, Sagres, Benfica III, Albeniz, and Ourique).

The Company has great visibility with regard to future cash flows with over EUR 247.4 million²⁵ currently contracted on a present value as at 31 December 2021, representing more than 12 times its current annual dividend. Approximately 68.5% of the present value of the revenues produced by the Company's investments has been contracted over the following five years²⁶. Approximately 74.0% of revenues are contracted for 2022. The portfolio's contracted revenues have a weighted average remaining life of 8.2 years (2020: 9.5 years) based on production hedged.

The Company aims to contract its revenues with counterparties that have attractive risk profiles, represented by a combination of investment grade corporates (PPAs) and highly rated sovereign entities (government regulated tariffs). The contracted position reflected in the graphs shown here represents a snapshot of the existing PPAs and government regulated tariffs as at 31 December 2021²⁷ and does not assume any replacement PPA or other forms of hedging after the expiry of these contracts. In accordance with the Company's investment strategy, AERIF intends to renew and implement replacement PPAs (or other forms of hedging as required) before any existing contracts expire, in order to maintain a high degree of contracted revenues.

²³ percentages refer to the portfolio fair value

²⁴ Asset revenues are discounted by the weighted average of all discount rates used for the asset valuations as at 31 December 2021

²⁵ Total revenue of fixed PPA and Government regulated tariffs discounted by the weighted average of the discount rates as at 31 December 2021

²⁶ Calculation based on the present value of revenues as at 31 December 2021 and the Company's portfolio discount rate. Guarantees of Origin ("GoO") contracts are not included in these calculations

²⁷ With the exception of Olhava, where a PPA replacement has been assumed, in accordance with the conditions of existing debt financing

During the year under review, the Company, together with its Investment Adviser secured a number of attractive PPAs. During the first and second quarters of 2021, two short term PPAs were secured for Sagres. These hedges cover approximately 10.0% of the total production over three months, at a price on average 30.0% higher than the then current contracted revenue. Additionally, for Holmen II and Svindbaek the Asset Management team together with the Markets Management Group secured short-term hedges with tenors of one quarter throughout the 2021 year for 50.0% and 25.0% of the production respectively. During December 2021, the Investment Adviser secured two additional long-term PPAs, the first being for Benfica III, which hedged an additional 33.0% of production approximately (previous production level hedged: 52.0%) at attractive prices some 93.0% to 122.0% above those of then existing PPAs. Secondly, at the project Albeniz, a PPA for an additional 20.0% of P50 production over five years was secured (previous production level hedged: 60.0%), these two new hedges provide the Fund with an attractive return and stable visibility of future cash flows.

New hedges comparison against market prices (Iberia)²⁸

²⁸ Blended Average Analyst price curve and Iberia forward price curves as at 31 December 2021

FINANCIAL PERFORMANCE

Production by Technology (AERIF share)

		Electricity Production (GWh)
Technology	Region	2021²⁹	2020	Variance
Wind	Denmark, Finland, Norway, Greece	395.0	382.6	3.2%
Hydropower	Portugal	48.4	62.0	(22.0)%
Solar	Portugal	79.0	15.3	417.4%
Total		522.3	459.9	13.6%

	Load Factors
Technology	2021	2020
Wind	13.0%	34.4%
Hydropower	24.1%	38.2%
Solar	18.1%	16.8%
Total	16.4%	34.9%

Technical availability³⁰

	2021	2020
Wind	98.6%	98.0%
Hydro	98.6%	99.9%
Solar PV	94.4%	98.1%
Total	98.2%	98.2%

Electricity production in 2021 amounted to 522.3 GWh, a 13.6% increase compared to the previous year (2020: 459.9 GWh). The portfolio's solar PV production increased by 417.4% largely driven by the addition of Ourique, which was acquired in June 2021 with an economic transfer date of 1 January 2021, and the first full year contribution from Benfica III which was acquired in October 2020. These assets produced 49.5 GWh and 29.5 GWh respectively. Particularly dry weather in Portugal during the second and fourth quarters of the year led to production at Sagres (Hydro) being 37.9% and 45.3% below budget respectively for these quarters which, in turn, reduced the total electricity output of the hydropower part in the portfolio for 2021. However, owing to a significant increase in electricity prices during the year and the retroactive revenue received for Desfina corresponding to the 2020 year, revenues ended the year 10.2% above budget.

²⁹ 2021 solar production reflects Ourique whose production is shown as at the economic transfer date 1 January 2021

³⁰ Average technical availability based on weighted installed capacity (AERIF share)

The portfolio's production total of 522.3 GWh in 2021 was 8.2% below budget, while technical availability has remained strong in all asset classes, at 98.2%. Lower than expected wind levels in the Nordic region largely accounted for the production ending below budget. Production levels in Norway and Denmark were 14.8% and 16.5% below budget respectively³¹. Finland performed as expected, with actual production in line with budget, mainly driven by a strong second quarter during which production was 10.7% above budget.

In Greece, higher than expected wind levels led to production surpassing budget by 3.6%, mainly driven by a strong fourth quarter where production exceeded budget by 33.4%. Irradiation levels in Portugal were lower than expected, with production on average for the solar PV investments in the country 5.0% below budget. The new acquisition for the year, Ourique, underperformed in in terms of production by 7.1% compared to budget. Lastly, at Sagres, a dry fourth quarter, including the third driest November in the past 90 years, led to production being 45.3% below budget for the quarter and 13.9% below budget for the year. Overall, the portfolio produced 13.6% more electricity compared to 2020, which can be attributed to the acquisition of Ourique, as well as first full-year production at Desfina and Benfica III.

Despite lower than expected production levels, revenues ended 10.2% above budget, driven by strong electricity prices and the revenue received from the FiP of Desfina pending to be received from 2020. An increase in demand created by heatwaves across Europe and colder winter weather, a near tripling of CO₂ prices and low European gas storage reserves helped to drive prices higher.

Dividend Cover (AERIF Share, Unaudited)

Dividend cover is calculated on the basis of the aggregated majority audited financial statements of the Company's special purpose vehicles ("SPVs") and structure companies, adjusted for AERIF's share. The dividend cover calculation is not audited; however the calculation is reviewed by the Company's auditors, PricewaterhouseCoopers.

An additional calculation methodology for dividend cover, based on the revenue accounts of the Company can be found in in the Annual Report.

	FY21³²	FY20
Production (GWh)	522.3	459.9
Average Revenue per MWh (EUR)	80.8	54.6
Asset income (EUR m)	42.2	25.1
Asset operating costs (EUR m)	(7.9)	(6.6)
Interest and tax (EUR m)	(4.5)	(2.1)
Asset underlying earnings (EUR m)	29.9	16.4
Asset debt amortisation (EUR m)	(12.2)	(8.2)
Company and HoldCo expenses, other (EUR m)³³	1.9	(0.9)
Total underlying earnings (EUR m)	19.6	7.3
Dividends paid (EUR m)	17.0	6.5
Dividend cover (x)	1.1	1.1

The Company was able to maintain adequate dividend coverage for the year, reinforcing AERIF's investment strategy which is focused on diversification and a high degree of contracted revenues.

³¹ Measure calculated by the sum of the actual production for the 2021 year divided by the budget of the production expected during 2021 for the investments located in Norway and Denmark

³² Calculation is based on AERIFs share of asset revenue and operating costs, sourced from asset level, majority audited accounts. Non-euro currencies converted to EUR as at 31 December 2021. Desfina is reflected in this calculation with the economic share (100% in 2021)

³³ Includes income accrued by AERIF in relation to shareholder loans provided to construction assets. Expenses reflect recurring ordinary costs and expenses at AERIF and HoldCo level; legal fees, investment expenses and Investment Adviser fee not included.

Operational Highlights

The Investment Adviser has an in-house Asset Management team which diligently monitors the operations and performance of the assets. This team is also responsible for optimising earnings and enhancing the value of the existing asset portfolio. During the year, the assets benefitted from a number of important initiatives as a result of proactive asset management:

· Sagres: Electricity production was 13.9% below budget during 2021, driven by particularly dry second and fourth quarters. November 2021 was the third driest November in the last 90 years in Portugal. However, given an increase in spot electricity prices, revenues remained in-line compared to budget. During the first and second quarters of the year, Sagres entered into two short-term PPAs (tenors of three months) hedging 5.0 MWh and 6.0 MWh respectively and securing attractive prices on average 30.0% above budgeted prices for those periods.

· Tesla: Lower than expected wind levels during the first three quarters of the year led to production being 14.8% below budget. However, there was a strong recovery in the fourth quarter, with production surpassing expectations by 13.1%. Revenues finished the year 10.0% above budget thanks to higher electricity prices in the Nordics. Additionally, the project completed two new Guarantees of Origin ("GoO") purchase agreements for the 2023 and 2024 years respectively.

· Holmen II: The first quarter of 2021 started with poor wind conditions and ended with production 25.7% below budget. Over the rest of the year, production improved. Production for the year was 11.7% below budget. Due to high electricity spot prices, no premium from the Danish Energy Authority was received after August 2021. During the first and second quarters of the year, production was hedged for lower electricity prices, which led to revenues being 32.0% below budget in the fourth quarter. In order to maximise revenues, during the fourth quarter the 'Regulerkraft' bid price was increased to move full load hours with no payment of premium in the future with periods of lower spot prices. Revenues ended the year 28.7% below budget.

· Olhava: Wind production level in Finland was in line with expectations, finishing the year 0.5% above budget with revenues ending 2.2% above budget given the higher than expected electricity prices. For 17 days in December 2021 one turbine was down, due to cold weather conditions, gear box vibrations as well as lack of manpower due to the holiday season, repairs have been delayed until mid of January 2022. This resulted in an expected loss of approximately EUR 129.0 thousand. If the technical availability is below the operations and management ("O&M") agreement, the project will be compensated by the O&M provider.

· Svindbaek: Production ended the year 21.1% below budget, given the lower wind levels experienced across Denmark and Norway in the first three quarters of the year. Furthermore, as spot prices rose significantly (above EUR 68.0 MWh) no premium from the Danish Energy Authority was received since August 2021. During the first and second quarter of the year, production was hedged for lower electricity prices, which led to revenues being 24.6% below budget during the third and fourth quarter. Appeals by local residents in relation to the welfare of bats were dropped under the condition that turbine closures took place in the summer months from July to October 2021 during the hours of dawn and dusk. In March 2022 the vendor paid EUR 1.7 million as compensation due to yield differences found between revised P50 yield studies and the original yield assessment, with the latest studies showing a lower yield.

· Benfica III: Production performance was 1.3% below budget. However, the high spot prices experienced in Europe led to the revenue of 2021 to end 12.1% above budget during 2021. During mid-March an interconnection issue was detected at Montes Novos (one of the three assets forming Benfica III) which lasted until the beginning of May 2021, the estimated loss due to this situation is EUR 53.0 thousand, which has been claimed to the insurance company with no decision taken as at 31 December 2021. Additionally, the Investment Adviser has negotiated additional PPAs for Benfica III. The new PPAs have a term of three years starting from 2022, with a pay as-produced structure. The additional PPAs increase Benfica III total P50 production coverage from 52.0% to approximately 85.0%, AERIF was able to secure the new PPAs at very attractive prices, with the new PPA price representing an increase of 93.0% to 122.0% compared to the existing PPAs in place.

· Desfina: Wind levels in Greece were better than expected, with production surpassing budget by 3.6% over the year. Revenue was 51.8% above budget, due to higher than expected electricity prices. In addition, retroactive revenues were paid that were attributable to the FiP from the year 2020. These revenues couldn't be paid in 2020 as they were subject to the operating licence, which was granted in March 2021.

· Ourique: Given lower than expected irradiation levels in Portugal, production in 2021 was 7.1% below budget. However, revenues ended 8.5% above budget due to revenues received from GoO contracts. There were no major downtimes or issues reported during 2021 at the investment. Aquila Capital is currently evaluating the possibility of co-locating a Storage opportunity next to the solar PV. Furthermore, the asset management team implemented Health, Safety and Environmental ("HSE") contracts to guarantee that all external providers comply with all legal and environmental requirements.

Construction Projects

· The Rock : All wind turbines were installed by the end of November 2021, 39 turbines completed first feed-in and 10 turbines completed the final commissioning by the end of December 2021. The Rock has received 50.0% of the revenues generated from the sale of electricity from these turbines since January 2022 and will continue to do so, plus any additional revenues from other turbines entering operation, until the date of COD. Despite tougher than expected winter weather, the engineering, procurement and construction ("EPC") takeover is expected for the second quarter of 2022. The delay of takeover will very likely result in additional costs and potential claims which remain subject to negotiation amongst the various stakeholders. The project has certain mitigation measures in place to offset some or all of these potential costs via the existing contracts in place (EPC, SPA, TSA, BoP Agreements), as well surplus cash on hand. The EPC has deployed additional snow-vehicles to facilitate transportation at site in order to finalise the commissioning activities.

In Norway, there has been a tendency over recent years for local interest groups to take legal action by way of injunctions against wind turbines under construction, in order to achieve court orders to stop any construction activities. In the case of Øyfjellet Wind AS ("The Rock"), the local reindeer district also adopted this approach and appealed after having lost in the first instance to a competent court for issuance of such injunctive relief. At the end of February 2021, this appeal was also lost by the local reindeer district. The legal counsel of Øyfjellet Wind AS does not expect further appeals to the Norweigan Supreme Court or other courts. The local reindeer district will, however, bring the matter now to an appraisal case that is scheduled to be heard starting in May 2022. A decision is expected mid 2022. Even though the Norwegian Supreme Court ruled in similar appraisal case (however, factually different to The Rock case) of a wind farm located in the same geographical area on 11 October 2021 and therein deemed this wind farm's facility licence and its respective expropriation permit from 2013 invalid, it is expected that this ruling will have no direct consequences for Øyfjellet Wind AS and its own appraisal case, even though both cases concern reindeer husbandry interests. As such, the chances of Øyfjellet Wind AS losing its licence are deemed still to be low.

· Albeniz: Construction works at Albeniz started at the beginning of 2021. As at 31 December 2021, module and low voltage installations, overhead line works, substation works and functional testing had been completed. Equipment connections were ongoing (50.0% completed) and the grid connection process started in January 2022. The COD is expected to take place during the second quarter of 2022, as permits across the industry have experienced delays due to the high number of projects being permitted, therefore, the administration has not been able to fulfil the expected timelines. In order to expedite the processes, the relevant teams of the Investment Adviser work closely with the authorities. Following favourable market pricing dynamics observed in Iberian power markets, the Investment Adviser has negotiated an additional PPA, it has a term of five years, with a baseload structure and increases Albeniz total P50 production hedging from 60.0% to 80.0% (over five years), representing a notable increase compared to the existing PPA in place. The initial PPA has a starting date during May 2022, which is when the Albeniz is expected to start selling electricity, in case of any delay, penalties under the PPA contract could be incurred.

· Other: We are pleased to report that there were no major health or safety incidents during the year.

Gearing

	As at	As at
	31 December	31 December	Variance³⁴
EUR million	2021	2020	(%)
NAV	417.4	316.9	31.7
Debt	144.3	113.0	27.7
GAV	561.8	429.9	30.7
Debt (% of GAV)	25.7	26.3	(60.0) bps
Weighted Average Maturity (years)	13.9	12.8	8.6
Weighted Average Interest Rate Cost (%)³⁵	2.5	2.6	(10.0) bps
RCF interest rate (%)	1.85	n.a.	n.a.

The portfolio's total debt increased to EUR 144.3 million in 2021 (31 December 2020: EUR 113.0 million), mainly driven by the refinancing of a USPP and a Green Bond for The Rock amounting to EUR 235.0 million and EUR 80.0 million on a 100% interest basis (AERIF´s share in The Rock is 13.7%). With the exception of the RCF (which was undrawn as at 31 December 2021, further explained in the next paragraph), all of the Company's debt is at the asset level and comprises of non-recourse project financing. The majority of the Company's debt is denominated in Euro, with the exception of the Company's Danish assets.

The Company reached a contractual close in relation to a two-year revolving credit facility with a facility limit of EUR 40.0 million. The facility also possesses an accordion option which enables the Company to upsize the facility limit to EUR 100.0 million. In addition, it has the option for a tenor extension beyond the existing two-year term, subject to lender consent. The Company first utilised the RCF in August 2021, in order to fund EUR 10.0 million of its commitment under The Rock's Bridge.

The portfolio increased the weighted average maturity of its debt to 13.9 years (2020 weighted average maturity: 12.8 years) largely as a result of the bond refinancing in relation to The Rock.

The Company's prospectus allows it to operate with a maximum gearing level of 50.0% of GAV. Over the year, the Company continued to operate well below this limit. Gearing as a proportion of GAV as at 31 December 2021 was 25.7% (31 December 2020: 26.3%). The decrease in gearing reflected a combination of the recent EUR 90.0 million capital raising, combined with ongoing debt amortisation.

³⁴ Variance calculated on basis points basis for figures shown in percentages

³⁵ Weighted average all in interest rate for euro denominated debt. DKK denominated debt has an average weighted interest rate of 2.7%

Debt Summary as at 31 December 2021

		AERIF	Drawn Debt		Bullet/		Hedged
Project		Share	(EUR million)	Currency	amortising	Maturity	Proportion	Type
Tesla		25.9%	9.8	EUR	Partly amortising	Mar-29	100.0%	Bank Debt
Sagres		18.0%	11.5	EUR	Fully amortising	Dec-28 / Jun-30	70.0%	Bank Debt
Olhava		100.0%	23.5	EUR	Fully amortising	Dec-30 / Sep-31	100.0%	Bank Debt
Holmen II		100.0%	15.2	DKK	Fully amortising	Dec-37	93.2%	Bank Debt
Svindbaek I		100.0%	8.4	DKK	Fully amortising	Dec-37	100.0%	Bank Debt
The Rock	USPP Bond	13.7%	32.2	EUR	Fully amortising	Sep-45	100.0%	Debt Capital Markets
The Rock	Green Bond	13.7%	11.0	EUR	Bullet	Sep-26	100.0%	Debt Capital Markets
Desfina		89.0%	32.7	EUR	Fully amortising	Jun-35	100.0%	Bank Debt
Subtotal			144.3
RCF		100.0%	0	EUR		Apr-23	0.0%	Bank Debt
Total			144.3				96.9%

Valuation

Asset Summary

EUR million	FY21	FY20	Variance (%)
Tesla	31.4	25.4	23.6
Sagres	15.8	15.2	4.1
Holmen II	24.5	21.5	13.6
Olhava	27.3	25.3	7.9
Svindbaek	40.6	37.0	9.7
The Rock³⁶	45.0	32.2	39.6
Benfica III	16.7	16.7	0.2
Albeniz³⁶	46.0	17.4	165.1
Desfina	40.9	37.9	7.9
Ourique	29.5	n.a.	n.a.
Total	317.6	228.5	39.0

³⁶ Includes capital contributions during the year: The Rock EUR 7.7 million (after repayment of the Bridge) and Albeniz EUR 25.5 million

· The Company's NAV as at 31 December 2021 was EUR 417.4 million or 102.6 cents per Ordinary Share. Compared to 31 December 2020 (EUR 316.9 million or 99.96 cents per Ordinary Share) this represents a NAV total return of 7.6% per Ordinary Share (including dividends)

· During the month of September, a capital raising totalling EUR 90.0 million took place with the shares issued at a price of EUR 1.03 cents per Ordinary Share or a premium to NAV of 5.0% to the Company's ex-dividend NAV as at 30 June 2021

· Dividends of EUR 17.0 million (5.0 cents per Ordinary Share) were paid during the year with respect to the fourth quarter of 2020 to the third quarter of 2021

· The movement in the valuation of the investments compared to 31 December 2020 was mainly driven by positive power price curve effects. Besides, the increase in short-term inflation forecasts had a slightly positive impact³⁸. Medium and long-term inflation assumptions remain unchanged

· In addition to the positive effects from power price curves and inflation, the following further events had an impact on the fair values of the assets:

- Sagres: Slightly negative effects due to impairment of receivables against existing power trader who was replaced in Q3 2021

- The Rock: Positive effect due to further decrease of construction risk in line with increase in construction progress

- Albeniz: Positive effect due to further decreased construction risk and negative effect resulting from later than expected COD caused by delay in the permitting process

- Desfina: Positive effects due to higher than expected production experienced during 2021 and the expected refinancing of the existing debt

· During the reporting period, EUR 6.3 million (2020: EUR 7.5 million) in cash have been distributed to the HoldCo in the form of interest and dividends

- The lower amount compared to the previous year results from timing effects related to distributions from the assets Svindbaek and Desfina (see operational highlights).

· Other relates to the settlement of Investment Advisory expenses, share issuance costs and foreign exchange losses

³⁷ Includes share issue costs (EUR 1.6 million), settlement of Investment Advisory fees (EUR 2.5 million) and FX losses (EUR 0.007 million)

³⁸ Short term Consumer Price Index ("CPI") forecast sourced from Bloomberg (2021) for the next five years

Ratings across the renewables sector weakened during the fourth quarter of 2021, leading to a number of funds trading around par or at a small discount. This, coupled together with a general oversupply of equity issuance in the market had a negative impact on the AERI share price in relation to the NAV.

Valuation methodology

The Company owns 100.0% of its subsidiary Tesseract Holdings Limited. The Company meets the definition of an investment entity as described by IFRS 10. As such, the Company's investment in the HoldCo is valued at fair value.

The Company has acquired underlying investments in SPVs through its investment in the HoldCo. The Investment Adviser has carried out fair market valuations of the SPV investments as at 31 December 2021 and the Directors have satisfied themselves as to the methodology, the discount rates and key assumptions applied, and the valuations. All SPV investments are at fair value through profit or loss and are valued using the IFRS 13 framework for fair value measurement. The following economic assumptions were used in the valuation of the SPVs.

Valuation Assumptions

As at 31 December 2021

Discount rates	The discount rate used in the valuations is derived according to internationally recognized methods. Typical components of the discount rate are risk free rates, country-specific and asset-specific risk premia. The latter comprise the risks inherent to the respective asset class as well as specific premia for other risks such as development and construction, such as is the case for The Rock, for example.
Power price	Power prices are based on power price forecasts from leading market analysts. The forecasts are independently sourced from providers with coverage in almost all European markets as well as providers with regional expertise. The approach applied to all asset classes (wind, solar PV and hydropower) remains unchanged with the first two using a blend of two power price curve providers and the third using a blend of three power price curve providers.
Energy yield/load factors	Estimates are based on third party energy yield assessments, which consider historic production data (where applicable) and other relevant factors.
Inflation rates	Long-term inflation is based on the monetary policy of the European Central Bank.
Asset life	In general, an operating life of 25 years for onshore wind and 30 years for solar PV is assumed. In individual cases, a longer operating life is assumed where the contractual arrangement (i.e. O&M agreement with availability guarantee) supports such an assumption. The operating lives of hydropower assets are estimated in accordance with their expected concession terms.
Operating expenses	Operating expenses are primarily based on respective contracts and, where not contracted, on the assessment of a technical adviser.
Taxation rates	Underlying country-specific tax rates are derived from due diligence reports from leading tax consulting firms.
Capital expenditure	Based on the contractual position (e.g. EPC agreement), where applicable

Portfolio Valuation - Key Assumptions

Metric		FY21	FY20
Discount rate	Weighted average	6.5%	6.6%
Long-term inflation	Weighted average	2.0%	2.0%
Remaining asset life³⁹	Wind	23	24
	Hydropower	11	12
	Solar	27	27
Operating life assumption⁴⁰	Wind	26	26
	Hydropower	n.a.	n.a.
	Solar	30	30

There were no significant changes in key valuation assumptions compared to the previous reporting period.

³⁹ Remaining asset life based on net full load years. Does not consider any potential asset life extensions

⁴⁰ Operating life assumption weighted using the fair value of the investments as at 31 December 2021

MARKET COMMENTARY AND OUTLOOK

Market Prices

In 2021, movements in the prices of fuels and CO₂ were key drivers of a bullish trend in power price levels, including in the European markets in which the assets are located. This upward trend was supported by a general post-pandemic recovery in electricity demand across industry and commercial sectors, but also the market´s response to cold winter spells and summer heatwave peaks - both linked to the 'La Niña' global weather phenomenon.

Gas underwent a strong rally during 2021, driven principally by record-low European gas storage reserves, lower than expected imports, as well as a high level of uncertainty around the commissioning of the gas pipeline Nord Stream 2. In addition, CO₂ prices almost tripled, driven mostly by a 'vicious circle' of other commodity price rises, higher demand - due to speculative trading/the attention of new investors - and a generally more pronounced political momentum for decarbonisation. The last few months of 2021 were characterised by a 'perfect storm' of the above factors, leading to extreme power price levels across most European geographies.

The aforementioned factors led to a general bullish trend in power price levels across European geographies - including Spain and Greece - where thermal power units continue to set the price. Thus, power price levels reflected the underlying fuel and EUA costs borne by these units. This impact was much less pronounced in the Nordics, leading to relatively lower prices, given the dominance of hydroelectric power in the generation mix. Nevertheless, there was convergence between Nordic prices and generally more bullish Continental European markets in 2021 due to a shrinking hydrological balance and the impact of the NordLink and North Sea interconnection links with Germany and the UK respectively.

While energy crises such as these are rare and unpredictable, the resilient performance of the portfolio during the year demonstrated the efficacy of the Company's investment philosophy, which is focused on diversification by technology and geography, supported by a high degree of contracted revenues.

EU Green Energy demand

A significant increase in green energy is expected within the EU in the short term, with the focus increasingly shifting to sector coupling. Additionally, private companies are increasingly pursuing their own emissions targets (e.g., RE100), therefore, directly increasing the demand for green energy. Decarbonisation demands more electricity from a number of different sectors, such as transportation, building and industry, and it requires significant additional amounts of energy overall. For example, electrification in Northern Europe is expected to lead to an increase in electricity demand of about 65.0% by 2050⁴². At the heart of this development is the emission-free generation of renewable energy. According to forecasts by Bloomberg, average annual additions of renewable energy sources within the EU need to almost double in the next four years (2021-2024) compared to 2017-2020.

Furthermore, the phasing out of coal-fired power plants is gaining momentum, due to the economic superiority of renewable electricity production. As an example, Spain benefits from a high availability of natural resources (particularly solar PV) which has led to a reduction in costs in recent years. Combined with Spain's rising climate ambitions, the competitiveness of solar PV in the energy system has strengthened considerably over recent years. Thus, we have passed not only turning point one - renewable energies as the cheapest source of new generation capacity - but also of turning point two. The total costs of a solar PV plant are already below the operating costs of existing coal or gas-fired power plants⁴³.

⁴² Source: Bloomberg 2021

⁴³ Source: Invesco: "Concerned about inflation? These real assets could help" (2021); MAN Institute: "How should investors reposition their portfolios in the face of heightened inflation risk?" (2021)

In order to fulfil rising electricity demand, as well as the EU's goal of increasing its share of renewable electricity generation to 65.0% by 2030, a significant investment will be required. According to a study by Bloomberg New Energy Finance, the goal of increasing the share of renewable electricity generation to 65.0% alone requires investments in renewable generation capacities amounting to EUR 350.0 billion per year until 2030. Such an estimate suggests funding from the Next Generation EU programme covers only one year's worth of investment needs.

In order to ramp up private investment in the future, stable and predictable cash flow generation is critical. However, the prices of renewable energies are dependent on weather conditions, and this tends to create high volatility. In response to this, the EU has announced a further 15.0 GW tender for renewable energies, which should lead to more stable and reliable conditions in the future.

Additionally, regional integration of the European electricity system mitigates the need for flexibility and is at the centre of the EU's plans. Different weather patterns in Europe lead to geographical balancing effects. Wind and solar outputs are generally much less volatile on an aggregated level and extreme high and low values disappear. Cross-border exchange minimises surplus generation from renewable energy and significantly reduces the risk of curtailments. With market integration, cross-border generation peaks allow for exports to regions where loads are not being met. In contrast, a hypothetical national autarky case has storage or curtailment requirements that are ten times higher.

Power Purchase Agreements

The continuing decline in levelized costs of energy ("LCOE") for wind and solar PV is increasingly being felt in markets. Resulting high competitiveness is reflected in the decreasing need for subsidies in Europe, although these are still relevant to investors. The graph below illustrates this development. While subsidies paved the way for renewable energies, auctions are increasingly being recorded that completely dispense with state support. In particular, solar PV systems in combination with ideal weather conditions in Southern Europe show LCOEs significantly below the prevailing electricity price level.

Private markets, on the other hand, are gaining in importance. PPAs have shown enormous growth across both 2020 and 2021, resulting in over 7.0 GW worth of PPAs per annum. This is nearly triple the 2.5 GW seen in 2019. The volume of PPA deals in 2021 stayed roughly aligned with 2020; however, wind contracts (both onshore and offshore) took the majority share across various geographies, leaving solar PV deals behind.

The adaptation of private markets in this context is not primarily due to a change in environmental awareness, but rather provides obvious proof of the economic advantages of renewable energy. Investors and operators of renewable generation sources benefit from a reduction in regulatory risks and stable cash flows in the long term. In addition, there are positive influences on bankability and, thus, on the cost of debt capital. This, in turn, supports the further expansion of renewable energies.

⁴⁵ Source: BNEF (2021)

Inflation

Investments in renewable energies represent an effective protection against inflation. In previous periods of high inflation, investments in real assets within the energy sector as well as the commodities sector demonstrated a positive correlation with the inflation rate⁴⁷. Renewable energies benefit from rising electricity prices with no burden on the cost side in relation to the use of resources. The fact that electricity markets are marginal and power producers must send their offers at their recognised marginal cost as well as growth rates of energy inflation exceeding the consumer price index have a significant positive effect on the earnings potential of renewable electricity generation plants.

⁴⁷ Source: Invesco: "Concerned about inflation? These real assets could help" (2021); MAN Institute: "How should investors reposition their portfolios in the face of height-ened inflation risk?" (2021)

In the EU over the last 20 years electricity prices have risen significantly more than the CPI with the electricity prices index having increased on average by 3.9% and inflation by 1.9%.

Additionally, PPAs represent a protection against fluctuations in electricity prices for both producers and suppliers. To counterbalance high inflation effects, indexed PPAs would be the best solution. However, in the market the majority of PPAs are not indexed and do not benefit directly from rising inflation in terms of electricity prices: However, merchant revenues are directly enhanced, and as shown in the previous paragraph the electricity prices index have outperformed the CPI in the EU; therefore, an appropriate balance between merchant and hedge prices provides the portfolio with a natural hedge against inflation, while maintaining a stable payment profile.

Conclusion

The Company targets investment in a mixture of wind, solar PV and hydropower technologies with the ability to invest up to 20.0% of GAV in storage. Additionally, the Company expects electricity prices to remain competitive throughout 2022, therefore it will remain active in the market to secure attractive hedges for its investments with the help of the Investment Adviser and its in-house Markets Management Group.

The Investment Adviser has identified an attractive pipeline for AERIF to invest during the 2022 period. In addition to the recently announced acquisition of Greco (100 MWp), the Investment Adviser is also progressing two near-term transaction opportunities in wind and solar PV with a total production capacity of approximately 100 MW (100% interest). Aquila Capital as at 31 December 2021 has a significant pipeline in development and under construction investments, spread across various European countries, with the majority of it allocated to Southern Europe (Iberia, Greece and Italy), countries in which the Investment Adviser has continued to grow its local presence.

Russia's invasion of Ukraine brings uncertainty to the commodities market and how price levels of modules and other hardware will be impacted directly or indirectly. The Company does not have any direct exposure to Ukraine or Russia, there are also no direct business relations with counterparties from these countries.

This invasion has led to higher volatility in electricity prices, driven by the increased energy and non-energy commodity related costs, inflation is expected to continue to rise. In this regard, energy and power markets will receive higher levels of scrutiny and future interventions in markets. Energy independence will become an important driver and local support for renewables and non-fossil fuel energy sources will most likely increase.

Political momentum with the objective of turning the European Union carbon neutral by 2050 and continuing decarbonization across different industries to reach their own targets places the Company in a unique position to benefit from the energy transition, given its European focus and established portfolio of assets, which contribute towards the green economy. Going forward, the Investment Adviser will continue to work with the Board to target appropriate investment opportunities.

Aquila Capital Investmentgesellschaft mbH
28 April 2022

ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")

Environmental

In 2015, the UN launched 17 Sustainable Development Goals, with the purpose of putting an end to poverty, improving health and education, reducing inequality, spurring economic growth and tackling climate change around the world. These goals are set to stimulate action for people, the planet and prosperity, and aim to transform the world by 2030.

UN Sustainability Development Goals

In 2018, the EU agreed to a climate and energy framework and set ambitious goals for 2030. The aim is to have a clean, affordable and reliable energy system in Europe, targeting:

40.0%
At least a 40.0% decline below 1990 levels in greenhouse gas emissions

32.0%
A 32.0% renewables share of the energy system

32.5%
A 32.5% improvement in energy efficiency

While the world has now faced two years of global pandemic, the pressure to replace fossil fuels with renewable energy has not abated. According to the International Renewable Energy Agency the share of renewable energy electricity generation has to increase to 65% by 2030. This means that additional 8.000 GW of renewable capacity is needed in this decade⁴⁹. In parallel, the EU's efforts to drive the energy transition through important regulatory frameworks such as the Sustainable Finance Disclosure Regulation ("SFDR") or the EU Taxonomy pose challenges for the financial industry. Aquila Capital has always taken care to ensure that the construction and operation of renewable energy projects does not come at the expense of the environment and the community. Therefore, we are convinced that we are well positioned to benefit from the developments. We are actively contributing to the energy transition and enable investors to participate through reducing complexity.

Taoufik Saoudi
Director of ESG at Aquila Capital

⁴⁹ IRENA (2022), World Energy Transitions Outlook 2022: 1.5°C Pathway, International Renewable Energy Agency, Abu Dhabi

UN Sustainable Development Goals

The Company aims to invest in a diversified portfolio of renewable energy infrastructure investments, such as hydropower plants, onshore wind and solar parks, across continental Europe and Ireland. With the objective of providing investors with a truly diversified portfolio of renewable assets, AERIF is able to deliver on its investment objectives as well as contribute towards the green economy. AERIF contributes to the following three UN Sustainable Development Goals:

AERIF's Contribution to the UN Sustainable Development Goals

Ensure access to affordable, reliable, sustainable and modern energy for all.

· AERIF's portfolio produces renewable energy which contributes towards Europe's electricity mix

· Renewable energy is a cost-effective source of energy compared to other options

· AERIF's investments in renewable assets help to support and encourage further investment in the industry

Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation.

· AERIF targets renewable investments which are supported by high quality components and infrastructure in order to optimise the energy yield and subsequent return to investors

· AERIF's investments help to support the construction of shared infrastructure (e.g. substations) which enables the further expansion of renewable energy sources

· AERIF's Investment Adviser, Aquila Capital, is responsible for monitoring and optimising the Company's day-to-day asset performance. This process also involves actively exploring how new technologies and other forms of innovation can be utilised to enhance asset performance and sustainability (energy yield, O&M, asset life)

Take urgent action to combat climate change and its impacts.

· The Company's 332.3 MW portfolio has the potential to power approximately 223.3⁵⁰ thousand households and offset approximately 236.5⁵⁰ thousand tonnes of CO₂ emissions. AERIF has ambitious goals to expand its portfolio, which will be accretive to further CO₂ reduction over time

· As a signatory to the UN Principles for Responsible Investments (UN PRI), the Company's Investment Adviser has integrated ESG criteria all along its investment process for real assets, which includes considerations of climate change

⁵⁰ Expected contribution for the year 2022, not including Greco nor any potential new investments

Methodology changes have been made from 2021 in order appreciate the development of the energy grid mix of the target regions as well as the effect of CO₂eq-emissions coming from the clean energy project itself.

The calculation of the avoided CO₂eq emissions is based on the assumption that electricity generated by the portfolio fed into the electricity mix displaces the same amount of current grid mix electricity generated (e.g., coal, gas, nuclear etc.) - and therefore also displaces the corresponding CO₂eq emissions of the displaced mix. The regional electricity grid mix composition (in %) for the lifetime is based on the Integrated Model to Assess the Global Environment, the shared socioeconomic pathway SPP2 and multiplied with the respective technology-based emission factor (in gCO₂eq/KWh) from renowned sources (IEA, EcoInvent and the German Environmental agency) as well as with the yearly production actuals and/or forecast (in KWh) fed into the grid. From this, the assets' lifetime CO₂eq-emissions are subtracted, considering that a renewable energy asset generates CO₂eq emissions over its whole life cycle (e.g. raw material sourcing, construction, operations, decommissioning) resulting in the final value displayed.

The calculation of average households supplied is based on 2018 Eurostat data ("https://ec.europa.eu/eurostat/ databrowser/view/t2020_rd300/default/table?lang=en" Statistics | Eurostat (europa.eu)). The average EU-27 household electricity consumption (in MWh/capital) is multiplied by the average EU-27 household size resulting in the average consumption of electricity of the average household size (in MWh/household). The electricity generated by the portfolio is divided by the EU-27 average consumption of electricity and household size (in MWh/household) resulting in the final value displayed.

Social

The assets are typically located in remote regions of Europe, where the resource factor is high. In some cases, the assets are closely linked to a local community within proximity. Active engagement with local communities is an integral part of the investment philosophy. The assets continue to support communities through the contracting of local service providers, payment of local taxes, as well as making lease payments for the land the assets utilise.

Engagement with the local community in Montes Novos

More than 30 sheep are present at the solar PV station in Montes Novos. Grazing sheep have been supplied by local shepherds to prevent grass and other plants from damaging the solar panels. This initiative demonstrates the opportunity for a harmonious co-existence of agriculture and photovoltaics (agrivoltaics) on the same land.

This method causes less damage to the solar panels and entails lower operating costs. In Montes Novos, the solar plants are located in zones where the vegetation grows continuously and previously had to be managed by O&M technicians. This initiative also provides more grazing for their flock. Additionally, this method avoids the use of pesticides that contaminate the soil, air and water.

The sheep help to minimise the risk of potential hazards caused by the continuous growth of vegetation, such as electrical faults leading to a fire. Furthermore, they create a pleasant environment for the O&M teams. The permanent presence of supervision personnel prevents non-electrical incidents.

The goal is to be a responsible investor, ensuring that environmental, social and governance criteria are incorporated into the day-to-day investment decisions and that we generate a positive impact on society. This is reflected across the investment philosophy and approach, and these values are shared by the Investment Adviser, Aquila Capital, which is dedicated to the green energy transition. Aquila Capital is committed to environmental protection through various sponsorships and partnerships, which are highlighted below.

Corporate responsibility: Aquila Capital

Transformation Award

The Aquila Capital Transformation Award recognises outstanding scientific work that focuses on applicable and unconventional solutions to combat climate change in Europe. In addition to providing financial support for research, this award focuses on cooperation in the practical implementation of solutions. This year's award was themed 'Solving the Climate Crisis through Innovation' and was endowed with EUR 20,000.

The winner: Dr Ning Yan, an assistant professor at the Van't Hoff Institute for Molecular Sciences at the University of Amsterdam, for his paper 'A membrane-free flow electrolyser operating at high current density using earth abundant catalysts for water splitting'. Dr Ning Yan and his team presented a very exciting, innovative way of how green hydrogen can be produced more cost-efficiently and at larger scale by combining the advantages of different electrolyser concepts. Using a membrane-less solution coupled with a novel cyclic operation, he introduced a new low-energy water-splitting process to produce pure hydrogen, which will be an important element of our future energy system.

WWF Germany

Aquila means "eagle" in latin. Accordingly, Aquila Capital partnered with WWF Germany in order to become sponsors of an eagle couple: Eddie and Carmen.

WWF has been committed to the protection and conservation of eagles in Germany since 1972. The foundation has the overarching goal of stopping the destruction of nature and the environment and building a future in which people live in harmony with nature.

With our donation, WWF Germany was able to acquire an ideal piece of forest and land in Schleswig-Holstein, Germany last year and convert it into a protected area. In addition to Eddie and Carmen, this territory also provides a natural habitat for numerous other animals and thus contributes directly to the preservation of biodiversity in our region.

Aquila Charity

With our initiative 'Aquila Charity', Aquila Capital employees and the company itself support self-selected charitable organisations.

Not only does Aquila Capital support various causes around Christmas time but is also committed to charity throughout the year. In recent years, Aquila Capital has donated over half a million euros to charitable organisations, and it plans to continue with this commitment.

The following institutions were supported during 2021:

· Hamburger Tafel

· Naturschutzbund Hamburg

· Deutsche Seemannsmission Hamburg

· Naturschutzbund Hamburg

· The Ocean Cleanup

· Kinderarmut in Deutschland e.V.

· Kinderhospiz Sternenbrücke

· Rettet den Regenwald e.V.

· Niederländische Armen-Casse

· Soldatenhilfswerk der Bundeswehr

Governance

AERIF and its Investment Adviser operate a structured screening, due diligence and investment process. This process is designed to ensure that investments are reviewed and compared on a consistent basis. Typically, due diligence for new investment opportunities is led by Aquila Capital's in-house functions (including Investment Management, Structuring & Tax, Risk Management, Legal, Valuation and Compliance) in conjunction with external advisers. Typically, due diligence for new investment opportunities is led by Investment Adviser's in-house functions (including Investment Management, Structuring & Tax, Risk Management, Legal, Valuation and Compliance), combined with external advisers.

The Board composition is unchanged since the Company's IPO and consists of four, non-executive members. The Board continues to uphold a stringent level of corporate governance. AERIF benefits from having an independent board of directors as well as an AIFM - Sanne Fund Management (Guernsey) Limited. During December 2021, Sanne Group plc completed its acquisition of PraxisIFM Funds Business. Thus, the name of the Company's Administrator and Company Secretary has changed from PraxisIFM Fund Services (UK) Limited to Sanne Fund Services (UK) Limited. The Board supervises the AIFM, which is responsible for making recommendations in relation to any investment proposals put forward by the Investment Adviser. The Investment Adviser is fully regulated and supervised by the Federal Financial Supervisory Authority ("BaFin") in Germany.

Governance and Investment Process⁵¹

Board of Directors
Investment Proposal				Investment Decision
AIFM: Sanne Fund Management (Guernsey) Limited
Investment Advice				Confirmation
Investment Adviser: Aquila Capital Investmentgesellschaft mbH
	Investment Committee (IC) = (Board of the AIFM - ACI) Approval of internal due diligence	IC status update and approval of external due diligence based on decision from IFM Weekly deal team meetings	IC status update Weekly deal team meetings	IC advice recommendation	IC advice of sales process PeriodicIC meetings	IC advice of sale
Aquila Capital in-house functions	Screening & Pre-due diligence	Internal due diligence	External due diligence & structuring	Investment review & decision	Investment monitoring	Divestment
Investment Management (transactions, asset & fund management)	Asset identification Preliminary analysis of opportunity	Internal due diligence	Due diligence with external advisers Structuring and contract negotiations	Filing of investment proposal Statements and approvals	Continuous asset and fund management	Contract negotiations
Structuring & Tax	Preliminary analysis of structure and NPP	Specification of investment structure, in control of tax due diligence		Statement and approval	Periodic review of investment structure	Statement and approval
Risk Management	Preliminary analysis of risks	Risk analysis		Statement and approval	Continuous risk management	Statement and approval
Legal	LOI, NDA	In control of legal due diligence	Contract negotiations	Approval of all contracts	Continuous support	Approval of all contracts
Valuation	Preliminary analysis	Independent valuation of asset		Statement and approval	Periodic valuation	Statement and approval
Compliance	Pre-KYC⁵² check	KYC and conflict-of-interest review		Statement and approval	Continuous surveillance	Statement and approval

Right of veto

Environmental, Social and Governance aspects are taken into account during the whole lifetime of the asset.

⁵¹ Aquila Capital Investmentgesellschaft mbH

⁵² KYC - know your client

As a signatory to the United Nations' Principles for Responsible Investments, Aquila Capital has integrated consideration of environmental, social and governance risks as well as opportunity assessments across every single stage of its investment process. Including any investments in which the Company participates.

ESG Integrated Investment Process

Asset Sourcing and Analysis

· Consider the ESG principles in the sector and country

Due Diligence

· Due diligence to consider the asset's compatibility with ESG principles, sustainability, climate neutrality and human rights

· Ensure transparency around ESG principles with partners

Acquisition

· An asset will be integrated into the portfolio only after all relevant ESG principles have been assessed

Ongoing management

· Consider ESG principles as they relate to the continual maintenance and administration of an investment strategy or asset

· Supplementary regulations will be enforced if local requirements are not adequate

ESG Portfolio Initiatives

The Company underwent its first GRESB assessment in 2021 and will undergo others in future years. A GRESB assessment is an objective, investor driven global ESG benchmark and reporting framework, which assesses the performance of real estate and infrastructure funds, companies and assets. The results provide investors with standardised data to help evaluate complex sustainability issues. The GRESB assessment is an important industry benchmark, as it can help to protect shareholder value by evaluating and improving the sustainability performances of real assets, at both asset level (operating assets only) and portfolio level.

In its first year of participating in a GRESB assessment, AERIF achieved a four out of a five-star rating. With an overall GRESB score of 84, the Company scored above the GRESB average of 77 points. At portfolio level, the rating demonstrates a particularly strong performance in stakeholder engagement and leadership compared to the peer group. At asset level, meanwhile, the rating recognizes AERIF's strong policy frameworks as well as its performance in resource and emission management, including in respect of water, greenhouse gas emissions and energy.

During the September 2021 refinancing of The Rock, the first Green Bond was issued. This bond was rated by the independent consultant CICERO Shades of Green and granted the 'Dark Green' rating and an 'Excellent' rating for governance, both of which are the highest possible ratings under CICERO's framework. These favourable ratings reflect the project's focus on best practice in areas such as environmental impact assessments and transparent engagement with local stakeholders.

In March 2022 Midtfjellet Wind Farm (Tesla) was awarded the Norwea's membership award, this prize is given to a member who has excelled with a particularly positive community involvement, for example through social or environmental sustainability. Norwea writes: "The prize goes to Midtfjellet WindFarm for its many years of work for outdoor life and activities in and around the facility. At Midtfjellet, past and future meet in a spectacular way. The landscape is wild and beautiful, at the same time as it houses the production of clean and renewable energy. The wind farm is a popular destination: cycling, downhill skiing, skiing, fishing and family trips. The surroundings with the fantastic turbines make the whole experience unique and special. Since the start in 2011, about 17,000 have been on a guided tour of the area. There have been people from nursing homes, kindergartens, schools, universities and other institutions, as well as companies and politicians. Congratulations to Midtfjellet Vindpark, all employees in the company and partners who have contributed to the success".

INVESTMENT POLICY AND KEY PERFORMANCE INDICATORS

Investment Policy

The Company will seek to achieve its investment objective set out above, predominantly through investment in Renewable Energy Infrastructure Investments in continental Europe and the Republic of Ireland comprising (i) wind, photovoltaic and hydropower plants that generate electricity through the transformation of the energy of the wind, the sunlight and running water as naturally replenished resources, and (ii) non-generation renewable energy related infrastructure associated with the storage (such as batteries) and transmission (such as distribution grids and transmission lines) of renewable energy, in each case either already operating or in construction/development ("Renewable Energy Infrastructure Investments").

The Company will acquire a mix of controlling and non-controlling interests in Renewable Energy Infrastructure Investments and may use a range of investment instruments in the pursuit of its investment objective, including but not limited to equity, mezzanine or debt investments.

In circumstances where the Company does not hold a controlling interest in the relevant investment, the Company will seek, through contractual and other arrangements, to, inter alia, ensure that the Renewable Energy Infrastructure Investment is operated and managed in a manner that is consistent with the Company's Investment Policy, including any borrowing restrictions.

Investment Restrictions

The Company aims to achieve diversification principally through investing in a range of portfolio assets across a number of distinct geographies and a mix of wind, solar PV and hydro technologies involved in renewable energy generation. The Company will observe the following investment restrictions when making investments:

· no more than 25 per cent. of its Gross Asset Value (including cash) will be invested in any single asset;

· the Company's portfolio will comprise no fewer than six Renewable Energy Infrastructure Investments;

· no more than 20 per cent. of its Gross Asset Value (including cash) will be invested in non-generation renewable energy related infrastructure associated with the storage (such as batteries) and transmission (such as distribution grids and transmission lines) of renewable energy;

· no more than 30 per cent. of its Gross Asset Value (including cash) shall be invested in assets under development and/or construction;

· no more than 50 per cent. of the Gross Asset Value (including cash) will be invested in assets located in any one country;

· no investments will be made in assets located in the UK; and

· no investments will be made in fossil fuel assets.

Compliance with the above restrictions will be measured at the time of investment and non-compliance resulting from changes in the price or value of assets following investment will not be considered as a breach of the investment restrictions.

The Company will hold its investments through one or more SPVs and the investment restrictions will be applied on a look-through basis.

Although not forming part of the investment restrictions or the Investment Policy, where Renewable Energy Infrastructure Investments benefit from a power purchase agreement, the Company will take reasonable steps to avoid concentration with a single counterparty and intends that no more than 25 per cent. of income revenue received by Renewable Energy Infrastructure Investments will be derived from a single off-taker.

Changes to the Investment Policy

The Directors do not currently intend to propose any material changes to the Company's investment policy. Any material changes to the Company's investment policy set out above will only be made with the approval of Shareholders.

Hedging

The Company does not intend to use hedging or derivatives for investment purposes but may from time to time use derivative instruments such as futures, options, futures contracts and swaps (collectively "Derivatives") to protect the Company from fluctuations of interest rates or electricity prices. The Derivatives must be traded on a regulated market or by private agreement entered into with financial institutions or reputable entities specialised in this type of transaction.

Liquidity Management

The AIFM will ensure that a liquidity management system is employed for monitoring the Company's liquidity risks. The AIFM will ensure, on behalf of the Company, that the Company's liquidity position is consistent at all times with its Investment Policy, liquidity profile and distribution policy. Cash held pending investment in Renewable Energy Infrastructure Investments or for working capital purposes will be invested in cash equivalents, near cash instruments, bearer bonds and money market instruments.

Borrowing Limits

The Company may make use of long-term limited recourse debt for Renewable Energy Infrastructure Investments to provide leverage for those specific investments. The Company may also take on long-term structural debt provided that at the time of entering into (or acquiring) any new long-term structural debt (including limited recourse debt), total long-term structural debt will not exceed 50 per cent. of the prevailing Gross Asset Value. For the avoidance of doubt, in calculating gearing, no account will be taken of any Renewable Energy Infrastructure Investments that are made by the Company by way of a debt or a mezzanine investment. In addition, the Company may make use of short-term debt, such as a revolving credit facility, to assist with the acquisition of suitable opportunities as and when they become available. Such short-term debt will be subject to a separate gearing limit so as not to exceed 25 per cent. of the Gross Asset Value at the time of entering into (or acquiring) any such short-term debt.

In circumstances where these aforementioned limits are exceeded as a result of gearing of one or more Renewable Energy Infrastructure Investments in which the Company has a non-controlling interest, the borrowing restrictions will not be deemed to be breached. However, in such circumstances, the matter will be brought to the attention of the Board who will determine the appropriate course of action.

Dividend Policy

Subject to the portfolio continuing to perform in line with expectations, the Board expects to declare total dividends for the year 2022 of not less than 5.25 cents per Ordinary Share.

Dividends are expected to be paid quarterly, normally in respect of the three months to 31 March, 30 June, 30 September and 31 December, and are expected to be made by way of interim dividends to be declared in May, August, November and February.

The Company will declare dividends in Euro and Shareholders will, by default, receive dividend payments in Euros. Shareholders may, on completion of a dividend election form, elect to receive dividend payments in Sterling (at their own exchange rate risk). The date on which the exchange rate between Euro and Sterling is set will be announced at the time the dividend is declared. A further announcement will be made once the exchange rate has been set. Dividend election forms will be available from the Registrar on request.

Key Performance Indicators ("KPIs")

The Board measures the Company's success in achieving its investment objective by reference to the following KPIs:

(i) Achievement of NAV and Share Price Growth over the Long Term

The Board monitors both the NAV and share price performance and compares with other similar investment trusts. A review of performance is undertaken at each quarterly Board meeting and the reasons for relative under and over performance against various comparators is discussed. The Company's NAV and share price returns since IPO (June 2019) to 31 December 2021 was 14.1% and 11.3% (2020: 6.3% and 10.8%) respectively.

The Chairman's statement incorporates a review of the highlights during the year. The Investment Adviser's Report highlights investments made and the Company's performance during the year.

(ii) Maintenance of a Reasonable Level of Premium or Discount of Share Price to NAV

The Company's broker monitors the premium or discount on an ongoing basis and keeps the Board updated as and when appropriate. At quarterly Board meetings the Board reviews the premium or discount in the year since the previous meeting in comparison with other investment trusts with a similar mandate. The share price closed at a 0.6% discount to the NAV as at 31 December 2021 (2020: 6.5% premium).

(iii) Maintenance of a Reasonable Level of Ongoing Charges

The Board receive management accounts which contain an analysis of expenditure which are reviewed at their quarterly Board meetings. The Board reviews the ongoing charges on a quarterly basis and considers these to be reasonable in comparison to peers.

Based on the Company's average net assets during the year ended 31 December 2021, the Company's ongoing charges figure calculated in accordance with the Association of Investment Companies ("AIC") methodology was 1.1% (2020: 1.4%).

(iv) To meet its Target Total Dividend in each Financial Year

The Company's IPO Prospectus and the Prospectus dated 17 September 2020 set out a target minimum dividend of 5.0 cents per Ordinary Share in relation to the year ended 31 December 2021. In line with both of the Prospectuses, the Company announced and paid during the year four interim dividends which totalled 5.0 cents per Ordinary Share. The Company aims to pay 5.25 cents per Ordinary Share for the year 2022.

RISK AND RISK MANAGEMENT

Principal Risks and Uncertainties

During the year the Company has carried out a robust assessment of its principal and emerging risks and the procedures in place to identify any emerging risks are described below.

Procedures to Identify Principal or Emerging Risks:

The Board regularly reviews the Company's risk matrix, with a focus on ensuring that the appropriate controls are in place to mitigate each risk. The experience and knowledge of the Board is important, as is advice received from the Board's service providers, specifically the AIFM, who is responsible for the risk and portfolio management services and outsources the portfolio management to the Investment Adviser.

1. Investment Adviser: the Investment Adviser provides a report to the Board on a quarterly basis or periodically as required on industry trends, insight to future challenges in the renewable sector including the regulatory, political and economic changes likely to impact the renewables sector;

2. Alternative Investment Fund Manager: following advice from the Investment Adviser and other service providers, the AIFM maintains a register of identified risks including emerging risks likely to impact the Company;

3. Broker: provides advice periodically specific to the Company on the Company's sector, competitors and the investment company market whilst working with the Board and Investment Adviser to communicate with shareholders;

4. Company secretary: briefs the Board on forthcoming legislation/ regulatory change that might impact on the Company; and

5. AIC: The Company is a member of the Association of Investment Companies, which provides regular technical updates as well as drawing members' attention to forthcoming industry and regulatory issues.

Procedure for oversight

Audit and Risk Committee: Undertakes a review at least twice a year 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.

PRINCIPAL RISKS

The Board considers the following to be the principal risks faced by the Company along with the potential impact of these risks and the steps taken to mitigate them.

Economic and Political

Principal Risks

Potential Impact/Description

Mitigation

1 Electricity Prices

The income and value of the Company's investments may be affected by future changes in the market price of electricity.

While some of the revenues of the Company's investments benefit from fixed prices, they are also partly dependent on the wholesale market price of electricity which is volatile and is affected by a variety of factors including:

· market demand

· generation mix of power plants

· government support for various forms of power generation

· fluctuations in the market prices of commodities

· foreign exchange

There is a risk that the actual prices received vary significantly from the model assumptions, leading to a shortfall in anticipated revenues by the Company.

Increased EU goals to push green economies will lead to ramp up of renewables and capacities with potential to lead to grid oversupply issues resulting in pricing pressures.

The current energy geopolitical crisis in Europe is driving increasing energy prices and volatility which is likely to have an impact on performance.

The Company holds a balanced mix of investments that benefit from government subsidies as well as long term fixed price PPAs. Greater than 68% of the present value of AERIF's forecast revenue over the next five years is contracted in the form of government tariffs or fixed price PPA.

The Investment Adviser retains the services of market leading energy consultants to assist with determining future power pricing for the respective regions.

The underlying SPV companies may use derivative instruments such as futures, options, futures contracts and swaps to protect from fluctuations in future electricity prices.

The Investment Adviser models and monitors power price curves on an ongoing basis and will recommend appropriate action such as the use of derivatives. In addition, the advisor has a dedicated team which is responsible for the origination, negotiation and execution of all PPAs.

The advisor reviews the hedging strategy on a deal by deal basis, both at time of investment and on and ongoing basis. Should changes be required to the hedging strategy, these will be recommended to the AIFM and Board.

2 Interest Rates/Inflation

Changes to interest rates may impact discount rates applied to the portfolio valuations and costs of debt both in the underlying SPVs and the Company.

Risks from changes in interest rates also include debt refinancing risk and the possibility of bank covenant breaches with a resulting valuation impact and potential loss on underperforming investments.

Future revenue and expenditure of the Company's investments include assumptions about inflation. Any variation from these inflation assumptions could impact, positively or negatively, the valuations and the asset value performance of the Company.

Interest rate risk on bank debt at the asset level is mitigated by the use of hedging instruments.

Most of the Company's non-contracted revenues and costs of the Company's investments are either indexed or correlated to inflation.

Investment Adviser provides updates of the hedging strategy and positions to the AIFM and to the Board periodically.

Aside from the above, Renewable energies represent an effective protection against inflation, as renewable energies benefit from rising electricity prices with no burden on the cost side in relation to the use of resources.

3 Exchange Rates

The Company holds investments in non-Eurozone jurisdictions. Changes in foreign currency rates may therefore impact the value of investments and of the income received.

The Company maintains all uninvested cash in base currency (Euro) other than for small amounts of operational cash in sterling and therefore does not expect a need to hedge currency.

SPVs may have natural hedges to non-Euro revenue through structuring of operating expenses and debt service in the respective currency to hedge some currency exposure.

The AIFM monitors and reports regularly to the Board on currency exposure.

4 Equity Market Volatility

The Company's ability to raise equity from investors to repay debt or to support further investments could be impacted by stock market volatility and pricing.

Market sentiment could go against renewable energy funds and the Company's share price could move to a significant discount.

The Company's adviser, Numis, monitors market conditions and reports regularly to the Board. In the event that the Company is unable to raise new capital to repay debt, the Company could defer making any new investments until the stock market recovered and in extreme circumstances, existing investments could be sold to reduce debt and raise liquidity.

In the event of the share price moving to a significant discount, the Board could implement its share buy-back policy as described in the prospectus.

5 Global Recession

Global recession may lead to electricity pricing volatility as a result of demand and inflationary pressures.

Other impacts of a global recession include increased inflation and possible resulting windfall taxes (taxing of renewable and/or energy assets), potential lack of debt availability, lack of access to capital markets for fund raising and increased counterparty risks as balance sheets become stressed.

Greater than 68% of the present value of the Company forecast revenue over the next five years is contracted in the form of governmental subsidies or fixed price PPA.

The Investment Adviser has a dedicated Markets Management Group team which is responsible for the origination, negotiation and execution of PPAs.

The Board, along with the Company's advisers, focus on risk identification and oversight will help to ensure key risks resulting from a global recession are identified and addressed in advance.

6 Change in Political Sentiment

A change in political direction in one of the countries in which the Company targets investment, could lead to changes, reductions, caps or withdrawals of government support arrangements or potentially the nationalisation of investments. This would have a material impact on the valuation of the investments and the Company's NAV.

Environmental groups may put pressure on government in relation to its renewables ambitions and permits due to environmental concerns and impact on the projects.

The AIFM, advised by the Investment Adviser, continuously monitors all jurisdictions in which the Company invests.

Additional due diligence on development and construction assets is undertaken for new investment opportunities (where applicable) in order to avoid or mitigate any potential issues.

Tax, legal and ESG due diligence is undertaken on each investment and reviewed prior to signing off any investment proposal.

Operational

Principal Risks

Potential Impact/Description

Mitigation

7 Investment Performance

There is a risk that the portfolio underperforms and, as a result, the target returns are not met over the longer term. This could lead to the dividend not being covered and an inability to pay the target dividend.

Adverse weather conditions may impact investment performance through lower than expected production levels.

Investments under development or construction have higher risk of performance due to permit and leases potential challenges, construction budget slippage and development performance.

Each quarter the Board reviews a report prepared by the Investment Adviser on the portfolio performance. A monthly production update for each of the investments is also provided to the Board.

In addition, a report on key risks is provided by the AIFM along with how these risks are being actively mitigated.

The Investment Adviser has a substantial team of executives employed across various disciplines within the renewables sector in 16 investment offices in 15 countries who oversee and monitor all of the investments.

New investments are proposed to the Board by the AIFM having received recommendations from the Investment Adviser. These are reviewed and approved by the Board in line with the Company's investment policy.

In the case of development/construction assets, the Investment Adviser puts in place legal agreements with the developer to align all parties for a successful outcome and mitigating the risks associated with the initial phase of the investment.

8 Pipeline and Investment Deployment

An important part of the Investment Adviser's role is its ability to source high quality potential investment opportunities in line with the Company's investment strategy.

Should suitable opportunities not be forthcoming and cash remains uninvested this could result in 'cash drag' with a potential impact on the Company's dividend target and investment objectives.

The Investment Adviser is a market leader in this sector and has a good track record in originating potential investments.

The AIFM monitors the investment pipeline received from the Investment Adviser and reports to the Board on progress in meeting the Company's investment targets.

It is unlikely that the Board would agree to raise new capital in the absence of a strong investment pipeline hence mitigating any impact of 'cash drag'.

9 Competition for Assets

With increasing numbers of investors seeking exposure to renewable assets, it is possible that new competitors will enter the market in which the Company operates. This could lead to increased pricing for the Company's target investments with corresponding lower returns and slower deployment of uninvested cash.

The track record of the Investment Adviser and its market position and penetration allow it to access potential investments that newer entrants may not have access to.

The Board is mindful of pricing when it reviews new investment proposals and the need to deliver on the Company's target objective and strategy.

10 Counterparty Risk

The majority of the operational risk in the Company's investments is retained by the counterparty or its subcontractors. However, some risks will remain within the investment.

Poor performance by a subcontractor may lead to the need for a replacement which could have cost implications impacting the performance of the investment and potentially distributions to the Company until the issue is resolved.

The value of the Company's investments and the income they generate may be affected by the failure of counterparties to comply with their obligations under a PPA.

Constant monitoring of the investments and the counterparties/ service providers allows the Investment Adviser to identify and address risks early.

Diversification of counterparties and service providers ensures any impact is limited. In addition, a diversified portfolio provides further mitigation.

The Investment Adviser assesses the credit risk of companies against defined criteria prior to them becoming counterparties to PPAs.

11 Operation and Maintenance of Assets

Failure to properly operate and maintain assets may result in reduction of revenues and value of assets.

Sub-contractors and operation managers may underperform or have financial difficulty.

Operation and maintenance of assets are subcontracted to a counterparty who is liable to ensure effective operation and maintenance. The Investment Adviser ensures that each such counterparty has the experience and resources to comply with their obligations and monitors compliance on an ongoing basis.

Replacements are generally available in the market and the Investment Advisor sits on boards of the project companies where possible.

12 Construction of Assets

For investments which are not in operation, delays in completion or in the receipt of operating permits may result in delays of commencement of operation and therefore delays in expected revenue streams.

Inability to source construction goods and materials due to supply chain issues.

Additional risks such as construction delays on completion, cost overruns, defects in construction, permit related issues/ claims etc may result in additional costs and/or delays in expected asset completion, impact revenue and ultimately impact on the value of the asset (increase discount rate).

Construction delays on completion when a PPA is already in place with a fixed starting date, exposes the investment to merchant price risk and additional compensation costs.

Supply chain issues, delays and increases in costs of construction inputs will lead to delays and cost overruns.

The Investment Adviser, part of Aquila Group is an experienced manager of development and construction projects in various jurisdictions throughout Europe utilising local experts.

Construction and post-completion risks are generally mitigated by appropriate contractual mechanisms and policies. The Investment Adviser assesses acceptable counterparties and monitors compliance on an ongoing basis.

The Company is restricted to a maximum of 30% of GAV to be invested in construction assets.

The Investment Adviser Markets Management Group structures the PPAs with sufficient time to mitigate any potential completion delay. EPC contracts are also structured to include delay protection mechanisms to mitigate any additional costs arising from the PPAs.

The Investment Adviser is experienced in due diligence and negotiating value adjustments against developers and the Board relies on the Investment Adviser's experience in relation to the best governance and alignment of interests of such investments performance, development and compliance.

13 Performance of the Investment Adviser

The Investment Adviser manages over EUR 13.9 billion for clients worldwide, there is a risk that it allocates resources to activities in which the Company is not engaged which could have a negative effect on the Company's investment performance.

Conflicts with other private Aquila clients and private investing vehicles of which Aquila cannot disclose to Board or AIFM.

The Investment Adviser is dependent on key people to identify, acquire and manage the Company's investments. There is a risk that a key person leaves the Investment Adviser.

The Company and AIFM are made aware of and review potential conflicts of interest at the time of each investment being made.

The Investment Adviser procures and provides the Board with an independent fairness valuation opinion, which mitigates the risk where valuation conflict exists. When assets are bought along with other funds managed by the Investment Adviser, the price is externally validated.

In addition, an investment allocation policy has been implemented by the Investment Adviser and has been agreed by the Board.

The strength and depth of the Investment Adviser's resources mitigate the risk of a key person departure.

14 IT Security

A hacker or third party could obtain access to the Investment Adviser or any other service provider and destroy data or use it for malicious purposes. Data records could be destroyed resulting in an inability to make investment decisions and monitor investments.

The pandemic and more recently the Russian and Ukraine war has increased IT security concerns and threats being posed to the Company and operating structure by hackers which may lead to loss of information or even a cash loss.

Service providers have been carefully selected for their expertise and reputation in the sector. Each service provider has provided assurances to the AIFM and Company on their cyber policies and business continuity plans along with external audit reviews of their procedures where applicable.

The Investment Adviser has an information security policy in place and has appointed an IT security officer whose tasks are to provide support for emergency events and crises, the monitoring of the resumption and repair of the IT security measures after completion of a disturbance or incident, and the ongoing development of improvements to the IT security concept.

The Investment Adviser's in-house Asset Management team has reviewed the protective measures taken by the service providers and has further increased the vigilance against cyber-attacks that could affect the performance and infrastructure of the investments. Insurance is in place in order to cover potential losses from direct attacks, for indirect attacks (e.g. against grid operation or transmission system) the the various administrators, operation and maintenance providers are required to maintain sufficient insurance coverage to mitigate possible damages.

15 Environmental /
Social / Governance

Significant ESG risks may arise such as health and safety, biodiversity reduction, unfair advantage, bribery, environmental impairment and lower life quality to local communities. Failure to adhere to its ESG policy and Impact Strategy could result in the Company being liable for damages or compensation to the extent that such losses are not covered by insurance policies. In addition, adverse publicity or reputational damage could follow.

The Investment Adviser performs detailed due diligence on ESG for each asset prior to Acquisition.

General standards including IFS Performance Standards, IFC Environmental Health and Safety Guidelines ("EHS") and Equator Principles as well as local health and safety and social laws are reviewed on a regular basis for all assets depending on the location and development status of each asset.

As part of this ESG due diligence various risks are assessed and documented including risk of climate change, risk of harm to local biodiversity and other environmental risks. These risks are all evaluated as part of the technical, legal and insurance due diligence as applicable.

In assessing each asset for acquisition, the Investment Adviser takes into account its ability to contribute to the UN Sustainable Development Goals and whether if its within the Principles for Responsible Investment ("PRI").

Local community issues, noise concerns, access considerations and the provision of a mechanism for local communities to voice concerns are all considered as part of the Investment Adviser's due diligence and of the project licensing for each asset.

In addition, the Investment Adviser continuously engages with local communities to discuss the provision of financial support for activities such as school orchestras, sports clubs, churches, kindergartens, theatre groups and centres for senior members of the local community.

The Board relies on the Investment Adviser to put in place legal agreements which includes best asset management compliance and governance.

An independent fairness opinion on the valuation is obtained for any asset purchased by the Company where a conflict might arise, such as an asset being acquired from another client advised by the Investment Adviser.

As part of the due diligence undertaken by the Investment Adviser on each asset prior to acquisition by the Company, procedures for anti-bribery, Know Your Client and anti ‑ corruption are all reviewed and assessed in line with the policy and framework adopted by the Company. Compliance with local laws and requirements are also assessed prior to a recommendation being made to the Board.

Full tax advice is received on the group structure as well as in relation to each asset prior to acquisition.

Financial

Principal Risks

Potential Impact/Description

Mitigation

16 Portfolio Valuation

The principal component of the Company's balance sheet is its portfolio of renewable investments. Each quarter the AIFM is responsible for preparing a fair market value of the investments, with input and guidance from the Investment Adviser. These valuations and the key underlying assumptions are approved by the Board.

There is a risk that these valuations and underlying assumptions such as future electricity prices and discount rates being applied are not a fair reflection of the market meaning that the investment portfolio could be over or under valued.

The Investment Adviser has a strong track record in undertaking valuations of renewable assets built up over the years since it was founded in 2001.

The AIFM and the Board review and interrogate the valuations and underlying assumptions provided by the Investment Adviser on a quarterly basis prior to approving them.

In addition, when there is a conflicted investment proposed by the Investment Adviser, the Investment Adviser procures and provides the Board and AIFM with a fairness valuation opinion on that investment from an Independent Adviser.

17 Leverage Risk

The use of leverage creates risks including:

· exposure to interest rate risks due to fluctuations in prevailing market rates

· covenant breaches

· enhanced loss on underperforming investments

· refinancing risk can impact asset returns and company cashflow.

As a result, the investment risk may be enhanced through the use of leverage.

The Company's investment policy restricts the use of leverage to:

· Short-term debt: 25% of the prevailing GAV

· Long-term structural debt: 50% of the prevailing GAV

The Investment Adviser provides updates of the covenant compliance to the AIFM and to the Board periodically and looks at refinancing as early as possible.

The AIFM monitors all debt levels against these policy restrictions and reports them to the Board on a quarterly basis.

The Company may use derivative instruments to protect itself from fluctuations in interest rates.

Compliance, Tax and Legal

Principal Risks	Potential Impact/Description	Mitigation
18 Changes to tax legislation or rates	Changes in tax legislation, such as base erosion and profit shifting rules, withholding tax rules and rates, could result in tax increases resulting in a decrease in income received from the Company investments. A possible windfall tax on profits from an investment levied by government.	The corporate structure of the Company is reviewed periodically by the Company and its advisers. The Investment Adviser works closely with tax and industry experts prior to providing structuring recommendations to the Company prior to investment and on an ongoing basis.
19 Regulatory and Compliance changes	The Company is required to comply with Section 1158 of the Corporation Tax Act to ensure maintenance of investment trust status, UK Listing Authority regulations including Listing rules, Foreign Account Tax Compliance Act and Alternative Investment Fund Managers Directive ("AIFMD"). The Company looks to comply with relevant ESG rules and regulations and continue to monitor those such as the SFDR. Failure to comply with the relevant rules and obligations may result in reputational damage to the Company or have a negative financial impact. Possible uncertainty remains with Brexit negotiations and eventual trade deals agreed. Unfavourable terms can impact withholding taxes, double tax treaty limitations and various other trading concerns. Additionally, the Company operates in multiple markets throughout Europe and some have shown signs of changes or potential in regulation as a response to high power prices.	All service providers including the broker, Administrator, Investment Adviser and AIFM are experienced in these areas and provide comprehensive reporting to the Board and on the compliance of these regulations. The AIFM is experienced in compliance with the AIFMD reporting obligations and reports at least quarterly to the Board. The Investment Adviser actively monitors changes in regulation across the markets in which the Company operates. The Company complies with article 8 of the SFDR and as noted under "ESG" looks to comply with local requirements in order to mitigate potential risks.
20 Pandemic-(COVID-19)	COVID-19 has had a significant impact on economies across the globe over the last two years resulting in market volatility and uncertainty.	The Company's response is focused on dealing with the practical impact of COVID‑19. All parties to the Company operate effective work from home policies and are assessed annually. The Investment Adviser is in close contact with each asset's O&M service providers and project constructors and continues to work with the counterparties to identify and mitigate any risks.

Emerging Risk

Principal Risks

Potential Impact/Description

Mitigation

21 Act of War/Sanctions

As evidenced with the ensuing war in Ukraine and the various sanctions and restrictions imposed, there is a possibility there could be supply delays for O&M, sanction considerations, volatile markets and general uncertainty. More difficult energy markets expected along with inflationary pressures in various construction and operational areas.

It has also led to short term price increases and more focus on renewable energy infrastructure.

The invasion of Ukraine by Russia brings uncertainty to the commodities market and how price levels of modules and other hardware will be impacted directly or indirectly. The Company does not have any direct exposure in Ukraine or Russia, there are also no direct business relations with counterparties from these countries.

Aquila is constantly monitoring various macro-economic developments, among others energy prices, commodity prices, freight prices and several component prices. Based on this, different options with regards to timing of construction, price fixing where possible etc. are assessed on a continuous basis. Furthermore, EPC and O&M contracts have been structured in such a way, that delay and price risks are borne by the counterparty wherever possible.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with international accounting standards in conformity with UK adopted international accounting standards. Under company law, 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 they have been prepared in accordance with UK adopted international accounting standards, 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 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 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 and the Directors' Remuneration Report comply with the Companies Act 2006 and Article 4 of the IAS Regulation.

The Directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' Confirmations

Each of the Directors, whose names and functions are listed in Corporate Governance section confirm that, to the best of their knowledge:

· the Company financial statements, which have been properly prepared in accordance with UK adopted international accounting standards give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

· the Directors' Report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

Ian Nolan

Chairman

28 April 2022

Financial Statements

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

		For the year ended 31 December 2021			For the year ended 31 December 2020
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)
Unrealised gains/(losses) on investments	4	-	19,236	19,236	-	(3,959)	(3,959)
Net foreign exchange losses		-	(7)	(7)	-	(12)	(12)
Interest Income	5	11,783	-	11,783	6,194	-	6,194
Investment Advisory fees	6	(2,682)	-	(2,682)	(1,671)	-	(1,671)
Other expenses	7	(1,388)	-	(1,388)	(1,340)	-	(1,340)
Profit/(loss) on ordinary activities before finance costs and taxation		7,713	19,229	26,942	3,183	(3,971)	(788)
Finance costs	8	(318)	-	(318)	(399)	-	(399)
Profit/(loss) on ordinary activities before taxation		7,395	19,229	26,624	2,784	(3,971)	(1,187)
Taxation	9	-	-	-	-	-	-
Profit/(loss) on ordinary activities after taxation		7,395	19,229	26,624	2,784	(3,971)	(1,187)
Return per Ordinary Share-undiluted (cents)	10	2.15c	5.59c	7.74c	1.31c	(1.87c)	(0.56c)
Return per Ordinary Share-diluted (cents)	10	2.14c	5.58c	7.72c	1.30c	(1.86c)	(0.56c)

The total column of the Statement of Comprehensive Income is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.

Return on ordinary activities after taxation is also the "Total comprehensive income for the year".

The notes form part of these financial statements.

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2021

		As at	As at
		31 December	31 December
		2021	2020
	Notes	(EUR '000)	(EUR '000)
Fixed assets
Investments at fair value through profit or loss	4	316,953	229,982
Current assets
Trade and other receivables	11	9,298	5,763
Cash and cash equivalents		94,275	121,014
		103,573	126,777
Current liabilities
Trade and other payables	12	(3,083)	(39,856)
		(3,083)	(39,856)
Net current assets		100,490	86,921
Net assets		417,443	316,903
Capital and reserves: equity
Share capital	13	4,069	3,170
Share premium		254,388	164,351
Special reserve	14	134,393	144,450
Capital reserve		23,853	4,624
Revenue reserve		740	308
Total Shareholders' funds		417,443	316,903
Net assets per Ordinary Share (cents)	15	102.58c	99.96c

The financial statements were approved by the Board of Directors on 28 April 2022 and signed on its behalf by

Ian Nolan
(Chairman)

Company number 11932433

The notes form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

			Share
		Share	premium	Special	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)
Opening equity as at 1 January 2021		3,170	164,351	144,450	4,624	308	316,903
Shares issued during the year⁵⁶	13	899	91,664	-	-	-	92,563
Share issue costs		-	(1,627)	-	-	-	(1,627)
Profit for the year		-	-		19,229	7,395	26,624
Dividend paid	16			(10,057)		(6,963)	(17,020)
Closing equity as at 31 December 2021		4,069	254,388	134,393	23,853	740	417,443

			Share
		Share	premium	Special	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)
Opening equity as at 1 January 2020		1,547	313	148,516	8,595	(54)	158,917
Shares issued during the year⁵⁶	13	1,623	167,266	-	-	-	168,889
Share issue costs		-	(3,228)	-	-	-	(3,228)
(Loss)/profit for the year		-	-		(3,971)	2,784	(1,187)
Dividend paid	16			(4,066)		(2,422)	(6,488)
Closing equity as at 31 December 2020		3,170	164,351	144,450	4,624	308	316,903

⁵⁶ During the year, the Company issued new Ordinary Shares of 87,424,431 (2020: 160,998,007) with gross aggregate proceeds of EUR 90.0 million (2020: EUR 167.5 million). The Company also issued 2,477,872 (2020: 1,371,018) Ordinary Shares in relation to settlement of Investment Adviser fees of EUR 2.5 million (2020: EUR 1.3 million)

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2021

		Year ended	Year ended
		31 December	31 December
		2021	2020
	Notes	(EUR '000)	(EUR '000)
Operating activities
Profit/(loss) on ordinary activities before finance costs and taxation		26,942	(788)
Adjustment for unrealised (gains)/losses on investments		(19,236)	3,959
Increase in trade and other receivables		(3,535)	(3,836)
Increase in trade and other payables		1,113	1,438
Net cash flow from operating activities		5,285	773
Investing activities
Purchase of investments		(125,127)	(77,395)
Repayments during the year		19,506	-
Net cash flow used in investing		(105,621)	(77,395)
Financing activities
Proceeds of share issues	13	92,563	168,889
Share issue costs		(1,627)	(3,228)
Dividend paid		(17,020)	(6,488)
Finance costs	8	(318)	(399)
Net cash flow from financing		73,597	158,774
(Decrease)/increase in cash		(26,739)	82,152
Cash and cash equivalents at start of year		121,014	38,862
Cash and Cash equivalents at end of year		94,275	121,014

The notes form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

1. GENERAL INFORMATION

Aquila European Renewables Income Fund Plc is a public Company limited by shares incorporated in England and Wales on 8 April 2019 with registered number 11932433. The Company is domiciled in England and Wales. The Company is a closed-ended investment company with an indefinite life. The Company commenced its operations on 5 June 2019 when the Company's Ordinary Shares were admitted to trading on the London Stock Exchange. The Directors intend, at all times, to conduct the affairs of the Company as to enable it to qualify as an investment trust for the purposes of section 1158 of the Corporation Tax Act 2010, as amended.

The registered office and principal of business of the Company is 6th Floor, 125 London Wall, London, EC2Y 5AS.

The Company's investment objective is to generate stable returns, principally in the form of income distributions, by investing in a diversified portfolio of Renewable Energy Infrastructure Investments.

The Company's Investment Adviser is Aquila Capital Investmentgesellschaft mbH authorised and regulated by the German Federal Financial Supervisory Authority.

Sanne Fund Management (Guernsey) Limited acts as the Company's Alternative Investment Fund Manager for the purposes of Directive 2011/61/EU on Alternative Investment Fund Managers Directive.

Sanne Fund Services (UK) Limited provides administrative and company secretarial services to the Company under the terms of an administration agreement between the Company and the Administrator.

2. BASIS OF PREPARATION

The financial statements have been prepared in accordance with UK adopted international accounting standards in conformity with the 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 issued by the AIC in April 2021.

The financial statements are prepared on the historical cost basis, except for the revaluation of certain financial instruments at fair value through profit or loss. The principal accounting policies adopted are set out below. These policies are consistently applied.

The functional currency of the Company is euros as this is the currency of the primary economic environment in which the Company operates. Accordingly, the financial statements are presented in euros rounded to the nearest thousand euros, unless otherwise stated. EUR/GBP exchange rate as of 31 December 2021 was 0.8408 (2020: 0.8941).

Accounting for Subsidiary

The Company owns 100% of its subsidiary Tesseract Holdings Limited ("HoldCo"). The Company has acquired renewable energy infrastructure investments through its investment in the HoldCo. The Company finances the HoldCo through a mix of loan investments and equity. The loan investment finance represents shareholder loans (the "shareholder loans" "SHLs") provided by the Company to HoldCo. The Company meets the definition of an investment entity as described by IFRS 10. Under IFRS 10 an investment entity is required to hold subsidiaries at fair value through profit or loss and therefore does not consolidate the subsidiary.

The HoldCo is an investment entity and as described under IFRS 10 values its SPVs investments at fair value through profit or loss.

Characteristics of an Investment Entity

Under the definition of an investment entity, the Company should satisfy all three of the following tests:

I. Company obtains funds from one or more investors for the purpose of providing those investors with investment management services;

II. 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. 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 investing in renewable energy infrastructure investments due to high barriers to entry and capital requirements;

II. the Company intends to hold these renewable energy infrastructure investments for the remainder of their useful life for the purpose of capital appreciation and investment income. The renewable energy infrastructure investments are expected to generate renewable energy output for 25 to 30 years from their relevant commercial operation date, the Directors believe the Company is able to generate returns to the investors during that period; 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.

The Directors have also satisfied themselves that Tesseract Holdings Limited meets the characteristic of an investment entity. Tesseract Holdings Limited has one investor, Aquila European Renewables Income Fund Plc, however, in substance Tesseract Holdings Limited is investing the funds of the investors of Aquila European Renewables Income Fund Plc on its behalf and is effectively performing investment management services on behalf of many unrelated beneficiary investors.

The Directors believe the treatment outlined above provides the most relevant information to investors.

Going Concern

The Directors consider that it is appropriate to adopt the going concern basis in preparing the financial statements. In forming this opinion, the Directors have considered any potential impact of the COVID-19 pandemic on the going concern and viability of the Company. In making their assessment, the Directors have reviewed income and expense projections and the liquidity of the investment portfolio, and considered the mitigation measures which key service providers, including the Investment Adviser, have in place to maintain operational resilience particularly in light of COVID-19 and the Russia-Ukraine war. The Directors are satisfied and are comfortable that the Company would continue to remain viable under downside scenarios, including decreasing government regulated tariffs and decline in long term power price forecasts.

The Company continues to meet day-to-day liquidity needs through its cash resources. The Company had cash and cash equivalents of EUR 94.3 million (2020: EUR 121.0 million) as at 31 December 2021. The Company's net assets as at 31 December 2021 were EUR 417.4 million (2020: EUR 316.9 million) and total expenses for the year ended 31 December 2021 were EUR 4.1 million (2020: EUR 3.0 million), which represented approximately 1.1% (2020: 1.4%) of average net assets during the year. At the date of approval of this document, based on the aggregate of investments and cash held, the Company has substantial operating expenses cover.

The major cash outflows of the Company are the payment of dividends and costs relating to the acquisition of new investments. The Directors are confident that the Company has sufficient cash balances and access to equity markets in order to fund commitments to acquisitions detailed in note 20 to the financial statements, should they become payable.

A majority of the underlying SPV revenues are derived from the sale of electricity through power purchase agreements in place with large and reputable providers of electricity to the market.

These providers have been contacted by the Investment Adviser to discuss their response to COVID-19 and business continuity plans. During the year and up to the date of this report, there has been no significant impact on revenue and cash flows of the SPVs. The SPVs have contractual operating and maintenance agreements in place with large service providers. Therefore the Directors and the Investment Adviser do not anticipate a threat to the SPVs revenue.

The Directors are satisfied that the Company has sufficient resources to continue to operate for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.

Critical Accounting Judgements, Estimates and Assumptions

The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions in certain circumstances that affect reported amounts. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities.

Key Judgements

As disclosed above, the Directors have concluded that the Company and HoldCo meets the definition of an investment entity as defined in IFRS 10. This conclusion involved a degree of judgement and assessment as to whether the Company met the criteria outlined in IFRS 10.

The Company's shareholder loans and equity investments in HoldCo are held at fair value through profit or loss. As shareholder loan investments form part of a managed portfolio of assets whose performance is evaluated on a fair value basis, shareholder loan investments are designated at fair value in line with equity investments. The Directors consider that the carrying fair value amounts of shareholder loans and equity investment in the financial statement are equal to their fair values.

Key Estimation and Uncertainty: Investments at Fair Value Through Profit or Loss

The key assumptions that have a significant impact on the carrying value of the Company's underlying investments in SPVs are the discount rates, useful lives of the assets, the rate of inflation, the price at which the power and associated benefits can be sold, the amount of electricity the assets are expected to produce and operating costs of the SPVs.

The discount rates are subjective and therefore it is feasible that a reasonable alternative assumption may be used resulting in a different value. The discount rates applied to the cashflows are reviewed annually by the Investment Adviser to ensure they are at the appropriate level. The Investment Adviser will take into consideration market transactions, where of similar nature, when considering changes to the discount rates used. The weighted average discount rate applied in the December 2021 valuation was 6.5% (2020: 6.6%).

Useful lives are based on the Investment Adviser's estimates of the period over which the assets will generate revenue which are periodically reviewed for continued appropriateness. The assumption used for the useful life of the wind and hydropower farms is 25 years and solar PV is 30 years. The actual useful life may be a shorter or longer period depending on the actual operating conditions experienced by the asset.

The price at which the output from the generating assets is sold is a factor of both wholesale electricity prices and the revenue received from the Government support regime. Future power prices are estimated using external third party forecasts which take the form of specialist consultancy reports. The future power price assumptions are reviewed as and when these forecasts are updated. There is an inherent uncertainty in future wholesale electricity price projection. Long term power price forecasts are provided by a leading market consultant, updated quarterly, and may be adjusted by the Investment Adviser where more conservative assumptions are considered appropriate. In the prior year, the Company has moved from a rolling average of a single power price curve forecast and adopted a blend of two curve provider's forecasts.

Specifically commissioned external reports are used to estimate the expected electrical output from the wind and hydropower farm and solar PV assets, taking into account the expected average wind speed at each location and generation data from historical operation. The actual electrical output may differ considerably from that estimated in such a report mainly due to the variability of actual wind to that modelled in any one period. Assumptions around electrical output will be reviewed only if there is good reason to suggest there has been a material change in this expectation. 'P50' level of output. The P50 output is the estimated annual amount of electricity generation (in MWh) that has a 50.0% probability of being exceeded both in any single year and over the long term and a 50.0% probability of being under achieved.

The operating costs of the SPV companies are frequently partly or wholly subject to inflation and an assumption is made that inflation will increase at a long-term rate. The SPVs valuation assumes long term inflation of 2.0% (2020: 2.0%).

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities are those used to determine the fair value of the investments as disclosed in note 4 to the financial statements under sensitivities.

New Standards, Interpretations and Amendments adopted from 1 January 2022

A number of new standards, amendments to standards are effective for the annual periods beginning after 1 January 2022. None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company.

New Standards and Amendments issued but not yet Effective

The relevant new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company's financial statements are disclosed below. These standards are not expected to have a material impact on the entity in future reporting periods and on foreseeable future transactions.

Amendments to IAS 1: Classification of Liabilities as Current or Non-current

In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments are effective for annual reporting periods beginning on or after 1 January 2023.

Reference to the Conceptual Framework - Amendments to IFRS 3

In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the Conceptual Framework. The amendments are effective for annual reporting periods beginning on or after 1 January 2022.

Definition of Accounting Estimates - Amendments to IAS 8

In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of 'accounting estimates'. The amendments are effective for annual reporting periods beginning on or after 1 January 2023.

Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2

In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements. The amendments to IAS 1 are applicable for annual periods beginning on or after 1 January 2023.

3. SIGNIFICANT ACCOUNTING POLICIES

Financial Instruments

Financial assets

The Company's financial assets principally comprise of investments held at fair value through profit (shareholder loan and equity investments) and Trade and other receivables.

The Company's shareholder loan and equity investments in HoldCo are held at fair value through profit or loss. Gains or losses resulting from the movements in fair value are recognised in the Company's Statement of Comprehensive Income at each valuation point. Where there is sufficient value within HoldCo, the Company's shareholder loans are fair valued at their redeemable amounts and the residual fair value reflected within the Company's equity investments.

Trade and other receivables initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.

Financial liabilities

The Company's financial liabilities include trade and other payables and other short term monetary liabilities which are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.

Recognition, derecognition and measurement

Financial assets and financial liabilities are recognised in the Company's Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

A Financial liability (in whole or in part) is derecognised when the Company has extinguished its contractual obligations, it expires or is cancelled. 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, financial assets at fair value through profit or loss are measured at fair value. Gains and losses resulting from the movement in fair value are recognized in the statement of comprehensive income. Financial liabilities are subsequently measured at amortised cost using the effective interest rate method.

Taxation

Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains. Shortly after listing the Company received an approval as an investment trust by HMRC. Current tax is the expected tax payable on the taxable income for the period, using tax rates that have been enacted or substantively enacted at the date of the Statement of Financial Position.

Deferred Taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the Statement of Comprehensive Income except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Segmental Reporting

The Chief Operating Decision Maker ("CODM"), which is the Board, is of the opinion that the Company is engaged in a single segment of business, being investment in renewable energy infrastructure assets to generate investment returns whilst preserving capital. The financial information used by the CODM to manage the Company presents the business as a single segment.

Income

Income includes investment income from financial assets at fair value through profit or loss and finance income.

Investment income from financial assets at fair value through profit or loss is recognised in the Statement of Comprehensive Income within investment income when the Company's right to receive income is established.

Interest earned on shareholder loans are recognised on an accruals basis.

Dividend income is recognised when the right to receive it is established and is reflected in the Statement of Comprehensive Income as Investment Income.

Expenses

All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Statement of Comprehensive Income, all expenses are presented as revenue as its directly attributable to the operations of the Company.

Payment of Investment Advisory fees in shares

The Company issues shares to the Investment Adviser in exchange for receiving investment advisory services. The fair value of the investment advisory services received in exchange for shares is recognised as an expense at the time at which the investment advisory fees are earned, with a corresponding increase in equity. The fair value of the investment advisory services is calculated by reference to the definition of investment advisory fees in the Investment Advisory Agreement.

Further details on Company's share issues to the Investment Adviser is disclosed in note 6 to the financial statements.

Foreign Currency

Transactions denominated in foreign currencies are translated into Euros at actual exchange rates as at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the period end are reported at the rates of exchange prevailing at the period end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss to capital or revenue in the Statement of Comprehensive Income as appropriate. Foreign exchange movements on investments are included in the Income Statement within gains on investments.

Cash and Cash Equivalents

Cash and cash equivalents includes deposits held at call with banks and other short-term deposits with original maturities of three months or less.

Share Capital, Special Reserve and Share Premium

Ordinary Shares are classified as equity. Costs directly attributable to the issue of new shares (that would have been avoided if there had not been a new issue of new shares) are recognised against the value of the ordinary share premium account.

Repurchase of the Company's own shares are recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

4. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

	As at 31 December 2021			As at 31 December 2020
	Share-			Share-
	holder	Equity		holder	Equity
	Loans	Investments	Total	Loans	Investments	Total
	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)
(a) Summary of valuation
Analysis of closing balance:
Investments held at fair value through profit or loss	193,078	123,875	316,953	174,046	55,936	229,982
Total investments	193,078	123,875	316,953	174,046	55,936	229,982
(b) Movements during the year:
Opening balance of investments, at cost	174,046	51,287	225,333	67,581	42,471	110,052
Purchases at cost	87,241	-	87,241	106,465	8,816	115,281
Repayments during the year	(19,506)	-	(19,506)	-	-	-
Conversion of SHL to Equity Instrument⁵⁷	(48,703)	48,703	-	-	-	-
Cost of investments	193,078	99,990	293,068	174,046	51,287	225,333
Revaluation of investments to fair value:
Unrealised movement in fair value of investments	-	23,885	23,885	-	4,649	4,649
Balance of capital reserve - investments held	-	23,885	23,885	-	4,649	4,649
Fair value of investments	193,078	123,875	316,953	174,046	55,936	229,982
(c) Gains/(losses) on investments in year (per Statement of Comprehensive Income)
Movement in unrealised revaluation of investments held	-	19,236	19,236	-	(3,959)	(3,959)
Gains/(losses) on investments	-	19,236	19,236	-	(3,959)	(3,959)

⁵⁷ The financing of the acquisitions of the assets Benfica III, Desfina and Albeniz in 2020 and Ourique in 2021 was carried out in a first step through the implementation of SHLs. Part of these SHLs was replaced by equity instruments in a second step in 2021. .

The fair value of the Company's equity and the shareholder loans investments in HoldCo are determined by the underlying fair values of the SPV investments, which are not traded and contain unobservable inputs. As such, the Company's equity and the shareholder loans investments in HoldCo have been classified as level 3 in the fair value hierarchy.

Fair Value Measurements

IFRS 13 requires disclosure of fair value measurement by level. The level of fair value hierarchy within the financial assets or financial liabilities is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the following 3 levels:

Level 1

The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2

Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.

Level 3

Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

The classification of the Company's investments held at fair value is detailed in the table below:

	As at 31 December 2021				As at 31 December 2020
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)
Investments at fair value through profit and loss Equity investments in HoldCo	-	-	123,875	123,875	-	-	55,936	55,936
Shareholder loan investments in HoldCo	-	-	193,078	193,078	-	-	174,046	174,046
	-	-	316,953	316,953	-	-	229,982	229,982

Due to the nature of the investments, they are always expected to be classified as level 3. There have been no transfers between levels during the year ended 31 December 2021.

The movement on the Level 3 unquoted investments during the year is shown below:

	Year ended	Year ended
	31 December	31 December
	2021	2020
	(EUR '000)	(EUR '000)
Opening balance	229,982	118,660
Additions during the year	87,241	115,281
Repayments during the year	(19,506)	-
Unrealised gains/(losses) on investments adjustments	19,236	(3,959)
Closing balance	316,953	229,982

Valuation Methodology

The Company owns 100% of its subsidiary Tesseract Holdings Limited ("HoldCo"). The Company meets the definition of an investment entity as described by IFRS 10, as such the Company's investment in the HoldCo is valued at fair value. HoldCo's cash, working capital balances and fair value of investments are included in calculating fair value of the HoldCo.

The Company acquired underlying investments in SPVs through its investment in the HoldCo.

The Investment Adviser has carried out fair market valuations of the SPV investments as at 31 December 2021 and the Directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied, and the valuation. All SPV investments are at fair value through profit or loss and are valued using the IFRS 13 framework for fair value measurement. The following economic assumptions were used in the valuation of the SPVs.

Valuation Assumptions

Discount rates	The discount rate used in the valuations is derived according to internationally recognized methods. Typical components of the discount rate are risk free rates, country-specific and asset-specific risk premia. The latter comprise the risks inherent to the respective asset class as well as specific premia for other risks such as development and construction, such as is the case for the Rock, for example.
Power price	Power prices are based on power price forecasts from leading market analysts. The forecasts are independently sourced from a provider with coverage in almost all European markets as well as providers with regional expertise.
Energy yield	Estimated based on third party energy yield assessments campaigns as well as operational performance data (where applicable) by taking into account regional expertise of a second analyst.
Inflation rates	Long-term inflation is based on central bank targets for the respective jurisdiction.
Asset life	In general, an operating life of 25 years for onshore wind and hydropower and 30 years for Solar PV is assumed. In individual cases a longer operating life is assumed where the contractual set-up (i.e. O&M agreement with availability guarantee) supports such assumption. The operating life of hydropower assets are estimated in accordance with their expected concession term.
Operating expenses	The operating expenses are primarily based on the respective contracts and, where not contracted, on the assessment from a technical adviser.
Taxation rates	The underlying country-specific tax rates are derived from due diligence reports from leading tax consulting firms.
Capital expenditure	Based on the contractual position (e.g. engineering, procurement and construction agreement), where applicable.

Valuation Sensitivities

The fair value of the Company's investment in HoldCo is ultimately determined by the underlying fair values of the SPV investments. As such sensitivity analysis is produced to show the impact of changes in key assumptions adopted to arrive at the SPV valuation.

For each of the sensitivities, it is assumed that potential changes occur independently of each other with no effect on any other base case assumption, and that the number of investments in the SPVs remains static throughout the modelled life.

The NAV per share impacts from each sensitivity is shown below.

(i) Discount rates

The DCF valuation of the SPV investments represents the largest component of the net asset value of the Company and the key sensitivities are considered to be the discount rate used in the DCF valuation and assumptions.

The weighted average valuation discount rate applied to calculate the SPV valuation is 6.5% at 31 December 2021.

An increase or decrease in this rate by 0.5% at project level has the following effect on valuation.

	NAV per	-0.5%	Total NAV	+0.5%	NAV per
	Share Impact	Change	Value in EUR	Change	Share Impact
Discount rate	in (EUR cents)	(EUR '000)	thousand	(EUR '000)	in (EUR cents)
Valuation as of 31 December 2021	4.06	433,950	417,443	402,401	(3.70)

(ii) Power price

Long term power price forecasts are provided by leading market consultants and are updated quarterly. The sensitivity below assumes a 10% per cent increase or decrease in merchant power prices relative to the base case for every year of the asset life. The sensitivity considers a flat 10% movement in power prices for all years, i.e. the effect of adjusting the forecast electricity price assumptions in each of the jurisdictions applicable to the SPV down by 10% and up by 10% from the base case assumptions for each year throughout the operating life of the SPV.

Note the Company intends to renew power price hedges (e.g. in the form of PPAs or other mechanisms) before the existing contracts (PPAs and government regulated tariffs) expire. This rolling hedge strategy is not reflected in the sensitivities illustrated above. When renewing the existing hedges, the Company's power price exposure and, therefore, its sensitivity towards power prices decreases.

A change in the forecast electricity price assumptions by plus or minus 10% has the following effect on valuation, as shown below.

	NAV per				NAV per
	Share Impact	-10.0%	Total NAV Value	+10.0%	Share Impact
Power price	(EUR cents)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR cents)
Valuation as of 31 December 2021	(7.57)	386,631	417,443	448,166	7.55

(iii) Energy yield

The base case assumes a "P50" level of output. The P50 output is the estimated annual amount of electricity generation (in MWh) that has a 50% probability of being exceeded both in any single year and over the long term and a 50% probability of being under achieved. Hence the P50 is the expected level of generation over the long term. The sensitivity illustrates the effect of assuming "P90 10 years" (a downside case) and 'P10 10 years' (an upside case) energy production scenarios. A P90 10 years downside case assumes the average annual level of electricity generation that has a 90% probability of being exceeded over a 10 year period. A P10 10 years upside case assumes the average annual level of electricity generation that has a 10% probability of being exceeded over a 10 year period. This means that the SPV aggregate production outcome for any given 10 year period would be expected to fall somewhere between these P90 and P10 levels with an 80% confidence level, with a 10% probability of it falling below that range of outcomes and a 10% probability of it exceeding that range. The sensitivity does not include the portfolio effect which would reduce the variability because of the geographical diversification. The sensitivity is applied throughout the next 10 years.

The table below shows the sensitivity of the SPV value to changes in the energy yield applied to cash flows from project companies in the SPV as per the terms P90, P50 and P10 explained above.

	NAV per	P90		P10	NAV per
	Share Impact	10 years	Total NAV Value	10 years	Share Impact
Energy yield	(EUR cents)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR cents)
Valuation as of 31 December 2021	(6.55)	390,769	417,443	441,868	6.00

(iv) Inflation rates

The projects' income streams are principally a mix of government regulated tariffs, fixed-price PPAs and merchant revenues. Government regulated tariffs and fixed-price PPAs tend not to be inflation linked, whilst merchant revenues are generally subject to inflation. The current contractual life of government regulated tariffs and fixed-price PPAs are shorter than their respective asset lives, meaning from a valuation perspective, the assets are more exposed to merchant revenues in the late asset life. As described earlier, the Company intends to renew power price hedges (e.g. in the form of PPAs or other mechanisms) before the existing contracts (PPAs and government regulated tariffs) expire. This rolling hedge strategy is not reflected in the sensitivities illustrated above. The projects' management and maintenance expenses typically move with inflation, however debt payments are fixed. This results in the SPV returns and valuation being positively correlated to inflation. The SPVs valuation assumes long-term inflation of 2.0% p.a.

The sensitivity illustrates the effect of a 0.5% decrease and a 0.5% increase from the assumed annual inflation rates in the financial model for each year throughout the operating life of the SPV.

	NAV per				NAV per
	Share Impact	-0.5%	Total NAV Value	+0.5%	Share Impact
Inflation rates	(EUR cents)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR cents)
Valuation as of 31 December 2021	(3.09)	404,850	417,443	430,413	3.19

(v) Asset life

In general, an operating life of 25 years for onshore wind and hydropower and 30 years for Solar PV is assumed. In individual cases a longer operating life is assumed where the contractual set-up (i.e. O&M agreement with availability guarantee) supports such an assumption. The operating life of hydropower assets are estimated in accordance with their concession term.

The sensitivity below shows the valuation impact from a one year adjustment to the asset life across the portfolio.

	NAV per				NAV per
	Share Impact	-1 year	Total NAV Value	+1 year	Share Impact
Asset life	(EUR cents)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR cents)
Valuation as of 31 December 2021	(2.15)	408,695	417,443	425,770	2.05

(vi) Operating expenses

The sensitivity shows the effect of a 10.0% decrease and a 10.0% increase to the base case for annual operating costs for the SPV, in each case assuming that the change to the base case for operating costs occurs with effect from 1 January 2021 and that change to the base case remains reflected consistently thereafter during the life of the projects.

An increase or decrease in operating expenses by 10% at SPV level has the following effect on valuation, as shown below.

	NAV per Share Impact	-10.0%	Total NAV Value	+10.0%	NAV per Share Impact
Operating expenses	(EUR cents)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR cents)
Valuation as of 31 December 2021	3.23	430,601	417,443	404,092	(3.28)

5. INTEREST INCOME

	For the year ended 31 December 2021	For the year ended 31 December 2020
Income from investments	(EUR '000)	(EUR '000)
Interest income from shareholder loans	11,783	6,194
Total Income	11,783	6,194

6. INVESTMENT ADVISORY FEES

	For the year ended 31 December 2021			For the year ended 31 December 2020
	Revenue	Capital	Total	Revenue	Capital	Total
	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)
Investment Advisory fees	2,682	-	2,682	1,671	-	1,671

Under the Investment Advisory Agreement, the following fee is payable to the Investment Adviser:

a) 0.75 per cent. per annum of NAV (plus VAT) of the Company up to EUR 300 million;

b) 0.65 per cent. per annum of NAV (plus VAT) of the Company between EUR 300 million and EUR 500 million; and

c) 0.55 per cent. per annum of NAV (plus VAT) of the Company above EUR 500 million

During the first two years of its appointment, the Investment Adviser has undertaken to apply its fee (net of any applicable tax) in subscribing for, or acquiring, Ordinary Shares. If the Ordinary Shares are trading at a premium to the prevailing NAV, the Company will issue new Ordinary Shares to the Investment Adviser. If, however, the Ordinary Shares are trading at a discount to the prevailing NAV at the relevant time, no new Ordinary Shares will be issued by the Company and instead the Company will instruct its broker to acquire Ordinary Shares to the value of fee due in the relevant period. The current Investment Adviser fee arrangement with Aquila Capital Investmentgesellschaft was extended, whereby the Investment Adviser fee is fully paid in the shares of the Company for an additional two years until 30 June 2023.

The Investment Adviser is also entitled to be reimbursed for certain expenses under the Investment Advisory Agreement. These include out-of-pocket expenses properly incurred by the Investment Adviser in providing services, including transactional, organisational, operating and/or travel expenses.

Share Based Payments

The Company settled investment advisory fees by issuing Ordinary Shares. The Company has issued following shares to settle investment advisory fees in respect of the year under review:

		Investment	Fair value of
		advisory fees	issue price	Number of
In respect of the year ended 31 December 2021		(EUR)	(cents)	shares	Date of issue
31 March 2021		587,524	102.13	575,271	17 May 2021
30	June 2021	587,156	100.61	583,596	11 August 2021
30 September 2021		747,975	102.28	731,301	10 November 2021
31 December 2021		759,537	103.83	731,520	09 February 2022

	Investment	Fair value of
	advisory fees	issue price	Number of
In respect of the year ended 31 December 2020	(EUR)	(cents)	shares	Date of issue
31 March 2020	359,625	100.37	358,299	18 May 2020
30 June 2020	356,714	99.38	358,939	11 August 2020
30 September 2020	360,178	99.08	363,522	10 November 2020
31 December 2020	587,469	101.21	587,704	09 February 2021

7. OTHER EXPENSES

	For the year ended 31 December 2021			For the year ended 31 December 2020
	Revenue	Capital	Total	Revenue	Capital	Total
	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)
Secretary and administrator fees	227	-	227	219	-	219
Tax compliance	32	-	32	17	-	17
Directors' fees	146	-	146	203	-	203
Directors' other employment costs	16	-	16	25	-	25
Broker retainer	53	-	53	40	-	40
Audit fees - statutory⁵⁸	237	-	237	235	-	235
Audit fees - interim review⁵⁹	-	-	-	45	-	45
AIFM fees	112	-	112	103	-	103
Registrar's fees	18	-	18	4	-	4
Marketing fees	70	-	70	119	-	119
FCA and listing fees	57	-	57	87	-	87
Legal fees	157	-	157	199	-	199
ESG Rating fees	107	-	107	-	-	-
Other expenses	156	-	156	44	-	44
Total expenses	1,388	-	1,388	1,340	-	1,340

During the year auditors received GBP 18,000 (VAT of GBP 3,000) for non-audit services in relation to reporting accountant services for admission of new shares to trading on the London Stock Exchange, which have been treated as a capital expense and included in 'share issue costs' disclosed in the Statement of Changes in Equity.

8. FINANCE COSTS

	For the year ended 31 December 2021			For the year ended 31 December 2020
	Revenue	Capital	Total	Revenue	Capital	Total
	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)
Interest charges	317	-	317	398	-	398
Bank charges	1	-	1	1	-	1
Total	318	-	318	399	-	399

⁵⁸ The GBP equivalent of the statutory audit fees was GBP 201,300 (2020: GBP 174,000) including VAT of GBP 33,550 (2020: GBP 29,000)

⁵⁹ Prior year interim review fees disclosed above, includes VAT of EUR 7,500

9. TAXATION

(a) Analysis of tax charge in the year

	For the year ended 31 December 2021			For the year ended 31 December 2020
	Revenue	Capital	Total	Revenue	Capital	Total
	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)
Total tax charge for the year (see note 9(b))	-	-	-	-	-	-

(b) Factors affecting total tax charge for the year:

The effective UK corporation tax rate applicable to the Company for the period is 19.00%. 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:

	Revenue	Capital	Total	Revenue	Capital	Total
	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)	(EUR '000)
Profit/(loss) on ordinary activities before taxation	7,395	19,229	26,624	2,784	(3,971)	(1,187)
Corporation tax at 19%	1,405	3,654	5,059	529	(754)	(225)
Effects of:
(Gain) / loss on investments held at fair value not (taxable) / allowable	-	(3,655)	(3,655)	-	752	752
Foreign exchange loss not allowable	-	1	1	-	2	2
Expenditure not deductible for tax purposes	10	-	10	38	-	38
Movement in management expenses not utilised / deferred tax not recognised	20	-	20	186	-	186
Impact of tax-deductible interest distributions	(1,435)	-	(1,435)	(753)	-	(753)
Total tax charge for the year	-	-	-	-	-	-

Investment companies which have been approved by the HM Revenue & Customs under section 1158 of the Corporation Tax Act 2010 are exempt from tax on capital gains. Due to the Company's status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided for deferred tax on any capital gains or losses arising on the revaluation of investments.

The Company has unrelieved excess management expenses of EUR 1,121,391 (2020: EUR 1,015,656). It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and therefore no deferred tax asset has been recognised. The unrecognised deferred tax asset calculated using a tax rate of 25% (2020: 19%) amounts to EUR 280,348 (2020: EUR 192,975). The March 2021 Budget announced an increase to the main rate of corporation tax to 25% from 1 April 2023. This increase in the standard rate of corporation tax was substantively enacted on 24 May 2021 and became effective from 2 June 2021.

10. RETURN PER ORDINARY SHARE

	For the year	For the year
	ended	ended
	31 December	31 December
	2021	2020
Revenue return after taxation (EUR '000)	7,395	2,784
Capital profit/(loss) return after taxation (EUR '000)	19,229	(3,971)
Total net return (EUR '000)	26,624	(1,187)
Weighted average number of Ordinary Shares-undiluted	344,137,679	212,833,759
Weighted average number of Ordinary Shares-diluted	344,869,199	213,428,575

	Number of shares
	For the year	For the year
	ended	ended
	31 December	31 December
Weighted average number of shares used as the denominator	2021	2020
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share	344,137,679	212,833,759
Ordinary Shares issued after the year end in settlement of investment advisory fees earned during the year	731,520	594,816
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share	344,869,199	213,428,575

11. TRADE AND OTHER RECEIVABLES

	As at	As at
	31 December	31 December
	2021	2020
	(EUR'000)	(EUR'000)
Interest due from shareholder loans	7,811	5,365
Intercompany receivables	1,384	371
Prepaid expenses	103	27
Total	9,298	5,763

12. TRADE AND OTHER PAYABLES

	As at	As at
	31 December	31 December
	2021	2020
	(EUR'000)	(EUR'000)
Accrued expenses	1,078	806
Investment in Desfina awaiting settlement	-	37,886
Deferred consideration payable	2,005	1,164
Total	3,083	39,856

13. SHARE CAPITAL

	As at 31 December 2021			As at 31 December 2020
	No. of shares	(EUR '000)	No. of shares	(EUR '000)
Allotted, issued and fully paid:
Ordinary Shares of 1 cent each ("Ordinary Shares")	406,939,412	4,069	317,037,109	3,170
Total	406,939,412	4,069	317,037,109	3,170

The Ordinary Shares shall carry the right to receive the profits of the Company available for distribution and determined to be distributed by way of interim or final dividends at such times as the Directors may determine in accordance with the Articles of the Company. The holders of Ordinary Shares have the right to receive notice of, and to attend and vote at, general meetings of the Company.

During the year to 31 December 2021, 89,902,303 Ordinary Shares (2020: 162,369,025) were issued with gross aggregate value of EUR 92,563,000 (2020: EUR 168,889,000).

For the year ended 31 December 2021	Shares in issue at the beginning of the year	Shares subscribed	Shares redeemed	Shares in issue at the end of the year
Ordinary Shares	317,037,109	89,902,303	-	406,939,412

For the year ended 31 December 2020	Shares in issue at the beginning of the year	Shares subscribed	Shares redeemed	Shares in issue at the end of the year
Ordinary Shares	154,668,084	162,369,025	-	317,037,109

Since the year end, the Company issued a further 731,520 (2020: 594,816) Ordinary Shares to the Company's Investment Adviser, in relation to advisory fees payable for the quarter ended 31 December 2021.

14. SPECIAL RESERVE

As indicated in the Company's prospectus dated 10 May 2019, following admission of the Company's Ordinary Shares to trading on the London Stock Exchange, the Directors applied to the Court and obtained a judgement on 30 July 2019 to cancel the amount standing to the credit of the share premium account of the Company. The amount of the share premium account cancelled and credited to a special reserve was EUR 149,675,608.

15. NET ASSETS PER ORDINARY SHARE

Net assets per Ordinary Share as at 31 December 2021 is based on EUR 417,443,000 (2020: EUR 316,902,809) of net assets of the Company attributable to the 406,939,412 (2020: 317,037,109) Ordinary Shares in issue as at 31 December 2021.

16. DIVIDEND PAID

The Company has paid the following interim dividends in respect of the year under review:

	For the year ended 31 December 2021		For the year ended 31 December 2020
	Cents per	Total	Cents per	Total
Total dividends paid in the year	Ordinary Share	(EUR '000)	Ordinary Share	(EUR '000)
31 December 2020 interim - Paid 12 Mar 2021 (2020: 20 Mar 2020)	1.25c	3,970	0.75c	1,162
31 March 2021 interim - Paid 18 Jun 2021 (2020: 22 Jun 2020)	1.25c	3,978	0.75c	1,451
30 June 2021 interim - Paid 3 Sep 2021 (2020: 14 Sep 2020)	1.25c	3,985	0.75c	1,453
30 September 2021 interim - Paid 3 Dec 2021 (2020: 29 Oct 2020)	1.25c	5,087	1.25c	2,422
Total	5.00c	17,020	3.50c	6,488

The dividend relating to the year ended 31 December 2021, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered is detailed below:

	For the year ended 31 December 2021		For the year ended 31 December 2020
	Cents per	Total	Cents per	Total
Total dividends declared in the year	Ordinary Share	(EUR '000)	Ordinary Share	(EUR '000)
31 March 2021 interim - Paid 18 Jun 2021 (2020: 22 Jun 2020)	1.25c	3,978	0.75c	1,451
30 June 2021 interim - Paid 3 Sep 2021 (2020: 14 Sep 2020)	1.25c	3,985	0.75c	1,453
30 September 2021 interim - Paid 3 Dec 2021 (2020: 29 Oct 2020)	1.25c	5,087	1.25c	2,422
31 December 2021 interim - Paid 11 Mar 2022 (2020: 12 March 2021)⁶⁰	1.25c	5,096	1.25c	3,970
Total	5.00c	18,146	4.00c	9,296

⁶⁰ Not included as a liability in the year ended 31 December 2021 financial statements

17. FINANCIAL RISK MANAGEMENT

The Investment Adviser, AIFM and the Administrator report to the Board on a quarterly basis and provide information to the Board which allows it to monitor and manage financial risks relating to its operations. The Company's activities expose it to a variety of financial risks: market risk (including price risk, interest rate risk and foreign currency risk), credit risk and liquidity risk. These risks are monitored by the AIFM. Each risk and its management is summarised below.

Market Risk

The value of the investments will be a function of the discounted value of their expected future cash flows, and as such will vary with, inter alia, movements in interest rates, market prices and the competition for such assets. The Investment Adviser carries out a full valuation on a quarterly basis takes into account market risks. The sensitivity of the investment valuation due to market risk is shown further on in note 4.

(i) Currency Risk

Foreign currency risk is defined as the risk that the fair values of future cashflows will fluctuate because of changes in foreign exchange rates. The Company's financial assets and liabilities are denominated in Euro and substantially all of its revenues and expenses are in Euro. The Company is not considered to be materially exposed to foreign currency risk.

(ii) Interest Rate Risk

The Company's interest rate risk on interest bearing financial assets is limited to interest earned on shareholder loans. The Board considers that, as shareholder loans investments bear interest at a fixed rate, they do not carry any interest rate risk.

The Company's interest and non-interest bearing assets and liabilities as at 31 December 2021 are summarised below:

	Interest bearing	Non-interest bearing	Total
Assets	(EUR'000)	(EUR'000)	(EUR'000)
Cash and cash equivalents	-	94,275	94,275
Trade and other receivables	-	9,298	9,298
Investments at fair value through profit or loss	193,078	123,875	316,953
Total assets	193,078	227,448	420,526
Liabilities
Creditors	-	(3,083)	(3,083)
Total liabilities	-	(3,083)	(3,083)

The Company's interest and non-interest bearing assets and liabilities as at 31 December 2020 are summarised below:

	Interest bearing	Non-interest bearing	Total
Assets	(EUR'000)	(EUR'000)	(EUR'000)
Cash and cash equivalents	-	121,014	121,014
Trade and other receivables	-	5,763	5,763
Investments at fair value through profit or loss	174,046	55,936	229,982
Total assets	174,046	182,713	356,759
Liabilities
Creditors	-	(39,856)	(39,856)
Total liabilities	-	(39,856)	(39,856)

(iii) Price Risk

Price risk is defined as the risk that the fair value of a financial instrument held by the Company will fluctuate. Investments are measured at fair value through profit or loss. As of 31 December 2021 the Company held investments with an aggregate fair value of EUR 316,953,000 (2020: EUR 229,982,000). All other things being equal, the effect of a 10% increase or decrease in the share prices of the investments held at the year end would have been an increase or decrease of EUR 31,695,000 (2020: EUR 22,998,200) in the profit after taxation for the year ended 31 December 2021 and the Company's net assets at 31 December 2021. The sensitivity of the investment valuation due to price risk is shown further on in note 4.

Credit Risk

Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfil its contractual obligations. The Company is exposed to credit risk in respect of Trade and other receivables, cash at bank and shareholder loan investments. The Company's credit risk exposure is minimised by dealing with financial institutions with investment grade credit ratings and making shareholder loan investments which are equity in nature. The Company's shareholder loan investments in HoldCo are secured by underlying renewal investments and as such these shareholder loans are not exposed to credit risk. No balances are past due or impaired.

	As at	As at
	31 December	31 December
	2021	2020
	(EUR'000)	(EUR'000)
Investments at fair value through profit or loss- shareholder loan investments	193,078	174,046
Trade and other receivables	9,298	5,763
Cash and cash equivalents	94,275	121,014
Total	296,651	300,823

The table below shows the cash balances of the Company and the credit rating for each counterparty:

		As at	As at
		31 December	31 December
		2021	2020
	Rating	(EUR'000)	(EUR'000)
Royal Bank of Scotland	A-2 / BBB-S&P Rating	4,074	47,611
Goldman Sachs-Liquid reserve fund	AAA-S&P Rating	-	37,934
EFG International AG-Daily liquid fund	A / F1-Fitch Rating	45,203	35,469
Royal Bank of Scotland International	A - 2 / BBB-S&P Rating	44,998	-
		94,275	121,014

Liquidity Risk

Liquidity risk is the risk that the Company may not be able to meet a demand for cash or fund an obligation when due. The Investment Adviser, AIFM and the Board continuously monitor forecast and actual cashflows from operating, financing and investing activities to consider payment of dividends, repayment of the Company's shareholder loans or further investing activities.

Financial assets and liabilities by maturity as at 31 December 2021 are shown below:

	Less than 1 year	1-5 years	5+ years	Total
	(EUR'000)	(EUR'000)	(EUR'000)	(EUR'000)
Assets
Investments at fair value through profit or loss-shareholder loan investments	-	-	193,078	193,078
Trade and other receivables	9,298	-	-	9,298
Cash and cash equivalents	94,275	-	-	94,275
Liabilities
Creditors	(3,083)	-	-	(3,083)
	100,490	-	193,078	293,568

Financial assets and liabilities by maturity as at 31 December 2020 are shown below:

	Less than 1 year	1-5 years	5+ years	Total
	(EUR'000)	(EUR'000)	(EUR'000)	(EUR'000)
Assets
Investments at fair value through profit or loss-shareholder loan investments	11,427	-	162,619	174,046
Trade and other receivables	5,763	-	-	5,763
Cash and cash equivalents	121,014	-	-	121,014
Liabilities
Creditors	(39,856)	-	-	(39,856)
	98,348	-	162,619	260,967

The shareholder loan investments are repayable upon realisation of renewable investments.

As at 31 December 2021, across the Company's investment portfolio there is approximately EUR 144.3 million (2020: EUR 112.9 million) of non-recourse, project debt (on a proportional basis) at the SPV level.

Capital and Risk Management

The Company's capital management objectives are to ensure that the Company will be able to continue as a going concern while maximising the return to equity Shareholders.

In accordance with the Company's investment policy, the Company's principal use of cash (including the proceeds of the IPO and placings) is investing in a diversified portfolio of Renewable Energy Infrastructure Investments, as well as expenses related to the share issue when they occur, ongoing operational expenses and payment of dividends and other distributions to Shareholders in accordance with the Company's dividend policy.

The Company considers its capital to comprise ordinary share capital, distributable reserves and retained earnings. The Company is not subject to any externally imposed capital requirements. The Company's share capital and reserves that are shown in the Statement of Financial Position at a total EUR 417,443,000 (2020: EUR 316,903,000).

The Board, with the assistance of the Investment Adviser, monitors and reviews the Company's capital on an ongoing basis.

Use of distributable reserves is disclosed in note 19.

Share capital represents the 1 cent nominal value of the issued share capital.

The share premium account arose from the net proceeds of new shares.

The capital reserve reflects any increases and decreases in the fair value of investments which have been recognised in the capital column of the income statement.

18. TRANSACTIONS WITH THE INVESTMENT ADVISER AND RELATED PARTY TRANSACTIONS

AIFM fees for the year ended 31 December 2021 amounts to EUR 112,000 (2020: EUR 103,000). As at 31 December 2021, the fee outstanding to the AIFM was EUR 8,700 (2020: EUR 8,500). The AIFM, Company Secretary and Administrator are part of same PraxisIFM Group which was acquired by the Sanne Group with effect from 3 December 2021. The Company Secretary and Administrator fees for the year ended 31 December 2021 amounts to EUR 227,000 (2020: EUR 219,000) and the total fees paid to PraxisIFM Group amounts to EUR 339,000 (2020: EUR 322,000).

Fees payable to the Investment Adviser are shown in the Income Statement. As at 31 December 2021, the fee outstanding to the Investment Adviser was EUR 759,537 (2020: EUR 594,816).

Fees are payable to the Directors, effective from 1 April 2021, at an annual rate of EUR 75,000 to the Chairman, EUR 50,000 to the Chairman of the Audit Committee and EUR 43,000 to the other Directors.

During the year, the Company advanced shareholder loans to HoldCo EUR 193,078,000 (2020: EUR 174,046,000). The accrued interest and the shareholder loans outstanding at the period end was EUR 200,889,000 (2020: EUR 179,411,000).

The Directors had the following shareholdings in the Company, all of which were beneficially owned.

	Ordinary shares	Ordinary shares
	At 31 December	At 31 December
	2021	2020
Ian Nolan	100,000	100,000
David MacLellan	75,000	75,000
Kenneth MacRitchie	50,000	50,000
Patricia Rodrigues	50,000	50,000

19. DISTRIBUTABLE RESERVES

The Company's distributable reserves consists of the special reserve and revenue reserve. Capital reserve represents unrealised investments as such is not distributable.

The revenue reserve is distributable. The amount of the revenue reserve that is distributable is not necessarily the full amount of the reserve as disclosed within these financial statements of EUR 740,000 as at 31 December 2021 (2020: EUR 308,000).

20. COMMITMENTS AND CONTINGENCIES

As at 31 December 2021 the Company has below future investment obligations relating to the Spanish construction project.

Project Albeniz: Albeniz is part of a cluster of four separate solar parks in various stages of development and construction. The portfolio is located in the south of Spain and is expected to be commissioned in the second quarter of 2022. As of the balance sheet date, the Company provided construction finance of EUR 42.8 million with a total expected investment of EUR 49.0 million.

Project The Rock: The commitments relating to the financing of the construction of the second construction asset, The Rock, were settled by the USPP and the Green Bond as part of the refinancing. COD is expected to take place in the second quarter of 2022.

21. UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATES

The following table shows subsidiaries of the Company. As the Company is regarded as an Investment Entity as referred Note 2, these subsidiaries have not been consolidated in the preparation of the financial statements.

Subsidiary entity name	Effective ownership %	Investment	Country of incorporation	Profit/(loss) for the year ended 31 December 2021 (EUR million)	Profit/(loss) for the period ended 31 December 2020 (EUR million)	Total assets balances as at 31 December 2021 (EUR million)	Total assets balances as at 31 December 2020 (EUR million)	Registered address
Tesseract Holdings Limited	100.0	HoldCo Subsidiary entity, owns underlying SPV investments	United Kingdom	19.2	(4.0)	123.9	55.9	Leaf B, 20th Floor, Tower 42, Old Broad Street, London EC2N 1HQ
Holmen II Wind Park ApS	100.0	Subsidiary entity, owns investment in Holmen II	Denmark	0.5	0.6	24.0	25.4	Københavnsvej 81 4000 Roskilde, Denmark
Aalto Wind No 2 Ltd. Oy	100.0	Subsidiary entity, owns investment in Olhava	Finland	0.0007	0.3	52.3	54.5	c/o Intertrust (Finland) Oy, Bulevardi 1, 6th floor, FI-00100 Helsinki, Finland
Svindbaek Vindkraft HoldCo ApS	100.0	Subsidiary entity, owns investment in Svindbaek	Denmark	(2.1)	(2.3)	33.8	34.9	Gyngemose Parkvej 50, 2860 Søborg, Denmark
Svindbaek Vindkraft GP ApS	100.0	Subsidiary entity, General partner to Svindbaek Vindkraft HoldCo ApS	Denmark	0.0004	(0.001)	0.005	0.006	Gyngemose Parkvej 50, 2860 Søborg, Denmark
Prettysource Lda	100.0	Subsidiary entity, owns investment in Benfica III	Portugal	(0.1)	(0.1)	4.5	4.8	Avenida Fontes Pereira de Melo, n.º 14, 11.º floor, 1050 121 Lisbon
Astros Irreverentes Unipessoal Lda	100.0	Subsidiary entity, owns investment in Benfica III	Portugal	(0.1)	(0.1)	4.5	4.8	Avenida Fontes Pereira de Melo, n.º 14, 11.º floor, 1050 121 Lisbon
Contrate o Sol Unipessoal Lda	100.0	Subsidiary entity, owns investment in Benfica III	Portugal	0.1	(0.1)	2.1	2.4	Rua Filipe Folque, no. 10J, 2 Dto, 1050-113 Lisbon
Argeo Solar S.L.	100.0	Subsidiary entity, owns investment in Albeniz	Spain	(0.2)	(0.4)	34.3	5.8	Paseo de la Castellana 259D, 14S-15, Madrid, Spain
Vector Aioliki Desfinas S.A.	89.0	Subsidiary entity, owns equity investment in Desfina	Greece	8.5	(1.2)	69.4	60.5	Salaminos Str. 20, 15124 Maroussi, Attica, Greece

The Company's investments in subsidiaries are held through HoldCo.

The following table shows associates of the Company. The Company's investments in associates are held through HoldCo.

Associate entity name	Effective ownership %	Investment	Country of incorporation	Profit/(loss) for the year ended 31 December 2021 (EUR million)	Profit/(loss) for the period ended 31 December 2020 (EUR million)	Total assets balances as at 31 December 2021 (EUR million)	Total assets balances as at 31 December 2020 (EUR million)	Registered address
Aquia Enlica, Lda	18.0	Associate entity, owns equity investment in Sagres	Portugal	3.3	6.2	88.9	88.4	Av. Fontes Pereira de Melo 14-11 1050-121 Lisboa Portugal
Midtfjellet Vindkraft AS	25.9	Associate entity, owns equity investment in Tesla	Norway	24.0 NOK	(32.6) NOK	1,094.1 NOK	(1,082.2) NOK	Sandvikvågvegen 45, N-5419 Fitjar, Norway
Oyfjellet Wind HoldCo Sarl	13.7	Associate entity, owns equity investment in The Rock	Norway	(0.2)	(0.003)	274.4	201.1	23, Am Scheerleck, L-6868 Wecker, Luxemburg
Palea Solar Farm Ourique S.A.	50.0	Associate entity, owns equity investment in Ourique	Portugal	(1.3)	n.a.	48.7	n.a.	Avenida Fontes Pereira de Melo, no. 14, 11. andar, 1050-121 Lisbon, Portugal

As disclosed in Note 4, the Company finances the HoldCo through a mix of shareholder loans and equity. The shareholder loans accrue at an interest rate range of 2.0% to 10.375%.

HoldCo finances its SPV investments through a mix of shareholder loans and equity. The shareholder loans accrue at an interest rate range of 2.5% to 9.75%.

There are no restrictions on the ability of the Company's subsidiaries and associate's entities to transfer funds in the form of interest and dividends.

22. POST BALANCE SHEET EVENTS

In March 2022, the Company's wholly owned subsidiary, Tesseract Holdings Limited has successfully completed the acquisition of a 100.0% interest in Greco, a Spanish solar PV construction project.

Payment of the deferred consideration amount (EUR 90.0 million) plus any potential earn-out will be due at or after project completion which is expected to take place in late 2022.

Other Information

ALTERNATIVE PERFORMANCE MEASURES

In reporting financial information the Company presents APMs, which are not defined or specified under the requirements of IFRS. The Company believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the Company. The APMs presented in this report are shown below:

(Discount)/Premium

The amount, expressed as a percentage, by which the share price is more than the Net Asset Value per Ordinary Share.

		As at	As at
		31 December	31 December
As at 31 December 2021		2021	2020
NAV per Ordinary Share (cents)	a	102.58	99.96
Share price (cents)	b	102.00	106.50
(Discount)/premium	(b÷a)-1	(0.6%)	6.5%

Ongoing charges

A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company.

		Year ended	Year ended
		31 December	31 December
As at 31 December 2021		2021	2020
Average NAV (EUR '000)	a	366,101	222,632
Annualised expenses (EUR '000)⁶¹	b	4,070	3,011
Ongoing charges	(b÷a)	1.11%	1.35%

Total return

A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company into the Ordinary Shares of the Company on the ex-dividend date.

As at 31 December 2021		Share price	NAV
Opening at 1 January 2021 (cents)	a	106.50	99.96
Dividend adjustment (cents)	b	5.00	5.00
Closing at 31 December 2021 (cents)	c	102.00	102.58
Total return	((c+b)÷a)-1	0.5%	7.6%

As at 31 December 2020		Share price	NAV
Opening at 1 January 2020 (cents)	a	107.80	102.75
Dividend adjustment (cents)	b	3.50	3.50
Closing at 31 December 2020 (cents)	c	106.50	99.96
Total return	((c+b)÷a)-1	2.0%	0.7%

⁶¹ Expenses consist of investment advisory fees of EUR 2,682,000 (2020: EUR 1,671,000) and other recurring expenses of EUR 1,388,000 (2020: EUR 1,340,000) in accordance with the AIC methodology.

Dividend Cover

Dividend cover ratio calculation is based on net result generated at the SPVs adjusted for the Company level expenses during the year.

		Year ended	Year ended
		31 December	31 December
		2021	2020
Net result generated at the SPVs (EUR '000)	a	19,554	7,254
Dividend paid (EUR '000)	b	17,020	6,488
Dividend cover ratio	a÷b	1.1	1.1

Dividend cover ratio calculation is based on the revenue account of the Company.

		Year ended	Year ended
		31 December	31 December
		2021	2020
Profit/(loss) on ordinary activities	a	7,395	2,784
Dividend paid	b	17,020	6,488
Dividend cover ratio	a÷b	0.4	0.4

Gross Asset Value

The Company's gross assets comprise the net asset values of the Company's Ordinary Shares and the debt at the underlying SPV level, with the breakdown as follows.

		31 December	31 December
		2021	2020
Ordinary Shares - NAV (EUR '000)	a	417,443	316,900
Debt at the SPV level (EUR '000)	b	144,327	113,000
Gross asset value (EUR '000)	a+b	561,770	429,000

Gearing

The Company's gearing is calculated as total debt as a percentage of the gross asset value.

		31 December	31 December
		2021	2020
Gross asset value (EUR '000)	a	561,770	429,900
Debt at the SPV level (EUR '000)	b	144,327	113,000
Gearing ratio	b÷a	25.7%	26.3%

FINANCIAL INFORMATION

This announcement does not constitute the Company's statutory accounts. The financial information for 2019 is derived from the statutory accounts for 2019, which will be delivered to the registrar of companies. The auditors have reported on the 2019; their reports were unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.

The Annual Report for the year ended 31 December 2019 was approved on 27 April 2020. It will be made available on the Company's website at https://www.aquila-european-renewables-income-fund.com/.

The Annual Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

This announcement contains regulated information under the Disclosure Guidance and Transparency Rules of the FCA.

ANNUAL GENERAL MEETING

In line with the requirements of the Companies Act 2006, the Company will hold an Annual General Meeting of Shareholders to consider the resolutions laid out in the Notice of Meeting. Notice is hereby given that the Annual General Meeting of Aquila European Renewables Income Fund Plc will be held at the offices of CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon Street, London EC4N 6AF on 9 June 2022 at 1 p.m. There will be no presentation from the Investment Manager and the sole business of the meeting will be to propose the resolutions set out.

Despite the lifting of restrictions on large gatherings many shareholders may not feel confident to attend shareholder meetings. Shareholders are therefore encouraged to appoint the "Chairman of the Meeting" as their proxy. Details of how to vote, either electronically, by proxy form or through CREST, can be found in the Notes to the Notice of AGM of the Annual Report.

The outcome of the resolutions will as usual be determined by Shareholder vote based on the proxy votes received. All valid proxy appointments (whether submitted electronically or in hard copy form) will be included in the poll to be taken at the AGM. The results of the poll will be announced to the London Stock Exchange and placed on the Company's website, in the usual way, as soon as practicable after the conclusion of the AGM.

Should a Shareholder have a question that they would have raised at the AGM, either of the Board or the Investment Manager, the Board would ask that they send it by email to aquilacosec@PraxisIFM.com by the 7 June 2022. Answers to questions will be published on the Company's website in advance of the AGM.

Shareholders should monitor the Company's website at www.aquilaeuropean- renewables-income-fund.com and London Stock Exchange announcements for any updates regarding the AGM. Alternatively, Shareholders can contact the Registrar, Computershare Investor Services PLC, for updated information (please see Notes to the Notice of AGM in the Annual Report for the Registrar's contact details).

Company Secretary and registered office

Sanne Fund Services (UK) Limited

(formerly PraxisIFM Fund Services (UK) Limited)

Tel : 020 3327 9720

6th Floor, 125 London Wall

London

EC2Y 5A

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