Asian Energy Impact Trust PLC 31 December 2023 Unaudited NAV and Company Update

RNS Number : 6019G

Asian Energy Impact Trust PLC

13 March 2024

 

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT MAY CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE UK'S MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, SUCH INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

LEI: 254900V23329JCBR9G82

 

13 March 2024

Asian Energy Impact Trust plc

(the "Company" or "AEIT")

31 DECEMBER 2023 unaudited Net Asset Value
and COMPANY UPDATE

Asian Energy Impact Trust plc, the renewable energy investment trust providing direct access to sustainable energy infrastructure in fast-growing and emerging economies in Asia, announces its unaudited net asset value ("NAV") at 31 December 2023.

HIGHLIGHTS

·		31 December 2023 (unaudited)	30 September 2023 (unaudited)	31 December 2022 (audited)
	Net assets - US$ million	85.0	88.5	86.6
	NAV per share - cents	48.4	50.4	49.3
	NAV total return per share since IPO[1]	-49.5%	-47.5%	-49.2%
·	NAV as at 31 December 2023 (relative to 30 September 2023) reduced by US$3.5 million.  This reflects a US$0.2 million increase in the underlying portfolio valuations offset by costs of US$2.9 million incurred in the quarter and US$0.8 million of dividends paid to shareholders.
·	Following a capital investment of US$19.8 million in SolarArise India Projects Private Limited ("SolarArise") to fund the equity required for constructing the 200MW solar project that forms part of the Rewa Ultra Mega Solar Park (the "RUMS project") (as announced on 11 October 2023), the Company and its UK subsidiary, AEIT Holdings Limited, had cash balances at 31 December 2023 of US$41.2 million (23.5 cents per share).
·	Construction of the RUMS project commenced in November 2023, with current project economics having deteriorated by US$1.1 million in the valuation as at 31 December 2023. Post the valuation date, issues between the landowner of the Rewa Ultra Mega Solar Park ("RUMSL[2]") and the surrounding farmers, which were outside of the control of the Company, in January and February 2024 restricted construction work. It is expected that commissioning will not now occur until late May 2024.
·	As at 31 December 2023, gearing in AEIT's investment portfolio represented 56.0% of the Group's adjusted gross asset value  ("GAV"). Gearing is not used at the Company level.
·	The audit of the Company's financial statements for the financial period ended 31 December 2023 is progressing and the annual results are expected to be announced in early April.

NET ASSETS

Net assets as at 31 December 2023 were US$85.0 million, with a NAV total return per share since IPO of -49.5%. The NAV per share decreased to 48.4 cents as at 31 December 2023. The following table reconciles the movements from the last published NAV as at 30 September 2023.

Net assets bridge - US$'000s	30 September 2023 to 31 December 2023
Net assets at 30 September 2023	88,458
Change in fair value of investment portfolio	20,071
Capital injection for RUMS project	(19,839)
Dividends paid to shareholders	(773)
Investment management fees	(545)
Other PLC costs (net)	(643)
Additional professional fees following suspension	(1,680)
Net assets at 31 December 2023	85,049

Fair Value of Investment Portfolio

The most significant movements in the fair value from 30 September 2023 to 31 December 2023 are summarised in the table below.

Fair value of investments bridge - US$'000s	30 September 2023 to 31 December 2023
Fair value of investments at 30 September 2023	25,494
RUMS project	18,742
Inflation, FX and roll forward of valuation date	955
Power prices	1,179
Generation	(929)
Capital restructuring and tax adjustments	(2,997)
Other adjustments	3,121
Fair value at 31 December 2023	45,565

RUMS project: The negative net present value ("NPV") associated with completing the project was US$14.6 million as at 30 September 2023. Since then, US$19.8 million was injected from SolarArise into the SPV. Actual changes in the underlying project economics amounted to a US$1.1 million reduction in value. The roll forward of the valuation date including updating for macro-assumptions and other model updates were offset by an increase in interest rate assumptions and an updated budget with additional capex.

Inflation, FX and roll forward: For inflation, the approach is to blend two inflation forecasts from reputable third-party sources and apply this consistently to assumptions. For FX, valuations are converted from local currency at the relevant spot rate at the balance sheet date. The discount rate unwind includes the NPV of future cashflows being brought forward from the last valuation date to 31 December 2023 as well as the inclusion of actual performance figures during the period.

Power prices: In determining the forecast for power prices, the approach taken is to blend at least two price curves as prepared by third-party independent market forecasters that are reputable in the relevant markets. The updated forecasts received for the Philippines and Vietnam for Q4 2023 were higher than those from Q2 2023 which were utilised in the 30 June 2023 and 30 September 2023 valuations. For the Philippines, the updated blended price forecast shows a notable increase in the very short term, a slight decrease in the late 2020s, followed by a moderate increase throughout the remainder of the modelled time period. For Vietnam, the updated blended price forecast remains very similar in the short term, with a moderate premium relative to the previous forecast emerging in the 2030s and a more significant premium in the 2040s.

Generation: A technical advisor was appointed in September 2023 to provide updated P50[3] yield assessments. Reports have now been received for SolarArise and have been updated in the model. The reports received include a "best case P50" and "worst case P50" forecast. The resulting generation from taking the midpoint is slightly below the estimated reduction applied to the P50 yield assessments at time of acquisition utilised in the 30 September 2023 valuation. The P50 utilised in the 31 December 2023 valuation represents the midpoint of the two forecasts. The reports for the Philippine and Vietnamese assets are still to be received and are expected to be utilised in the 31 March 2024 valuation. The Transitional Investment Manager is continuing to work with the technical advisor and the SolarArise asset manager to further understand the root causes of the underperformance of the SolarArise assets to best evaluate possible optimisation options.

Capital restructuring and tax adjustments: As a result of the capital injection into the RUMS project, a reorganisation of intercompany debt was required within the SolarArise SPVs, resulting in greater cash traps as distributions are delayed. This resulted in a negative US$3.2 million impact on the valuation.  A review is underway to consider options for optimising the SolarArise capital structure.

Other adjustments: The most material element, which accounted for US$2.3 million of the US$3.1 million movement, was updating assumptions for decommissioning and residual land value where land is owned in India. The balance of the other adjustments related predominantly to operational cost revisions. No changes were made to the discount rates applied which are in the range of 10.0% - 12.5%.

Dividends

The Board declared a third interim dividend in respect of the year ended 31 December 2023 (the "Q3 2023 Dividend") of 0.44 cents per ordinary share in respect of the quarter ended 30 September 2023 (total cost: US$0.8 million). The Q3 2023 Dividend was paid on 11 December 2023 to shareholders on the register at the close of business on 17 November 2023. The Q3 2023 Dividend was funded out of the Company's distributable capital reserves and this outflow is reflected in the 31 December 2023 NAV.

The Board does not intend to declare a dividend in respect of the quarter ended 31 December 2023 prior to completion of the strategic review, the outcome of which is expected to be announced by early April 2024.

Expenses

In the three-month period ended 31 December 2023, investment management fees totalled US$0.5 million of which US$0.1 million may be claimed by the former Investment Manager (but is not being paid to the former Investment Manager whilst the Board evaluates all available options) and US$0.4 million is payable to the Transitional Investment Manager for work carried out by it since 1 November 2023. This full amount remains accrued and unpaid at the period end.

Other PLC costs are shown net of interest received on cash deposits of US$0.6 million and realised foreign exchange gains of US$0.3 million.

Since the material uncertainty arose during the preparation of the December 2022 accounts and audit, additional professional fees have been incurred to provide an in-depth examination of the valuations, to review and validate the valuation models, to undertake an extensive review into the tax and cash extraction positions, to undertake a comprehensive review of the RUMS project and seek advice with regard to the likely abort liabilities and to provide advice associated with the share suspension, shareholder meeting requisitions by funds affiliated with the former Investment Manager, the changes to the investment policy, effecting the change in Investment Manager and the Board's ongoing strategic review. Additional professional fees incurred since suspension of listing in the Company's shares total US$5.3 million, of which US$3.6 million was included in the September 2023 NAV and a further US$1.7 million was incurred in the quarter ending 31 December 2023. The Board is investigating the Company's right to seek compensation for these additional professional fees whilst reserving all the Company's other rights.

GEARING

Gearing is not used at the Company level.  As at 31 December 2023, US$7.2 million had been drawn under the US$54.9 million project finance facility for construction of the RUMS project. As at 31 December 2023, SolarArise's SPVs had aggregate external borrowings of US$108.6 million (30 September 2023: US$102.8 million) and the Vietnamese assets had external borrowings of US$1.3 million (30 September 2023: US$1.3 million), whilst the Philippine assets were ungeared. As at 31 December 2023, gearing in the investment portfolio represented 56.0% (30 September 2023: 54.6%) of the Group's adjusted GAV. On a pro forma basis, gearing would increase to 64.5% once the full project finance facility of the RUMS project is drawn down based on the NAV as at 31 December 2023.

UPDATE ON OPERATING ASSETS

The Transitional Investment Manager is progressing with its review of the Company's portfolio as part of the strategic review being undertaken by the Board. Operational performance data for the assets from 1 January 2023 to 31 December 2023 has been examined.

The 2023 asset level budgets included a 5% reduction in generation based on historical observed underperformance from the existing P50 generation expectations. Actual performance in the year was 8.3% below the existing P50s. Of this, 3.8% was in relation to lower irradiance and the other underperformance was related to site-specific issues as anticipated in the budgets. In particular, two of the SolarArise sites had specific issues that impacted generation. TT2 experienced issues with pollution in the area and TT6 experienced issues with flooding and the control system. For SolarArise, the midpoint of the technical advisor's updated best and worst case P50 forecasts will be used to set the generation budget for 2024 which consider lower expectations for irradiance and site-specific performance issues. 

With respect to the Vietnamese portfolio, one of the assets, which is a rooftop solar project on a furniture factory, is significantly underperforming against expectations. This is a result of sawdust from the facility below escaping and settling on the panels. A solution for this is under investigation with the operations and maintenance provider and the rectification plan is expected to be in place by the end of Q2 2024.

UPDATE ON RUMS PROJECT CONSTRUCTION

Construction of the RUMS project commenced in November 2023. All the solar modules have arrived on site, alongside the majority of the other equipment needed to build the solar farm.

Construction faced delays due to farmers from the surrounding land temporarily restricting access to the construction site in early to mid-January and limiting on-site activities from 29 January to mid-February 2024. This stemmed from land-related issues, for example to do with road access, between the owner of the land, RUMSL and the neighbouring farmers. Resolution between these parties was outside of the Company's control. However, SolarArise's local asset manager escalated the issue within the relevant Indian government departments and local authorities. Following resolution, construction recommenced in the third week of February.

Additionally, the project's budget did not initially include provisions for the installation of dynamic reactive power equipment. The responsibility for this additional infrastructure, as mandated by Central Electricity Authority regulations, was unclear. In January 2024, in a meeting with RUMSL, SolarArise and other significant developers were informed that the cost would need to be self-funded by SolarArise.

RUMSL is also now behind schedule in constructing the transmission line and other infrastructure required for commissioning. It is expected that commissioning will not occur until late May 2024.

A US$2.8 million contingency was included in the modelled project costs in the 31 December 2023 valuation.  Delays to the commissioning date beyond 31 March 2024 impacts the project costs.  Every month of delay beyond 31 March 2024 will have a negative impact of US$0.5 million - US$0.7 million per month on NAV. In isolation, this is projected to result in a decrease in valuation of approximately US$1.4 million for a 31 May 2024 commissioning date, and approximately US$2.1 million for a 30 June 2024 date. Contractual avenues to recoup additional costs will be explored.

The Board has approved additional cash funding of up to US$4.5 million to fund the project delays and additional costs. The NAV impacts presented above assume this cash injection has taken place.  

Q4 2023 FACTSHEET

The Company's factsheet for the quarter ended 31 December 2023 will be available shortly on its website, www.asianenergyimpact.com.

The person responsible for arranging the release of this announcement on behalf of the Company is Uloma Adighibe of JTC (UK) Limited, the Company Secretary.

Enquiries

Asian Energy Impact Trust plc Sue Inglis, Chair	Tel: [phone]
Octopus Energy Generation (Transitional Investment Manager) Press Office	Tel: [phone] [e-mail]
Shore Capital (Joint Corporate Broker) Mark Percy / Rose Ramsden (Corporate) Adam Gill / Matthew Kinkead / William Sanderson (Sales) Fiona Conroy (Corporate Broking)	Tel: [phone]
Peel Hunt LLP (Joint Corporate Broker) Luke Simpson / Huw Jeremy (Investment Banking Division) Alex Howe / Richard Harris / Michael Bateman / Ed Welsby (Sales)	Tel: [phone]
Smith Square Partners LLP (Financial Advisor) John Craven / Douglas Gilmour	Tel: [phone]
Camarco (PR Advisor) Louise Dolan / Eddie Livingstone-Learmonth / Phoebe Pugh	Tel: [phone] [e-mail]

About Asian Energy Impact Trust plc

Asian Energy Impact Trust plc listed on the premium segment of the main market of the London Stock Exchange in December 2021 and was awarded the Green Economy Mark upon admission. The Company is an Article 9 fund under the EU Sustainable Finance Disclosure Regulation.

With effect from 1 November 2023, the Company appointed Octopus Energy Generation as its transitional investment manager until 30 April 2024 (the "Transitional Investment Management Period"). The Transitional Investment Management Period will allow the Board with its advisers to complete the strategic review of options for the Company's future.

Further information on the Company can be found on its website at www.asianenergyimpact.com.

About Octopus Energy Generation 

Octopus Energy Generation ("OEGEN" or the "Transitional Investment Manager") is driving the renewable energy agenda by building green power for the future. Its London-based, leading specialist renewable energy fund management team invests in renewable energy assets and broader projects helping the energy transition, across operational, construction and development stages. The team was set up in 2010 based on the belief that investors can play a vital role in accelerating the shift to a future powered by renewable energy. It has a 13-year track record with approximately £6 billion of assets under management (AUM) (as of September 2023) across 16 countries and total 3.2GW. These renewable projects generate enough green energy to power 2.3 million homes every year, the equivalent of taking over 1.2 million petrol cars off the road. Octopus Energy Generation is the trading name of Octopus Renewables Limited.  

Further details can be found at  www.octopusenergygeneration.com.

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[1] NAV total return per share represents the total return to shareholders, being the combined effect of the rise or fall in the NAV per share over the relevant period and assumes dividends paid in the relevant period are reinvested immediately in the Company at the prevailing NAV per share, in comparison to the NAV per share at the IPO.

[2] RUMSL is a joint venture between Madhya Pradesh UrjaVikas Nigam Limited and Solar Energy Corporation of India. Solar Energy Corporation of India Ltd is a company of the Ministry of New and Renewable Energy, Government of India.

[3] The term 'P50' refers to the median probability scenario for the energy output of a solar asset. It means that there is a 50% chance that the actual energy production will exceed the P50 estimate and a 50% chance that it will fall below.

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