Downing Two VCT Net Asset Value(s)

 
TIDMDP2F 
 
   Downing TWO VCT plc 
 
   LEI: 213800HJGTPW7F8YEY55 
 
   Unaudited Net Asset Values 
 
   21 February 2020 
 
   Downing TWO VCT plc announces that its unaudited Net Asset Values as at 
31 December 2019 are as follows: 
 
 
 
 
                                        Unaudited  Unaudited 
                                        31-Dec-19  30-Sept-19 
F Share class 
Net asset value per 'F' Share           26.5p      31.6p 
Cumulative distributions per 'F' Share  72.0p      67.0p 
Total return per 'F' Share                  98.5p       98.6p 
                                        =========  ========== 
 
'G' Share class 
Net asset value per 'G' Share           48.4p      63.0p 
Cumulative distributions per 'G' Share  51.5p      37.5p 
Total return per 'G' Share                  99.9p      100.5p 
                                        =========  ========== 
 
'K' Share pool 
Net asset value per 'K' Share           58.2p      68.0p 
Cumulative distributions per 'K' Share  -          - 
Total return per 'K' Share                  58.2p       68.0p 
                                        =========  ========== 
 
   Provisions have been made against the value of several investments in 
the K Share pool. The impact of the valuation movements on NAV since 30 
September 2019 are summarised as follows: 
 
 
 
 
                                  K Share Pool 
                                    Movement 
                                 Pence per share 
Jito Trading Limited                       (4.4) 
SF Renewables (Solar) Limited              (0.3) 
Rockhopper Renewables Limited              (1.4) 
Indigo Generation Limited                  (1.6) 
Ironhide Generation Limited                (1.6) 
Other/running costs                        (0.5) 
                                           (9.8) 
 
 
   The Investment Manager, Downing LLP, has provided comments on the 
investments with significant movements in value as follows: 
 
   Jito Trading Limited 
 
   Jito Trading owns a wood pellet manufacturing plant in Weitra, Austria. 
Following several issues with this plant it has been concluded that it 
is appropriate to seek a buyer to acquire the company. An advisor has 
been appointed to sell the business, however a sale based on the current 
offers would not recover any value for equity shareholders. An improved 
offer is currently being sought in order to seek some recovery in value. 
 
   Indian Solar Companies 
 
   SF Renewables (Solar) Limited, Rockhopper Renewables Limited, Indigo 
Generation Limited and Ironhide Generation Limited each own ground 
mounted solar farms in India in differing stages of operations.  A 
number of market wide factors have impacted the valuations of solar 
farms in the areas our investments are located. The main issues have 
resulted from state political activity, and the significant reduction in 
power prices available through the private Power Purchase Agreement 
("PPA") market (which in turn is heavily influenced by state policy). 
Current PPA terms are low but it is not unreasonable to assume that 
there are prospects for a return to more normal market pricing in due 
course. However, there can be no certainty as to if, and when, this may 
happen and it is outside our control. In addition, currency movements 
have impacted investments.  Based on the above, we have made provisions 
against all Indian Solar investments.  Any project specific matters are 
noted in the detailed commentary below. 
 
   SF Renewables (Solar) Limited 
 
   SF Renewables operates a ground-mounted solar farm in Southern India 
which was completed and connected to the grid in March 2017. It has 
entered into a framework agreement with high quality offtakers 
(including CocaCola) and is currently selling its power at a fixed rate 
for the medium term.  The fixed price periods are coming up for renewal 
at various stages over the next 24 months.  As a result of a market wide 
downward trend on solar PPA pricing, management are forecasting a 
reduction in the pricing on renewal compared to the original investment 
case. There are also some concerns over the regulatory environment which 
has some downward pressure on valuation.  The value of the equity in the 
company has been reduced from GBP1.06 to GBP0.90 per share. 
 
   Rockhopper Renewables Limited 
 
   Rockhopper Renewables operates a single ground-mounted solar farm in 
Telangana which connected to the grid in December 2017.  Whilst meeting 
the criteria for the relevant permits to enter into private PPAs the 
state authorities have delayed the grant of these permits unlawfully. 
The company had reached agreement with a number of corporate offtakers 
under similar arrangements to SF Renewables but cannot yet sell 
electricity directly to corporate customers until the permit is granted. 
As a result of the uncertainty over both whether a permit will be 
granted and also whether the PPA pricing in the original investment case 
can now be achieved, the value of the equity has been reduced from 
GBP0.87 to GBP0.50 per share. 
 
   Indigo Generation Limited and Ironhide Generation Limited 
 
   Indigo Generation and Ironhide Generation are both developing solar 
farms on adjacent land in Maharashtra, India. Construction of the first 
phase of each site is now complete and grid connections are secured. 
The initial phase can be brought into operation as the second phase is 
being constructed. The sites will operate independently and seek to 
maintain their own private PPAs.  The private PPA market in Maharashtra 
has been particularly affected by reductions in long term PPA terms, 
particularly with respect to low inflation indices in an economy where 
inflation is running at very high levels.  As a result, management are 
forecasting a reduction in the pricing on energisation compared to the 
original investment case. 
 
   There are also other factors which also weigh on valuation, but which 
have a less material impact. For example, the second phase of the build 
programme is behind schedule due to some delays in the transfer of the 
land. The value of the equity in both companies has been reduced from 
GBP0.70 to GBP0.35 per share. 
 
 
 
 
 
 

(END) Dow Jones Newswires

February 21, 2020 02:00 ET (07:00 GMT)

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