Riverstone Energy (RSE) is amending its performance allocation arrangements, as follows:
- Portfolio level cost benchmark: A performance allocation will only be distributed in respect of a realised investment if, at the time of the realisation of the relevant investment, the aggregate of the fair market value of all of the company’s then unrealised investments and the proceeds of all of its realised investments since inception exceeds the aggregate acquisition price of all of the Company’s unrealised and realised investments. If this portfolio level cost benchmark is not met at the time of realisation of the relevant investment, distribution of the performance allocation is subject to deferment as described further below.
- 8% hurdle rate: A performance allocation will only be accrued for payment upon the realisation of an investment if the proceeds from that investment exceed an amount equal to its acquisition cost plus an 8% annual cumulative hurdle rate calculated from the date of investment to the date of realisation. If the hurdle is met, the performance allocation will be 20% of all net profits in respect of each such investment. “Net profits” means the proceeds received from each realised investment (after the expenses related to its disposal) minus the acquisition price of that realised investment.
- Full realisation: A performance allocation will only be calculated and accrued on the full realisation of the entire interest in an investment, unless a partial realisation results in the full return of all capital invested in such investment. Otherwise, no performance allocation will be payable on partial disposals and the ability for the manager to elect to receive a performance allocation on an investment that has been held by the company for at least seven years (but not sold) has been removed.
- Deferral: If the portfolio level cost benchmark is not met at the time of full realisation of the relevant investment, it will be retested on a quarterly basis for the following three years. If, at any time during those three years, the benchmark is satisfied for four continuous quarters, the relevant performance allocation will then become distributable without interest. Any accrued but undistributed performance allocation that has been deferred due to the portfolio level cost benchmark test will expire after 36 months.
Distribution of investment proceeds
In addition, the company and its manager have agreed that, going forward, 20% of the net profits attributable to each fully realised investment, net of taxes, withholdings or reserves for taxes will, at the discretion of the company, be available for distribution to the company’s shareholders, whether by dividend or share repurchases.
Amendments effective as of 30 June 2019
The amendments will be effective as of 30 June 2019 and will apply to all current and future investments of the company.
Other than as described in this announcement, the investment management agreement and related arrangements between RSE and the manager will remain as previously agreed.
RSE is a closed-ended investment company that invests exclusively in the global energy industry across all sectors. RSE aims to capitalise on the opportunities presented by Riverstone’s energy investment platform. RSE has 12 active investments spanning oil and gas, midstream, energy services, and power in the Continental U.S., Western Canada, Gulf of Mexico, Europe, and Latin America.
RSE: Riverstone Energy announces amendments to performance allocation arrangements