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Aquila Energy Efficiency wants to push on

Aquila Energy Efficiency wants to push on – the company has concluded its strategic review and the board has decided thatwhilst certain changes are required to enable the investment adviser to execute on the company’s investment strategy, the market opportunity for energy efficiency investments located in Europe remains attractive, particularly in the context of high energy prices.” In other words, it will keep going as before.

The investment adviser now reckons that the IPO proceeds will be fully deployed by the end of December 2022.

The continuation vote scheduled for the AGM to be held in 2025 will be brought forward and is expected to be voted on by shareholders during February 2023. Should deployment not improve materially in the next three months, the board will consider bringing the date further forward.

The investment adviser’s fees will now only be charged on committed capital and that will be applied retrospectively from the time of the IPO [So we may see a small jump in the NAV as fees are refunded]

The investment adviser plans to increase the size of its dedicated investment team.

An external consultant, Complete Strategy Ltd, which was paid to assist the board with its review, will be engaged by the company for an initial period of six months to provide the board with a detailed analysis of monthly deployment performance, with the costs to be borne by the investment adviser.

The board has been looking to recruit additional directors [one would probably be enough, given the size of the fund].

Where things stand

At the last update on 31 January 2022, the company had agreed to invest a total of approximately €17.6m, of which it had deployed a total of approximately €11.9m. Since that time, the company has deployed a further €6.3m and committed €5.5m, taking total commitments to approximately €23.1m, and deployment to approximately €18.2m. In addition, the company has approved a further €4m of investments which have not yet contractually completed.

The stated dividend target of 3.5 pence per ordinary share for the financial year ending 31 December 2022 is unlikely to be covered by earnings. The board will review what it feels is appropriate to pay as a dividend in light of the deployment of the IPO proceeds as the year progresses.

The accounts will be delayed, perhaps not materialising until 30 June 2022.

The placing programme permissions are likely to expire unused on 9 May 2022.

[The fund is trading on a 20.8% discount – maybe a little wider than that given the fee refund – and has a market cap of just £77m. It is hard to envisage that discount closing completely before February 2023, which must call into question the outcome of the continuation vote. However, if it does manage to commit most of the IPO proceeds before then, winding the fund up will be costly and time consuming. If the money is deployed and the fund continues, it may be June 2023 or later before we see fully covered dividends in line with the prospectus. Rolling the fund into SDCL Energy Efficiency might have provided a better outcome for shareholders.]

AEET : Aquila Energy Efficiency wants to push on

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