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Aquila European results overshadowed by discount problem

Aquila European Renewables Income Fund’s results for the year ended 31 December 2021 show an NAV total return of 7.6%, but after some discount widening, a return to shareholders of just 0.5%. Dividends totalled 5 cents per share (in-line with its target) and these were covered 1.1 times. The dividend target for the current financial year is 5.25 cents, an increase of 5%.

Portfolio production was 522.3 GWh during the year, 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 some extra revenue from the Greek wind farm Desfina that had been tied up awaiting the award of the operating licence, revenue was 10.2% higher than budget.

Construction of the Rock wind farm in Norway was delayed but construction was completed in December 2021, with all 72 wind turbines now erected and energisation currently in progress. A number of the turbines are already energised and as a result are producing electricity and revenue. The delay required the fund to take on additional bridge financing. This has been refinanced since. The legal dispute with the local Sami people (who claim the wind farm is disturbing their reindeer) is ongoing and this is one reason for the discount we think.

The company entered into new power purchase agreements for its Sagres, Holmen II, Svindbaek, Benfica III and Albeniz projects in order to take advantage of higher market prices, thereby increasing contracted revenue.

The portfolio now includes ten separate investments, with a total generating capacity of 332.3 MW. The fund’s new 100MW Spanish solar investment – Greco – will “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“, says the chairman.

The investment adviser has agreed to be paid in shares for an additional two years until 30 June 2023.

AERI : Aquila European results overshadowed by discount problem

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