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Aquila Energy Efficiency shows progress but there’s a way to go yet

Aquila Energy Efficiency Trust says that its commitments to investments were £87.3m as at 19 December 2022, up from £55.5m at 31 August 2022. Total income-generating, deployed capital has increased to £54.4m (31 August 2022: £32.1m). The company is expected to achieve an average gross unlevered project yield of 8.0% over all investments made to date. The investment adviser says that it has experienced delays to decision making by corporates, which it attributes to significant volatility in wholesale electricity prices and uncertainties over the impact of new energy policies designed to address this issue, for example, energy price caps.

The board has approved commitments totalling a further £8.7m, which are awaiting financial close. The investment adviser currently expects that about 80% of the capital available for investment will have been deployed by 31 March 2023.

The portfolio now comprises 30 investments in Germany, Italy, Spain and the United Kingdom with 19 different energy service companies (ESCOs), across a wide range of technologies including solar PV, combined heat & power (CHP), biogas, sub-metering, wind, and water management. In addition, there is a suite of building energy efficiency technologies being deployed in Italian Superbonus projects.

Investments since 31 August 2022 include:

  • £10.7m investment to acquire receivables due under water management service agreements for condominiums and multi-family homes in Germany, mainly managed by large property managers.
  • £8.0m commitment to fund the acquisition of a biogas plant and investment in liquefaction equipment by one of Germany’s leading biogas development companies with more than 20 years’ experience in the sector.
  • £5.8m commitment to fund the refurbishment of condominiums in Spain under the “Programa de Rehabilitacion Energetica de Edificios” (PREE) incentive scheme. The investment is based on the purchase of receivables generated by energy saving contracts.
  • £3.5m commitment to fund solar PV plants in self-consumption for residential properties located around Madrid, Barcelona and Valencia originated by Solarnub, a fast-growing trading management platform for solar companies; this is the second investment with Solarnub.
  • £0.9m commitment to fund a solar PV project for self-consumption for a leading Spanish ceramic tiles manufacturer, developed by a Valencia based ESCO.
  • £0.8m commitment to fund a solar PV project for self-consumption for an Italian manufacturing business.
  • £0.6m commitment to invest in a cluster of solar PV projects in self-consumption located in Cordoba and Granada marking the start of a new relationship with a Spanish developer based in Córdoba
  • £0.5m of other commitments including the fourth solar PV project with an Italian developer and a second Solar sV project with another Spanish developer based in Barcelona; and
  • £0.4m investment in operational small wind farms in the UK which benefit from feed-in and export tariffs and provide onsite power for self-consumption.

Vale of Mowbray update

The CHP project being developed by Ega Energy for Vale of Mowbray Limited is on hold due to this company having entered into administration. £0.9m has been invested in the project with the majority of the capital applied to acquire the CHP equipment, which is not yet onsite. Ega Energy is identifying other clients who may use the equipment if the Vale of Mowbray site is not acquired by a business with a sufficiently strong credit rating. The adviser believes that its contractual arrangements with Ega Energy protect the value of the investment made to date and so no impairment has been made at this point.

[It is good to see progress being made and the highly diversified portfolio now includes a number of exposures that are unique to this trust. However, the delays, the distributions from capital and the odd bit of bad news such as Vale of Mowbray, have left the smallest fund in the sector trading at its widest discount. The company has a long way to go before it can convince us that it is worth it persevering as a standalone vehicle and we still think a merger with a larger player makes sense.]

AEET / AEEE : Aquila Energy Efficiency shows progress but there’s a way to go yet

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