Aquila European Renewables (AERI) announced its annual results for the year end 31 December 2023. The NAV total return was -6.0% while shares fell -9.0% with the discount widening to 20.3%. The company sited substantial interest rate increases, supply chain disruptions and falling commodity and electricity prices for the negative returns.
AERI did deliver a dividend yield of 7.4% and has guided for a 5.79 cent payout for 2024, a 5% increase on the previous year. In addition, it announced that a total of €49.0m of capital was returned to shareholders in the form of dividends and share buybacks over 2023, reducing total ordinary shares in issue by 7.4%. The company also completed 154.8 MW of construction assets, resulting in a fully operational portfolio.
Discussing the returns and the outlook for the company, chairman Ian Nolan commented,
“We expect the macro-economic environment for 2024 to benefit from several positive cyclical catalysts, with the core assumption being that inflation in the European Union will continue to recede in the coming months. The easing of significant price increases across the board witnessed in 2022 and 2023 should lead to a further fall in inflation towards the European Central Bank’s inflation target of 2.0%. However, many trends including ageing demographics in the labour market, de-globalisation, energy shortages, disrupted supply chains, and higher defence spending as a result of the continued conflict in Ukraine, will ensure that inflation remains elevated compared to the last decade. Against this backdrop, in the absence of any exogenous events that could derail assumptions on inflation or the global economic situation, the market consensus is that central banks should begin to cut interest rates this year, reversing the steepest tightening cycle in over 40 years. Lower interest rates have the effect of reducing the discount rate applied to the DCF valuation of assets, thus increasing value – all other things being equal.
“The past year also saw accelerated European and national deployment plans for renewables across most countries the Company is invested in, as governments recognise the urgency of renewable energy developments as a source of energy security and environmental progress, while also signalling increased stability and visibility over the regulatory landscape. Combined with a more favourable interest rate outlook, we expect this to bode well for the renewable energy sector.
“Your feedback as shareholders is highly valued and we hope our actions since the Annual General Meeting (“AGM”) in June 2023, including the announced review of broader options, demonstrate we are listening and will continue to act decisively in the interests of all shareholders. Finally, following the inaugural continuation vote put to shareholders at the last AGM, your Board committed to providing shareholders, notwithstanding the outcome of the ongoing review of broader options, with a further opportunity to vote on the future of the Company by September 2024.”
AERI : Improving outlook after tough year for Aquila European Renewables