Managed run off continues for Aquila Energy Efficiency Trust

Aquila Energy Efficiency Trust (AEET) announced its annual results for the year end December 31 2023. The company saw a NAV total return of 0.3%, while shares fell 17.6%, leading the discount down to 39.3%. The company has made no new investments outside its existing commitments since the failed continuation vote back in Feb 2023 and has continued the ongoing managed run-off of the portfolio.

Discussing the results and the ongoing run-off, chair Miriam Greenwood commented:

“As at 31 December 2023, AEET had investments of £65.48m and legal contractual obligations to fund committed investments of £5.58 million. During the year, due to the managed run-off status of the company, relationships have become strained with some of the Energy Services Companies which have been the intermediaries to the company’s investments. If these relationships deteriorate further there may need to be additional impairment to the value of some of the company’s investments. Meanwhile, the investment adviser continues to monitor the performance of the company’s investments closely.

“In light of the successful continuation managed run-off resolution, the board has been working with its financial advisers to ensure that the company is in a position to present chareholders with a proposal to return cash. This has been a complex process. We have, however, operated during the year with the principal intention to preserve cash. This has resulted in decisions not to proceed (where it was legally possible) with £14.6m of potential investments. This has left only £5.58m to be invested, the majority of which was deployed by the end of April 2024.

“The difficulty of ensuring a return of capital from assets that are individually small in size, geographically spread, contractually complex and in many instances of a long maturity should not be underestimated. Our advisers have run an extensive process to seek offers from market participants for the portfolio of assets which would deliver value to shareholders in a shorter time frame than a managed run-ff. The board has also been open to entertaining structural proposals which would address the company’s size and liquidity, mindful always of the shareholders’ desire to see a full return of capital. However, it has not yet proved possible to find an asset sale or a structural solution that provides sufficient value in comparison with the managed run-off. The board, with the support of its advisers, continues to seek alternatives to increase the value returned to shareholders via the managed run-off. As announced on 6 March 2024, the first successful return of capital under is to be achieved by way of a tender offer at a fixed price of 94.28 pence per share, subject to the approval of shareholders at the general meeting to be held on 13 May 2024.

“As mentioned, the company has been managed over the year with the principal objective to preserve cash and, accordingly, we will now, as part of the managed run-fff process, return £17.5m to Shareholders under the tender offer. We have decided to return capital to shareholders by way of a tender offer as we believe it is in the interests of the majority of shareholders and provides an equitable distribution. We will, however, continue to keep under review the method of distribution, including the payment of dividends. Whilst further distributions will be made as unrestricted cash becomes available, I wish to stress that a significant part of the portfolio may take a considerable time to realise.”

AEET : Managed run off continues for Aquila Energy Efficiency Trust