Riverstone Energy’s board has been talking to its manager about the strategic direction of the company. They have agreed that it is time to wind-down the company – sell the assets and return the proceeds to shareholders.

Shareholders will need to approve the idea. To get that done, the company will soon be publishing a circular to convene a meeting to vote on the plan (including a change of investment policy) and how it will be managed.

The wind down would be carried out by the existing manager.

The manager’s fee would be cut from 1.5% of net assets to 1%, subject to the equivalent of a minimum annual fee of $500,000.

The existing performance fee arrangements would cease to apply. However – and here we quote the announcement verbatim as this is complicated –

Subject to the Managed Wind-Down being approved, REL would agree to pay to the Investment Manager a cash adjustment payment (the “Adjustment Payment”). The Adjustment Payment would be payable in two tranches, as follows:

• The first tranche would be paid shortly after approval of the Managed Wind-Down and would be calculated by reference to the Relevant Termination Payment which would have been payable by REL in respect of the Net Asset Value attributable to the company’s conventional portfolio, its public decarbonisation portfolio and its holdings of cash and cash equivalents had the IMA been terminated on the commencement of the Managed Wind-Down and based on the prevailing quarterly NAV on that date.
• The second tranche would be paid shortly following the completion of the sale of the last remaining investment in the company’s existing portfolio as at the Commencement Date (the “Final Disposal Date”), and would be determined by reference to the Relevant Termination Payment which would have been payable by REL in relation to the Net Asset Value attributable to the assets comprising the Company’s private decarbonisation portfolio, had the IMA been terminated on the Final Disposal Date. For these purposes, the Net Asset Value of each investment in such portfolio would be determined by reference to the actual sale proceeds received by REL in respect of such investment.
• For these purposes, “Relevant Termination Payment” means the payment equal to 20 times the relevant quarterly management fee, which would be payable by the company under the IMA if Shareholders approved the commencement of the Managed Wind-Down without the consent to the Investment Manager. The Relevant Termination Payment and, in turn, the Adjustment Payment, would not include any payment in respect of performance allocation.

[I have never been a fan of this fund’s fee arrangements, which have always looked a bit greedy, as you can read here. As I read it, the manager gets 7.5% of all the assets outside of the unlisted portion of the decarbonisation portfolio upfront PLUS 7.5% of the realisation proceeds of the unlisted decarbonisation portfolio at the end of the process – that’s about £21m. I wasn’t in favour of a penalty clause that paid out for the manager if shareholders said that they wanted their money back, but here it looks as though the manager is saying it’s us that doesn’t want to carry on but pay us out anyway. This is one, very good, reason why the trust is trading on a 33% discount. I suppose shareholders could oppose the managed wind down idea, but then what?]

RSE : Riverstone Energy plans managed wind down