Investment trust insider on Aquila European Renewables – James Carthew: Don’t wind down Aquila European Renewables
I have been doing some work with Aquila European Renewables (AERI) recently. Like every other renewable energy investment company, AERI trades at a discount, with the shares currently around 12% below net asset value (NAV). However, AERI has been one of the most proactive in addressing the problem and my hope is that it will soon have it under control.
Launched in July 2019, AERI managed to expand before the discount appeared so that it is a reasonable size with a market value of £320m and assets capable of generating 464MW of power. Its focus on the European renewables market makes it a useful diversifier to hold alongside more UK-centric funds. It also made sense for it to use the euro as its reporting currency. The shares trade on the LSE both in euros (under the AERI ticker) and in sterling (as AERS). These are the same shares, with the same rights, underlying portfolio and voting rights.
AERI had permission from the outset to invest up to 30% of its portfolio in assets under construction. That is good news for the NAV, as these assets tend to get written up in value as they move from the construction phase to the operational phase and become less risky. This has been one of the factors that has helped drive AERI’s NAV from 98 cents per share at flotation to 110.1 cents at 31 March 2023.
The last of AERI’s construction-phase assets, Guillena, a 50MW solar farm in Andalucia, Spain, became operational in April. In the context of AERI’s portfolio, it and sister plant Jàen are likely to generate a significant proportion of the fund’s power in future periods. The adviser managed to secure long-term power purchase agreements (PPAs) for these plants at €66/MWh, around twice that budgeted at the time that these assets were being acquired.
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