Announcement of Interim Results
The Renewables Infrastructure Group Limited
("TRIG", the "Company", or together with the holding companies, the "Group")
Announcement of Interim Results
for the period from 1 January 2014 to 30 June 2014
21 August 2014
An infrastructure investment company
with a portfolio of operational wind and solar assets, diversified across weather systems, regulatory regimes and power markets
Solid performance in the first half
· Directors' valuation of the portfolio at 30 June 2014 of £353.3 million, up from £300.6 million reflecting acquisitions and portfolio returns during the period
· Production of electricity at nearly 400GWh and cash generation continuing in line with expectations
· Portfolio increased to 24 investments during the period with the acquisition of two solar parks and two onshore wind farms, increasing generating capacity to 341.1MW
· Raised equity capital of £66.2 million through an issue of C shares in March 2014
· Revolving acquisition facility of £80 million arranged to enhance flexibility
Momentum continues since June
· Since the period end, the Company has acquired a further three solar PV assets for £73.7 million with generating capacity of 56.6MW, bringing the total portfolio to 27 assets and 397.7MW.
· Raised equity capital of £38.6 million through a tap issue on 11 August
· 3.0p dividend declared on 14 August and Company targeting a total distribution of 6.08p for the year ended 31 December 2014
Financial highlights for the period to 30 June 2014
|
|
Per share |
|
Net Asset Value per share at 30 June 20141 |
102.3p |
|
Net Asset Value per share at 30 June 2014, net of the interim dividend |
99.3p |
|
Profit before tax |
£10.8m |
|
Earnings per share |
3.3p |
|
Interim dividend per share (declared on 14 August 2014) |
3.0p |
|
Portfolio return |
9.1% |
Helen Mahy, non-executive chairman of the Company, said:
"We have reported a strong set of interim results, in line with TRIG's objectives of providing attractive income-based returns through investing in a diverse portfolio of projects in established renewables technologies in the UK and Northern Europe. Since our IPO just over a year ago, the Company has now grown by half - by number of projects and by portfolio value, providing nearly 400MW of generating capacity from 27 onshore wind and solar PV projects. "
Richard Crawford, Director, Infrastructure, InfraRed Capital Partners, said:
"TRIG continues to perform in line with its operational and financial targets, and is pleased with further vindication of the diversification strategy of onshore wind and solar PV, which continue to show complementary performance. As well as adding four projects, plus a further three since the end of June, the Company has so far this year successfully raised over £100 million of additional equity contributing to the growth, diversification and liquidity of the Company.
Enquiries
InfraRed Capital Partners 020 7353 4200 (on the day)
Richard Crawford, Infrastructure
Matt Dimond, Investor Relations
Phil George, Portfolio Director
RES 020 7353 4200 (on the day)
Jaz Bains, Commercial Director, EMEA
Simon Reader, Communications & Marketing
Tulchan Communications 020 7353 4200
Camilla Cunningham
Victoria Huxster
Chairman's Statement
Introduction
On behalf of the Board, I am pleased to present the interim report for The Renewables Infrastructure Group Limited ("TRIG" or the "Company", and with the holding companies, the "Group") for the six months to 30 June 2014.
We had a successful first period in 2013, on which we reported in February, and the Company's performance overall remains in line with its operational and financial expectations with TRIG continuing its steady portfolio growth in the six month period.
TRIG is the only London-listed investment company to benefit from a portfolio diversified both by technology (onshore wind and solar PV) as well as by jurisdiction (with investments across the UK, France and Ireland). Acquisitions increased the generation capacity of the portfolio by 18% during the period, taking it to 24 assets and 341.1MW, the largest amongst its peers on both measures. This reflects the strategy determined at launch, mitigating against operational, weather, regulatory and power price risks through diversification. The strategy also gives TRIG the flexibility when seeking investments to look across multiple markets (two sectors and Northern European countries) for the best opportunities, with the necessary breadth and depth of execution and operating skills being provided by the management combination of InfraRed Capital Partners ("InfraRed") as Investment Manager and Renewable Energy Systems ("RES") as Operations Manager.
This diversification, investment flexibility and management capability, coupled with the market opportunity, reinforce the Board's confidence in TRIG's ability to meet its dividend target, increasing with inflation, and to grow to enhance stock availability and liquidity for investors. Total shareholder return (share price plus dividends) was 9.9% from the IPO to 30 June 2014.
Performance
Production
Variations in weather from period to period, and accordingly the Group's electricity generation, are to be expected. The half year has been unusually variable, with a particularly still but sunny second quarter following the very wet and windy winter months, with the overall result that generation during the six month period is a little (4%) down against the Group's central projections, although is on budget when compared with the eleven months as a whole since the IPO, as production in the first five months was above budget by a similar margin (5%). This overall resilient performance has been assisted by the diversification of the Company's portfolio across multiple technologies and local weather systems.
Financial Results
Profit before tax for the six month period to 30 June 2014 was £10.8 million and earnings per Ordinary Share were 3.3 pence. In the Company's first five month trading period to 31 December 2013, profit before tax was £10.3 million and earnings per Ordinary Share were 3.4 pence. The movement in earnings principally reflects the variations in generation between the two accounting periods and valuation movements which include slight downward adjustments for currency and for power price forecasts.
Cash received from the portfolio by way of distributions, which include interest and loan repayments, was £16.3 million. After Group costs, net cash flow of £14.3 million covered the interim cash dividend paid by 2.2 times. This is equivalent to 1.8 times had the interim cash dividend been in respect of a full six month period instead of the opening five month period.
The net asset value ("NAV") per share was 102.3 pence at 30 June 2014, an increase of 4.3% on the 98.1p NAV upon Admission on 29 July 2013. After taking into account the interim dividend of 3.0 pence per share declared on 14 August 2014 and to be paid on 30 September 2014, NAV per share at 30 June 2014 was 99.3 pence.
Total management fees accruing to InfraRed and RES amounted to £1.6 million in the period, comprising their management and advisory fees based on 1.0% per annum in aggregate of the Adjusted Portfolio Value with 20% of the fees to paid through the issue to the Managers of 319,206 Ordinary Shares in aggregate. For the six months to 30 June 2014, using the AIC methodology, the Company's Ongoing Charges Percentage was 1.18% on an annualised basis (1.20% for the first accounting period to 31 December 2013).
More details of the financial performance are set out in the Managers' Report as well as in the financial statements.
Acquisitions
During the period, TRIG successfully completed the acquisition of two solar PV projects and two wind projects for £55.5 million. This increased the portfolio to 24 projects with combined capacity of 341.1MW, comprising 16 onshore wind and 8 solar PV assets in the UK, France and Ireland.
The Board is particularly pleased to report on the successful implementation of the further diversification into solar PV, being naturally complementary to wind. As at 30 June 2014, solar PV represented approximately 26% of the portfolio by value (from 10% at IPO).
Capital Raising
The Group's £80 million revolving acquisition facility, provided by Royal Bank of Scotland plc and National Australia Bank Limited and announced on 21 February 2014, provides the Group with the flexibility to acquire further assets on a timely basis, reducing the performance drag associated with holding excess cash. This facility has been utilised and repaid during the period providing an effective bridge to equity issuance. The Group's revolving debt facility was undrawn at the period end. The average project level gearing across the portfolio at the period end was approximately 42%.
During March 2014, the Company launched and completed its first follow-on prospectus capital raising in the form of a C Share Placing, Open Offer and Offer for Subscription which raised gross proceeds of £66.2 million to pay down the acquisition facility and raise further capital for the near-term investment pipeline. The C Shares were converted to Ordinary Shares on 1 July 2014.
Valuation
The Investment Manager has prepared a fair market valuation for each investment in the portfolio as at 30 June 2014. This valuation is based on a discounted cash flow analysis of the future expected equity and loan note cash flows accruing to the Group from each investment. This valuation uses key assumptions which are set by the Investment Manager using its experience and judgement having taken into account available comparable market transactions and financial market data in order to arrive at a fair market value.
The Directors have satisfied themselves as to the methodology used and the assumptions adopted and have approved the valuation of £353.3 million for the portfolio of 24 investments as at 30 June 2014.
This valuation compares with £279.4 million for the initial portfolio of 18 assets as at 29 July 2013 at the time of the Company's IPO and £300.6m for the 20 assets owned as at 31 December 2013. An analysis of the increase in the valuation is detailed in the Managers' Report.
Distributions
In line with the policy stated upon IPO, the Board has declared an interim dividend for the six months ending 30 June 2014 of 3.0p per share, payable to those ordinary shareholders on the register on the record date of 22 August 2014. The Board believes that it would be in the general interest of shareholders, who may be able to treat distributions of Scrip Shares as capital for tax purposes or who may otherwise wish to roll over their dividend entitlement into further investment in the Company, to have the option of electing to receive part or all of their dividends in the form of Scrip Shares. A scrip dividend alternative is also being offered and details will be sent shortly to shareholders. The cash dividend will be paid to shareholders on 30 September 2014.
Based on the current performance of the portfolio, the Board is targeting an interim dividend of 3.08p per Ordinary Share for the six months ending 31 December 2014, incorporating the first inflation-adjusted increase in the dividend for the Company. This results in a dividend target of 6.08p in aggregate per share in respect of the year to 31 December 2014. Looking further ahead, the Board reaffirms its intention to grow the dividend with UK inflation over the medium term.
Environmental, Social and Governance
The TRIG portfolio at 30 June 2014 powers the equivalent of 190,000 households and avoids the emission of 330,000 tonnes of CO2 annually.
Community initiatives have been launched at a number of our sites in the last six months. In the UK and Ireland these include supporting a lunch club for the elderly, installing solar panels on a village hall, supporting a 'talking newspaper' and expanding a scheme that discounts energy bills to cover residents and businesses close by another two wind farms in the portfolio. In France a number of initiatives have taken place including the annual sponsorship of two local events in the region around Cuxac Cabardès - the "Foulées de la Montagne Noire" (a running event) and "Guitares à Travers Chants" (a summer music festival) and the project company at Haut Languedoc has been working with the tourist authority on upgrading hiking trail map-boards and signage through the farm.
The Board has welcomed the addition of Mr Klaus Hammer to the TRIG board from 1 March 2014 as the fourth non-executive Director. Mr Hammer has extensive knowledge of energy markets and international career experience spanning 20 years at E.ON and Royal Dutch Shell.
In July 2013, the Alternative Investment Fund Managers Directive ("AIFMD") came into force. The Company took advantage of the transitional arrangements that allowed a one year's grace period in order to put in place policies, procedures and registration to enable compliance by July 2014.
After taking professional and legal advice, the Board determined that the Company would become a self-managed Alternative Investment Fund ("AIF"). The Company has now registered as a self-managed AIF and has implemented a small number of changes to procedures to enable the Board to fulfil its role in the supervision of investment decisions and the management of risk.
The Board's intention is for TRIG to remain at the forefront of disclosure and transparency for our sector. We note the high level of engagement by TRIG's Managers, InfraRed and RES, with leading institutional investors, investment analysts and the media as the listed renewables sector establishes itself as a mainstream attractive yield product alongside other infrastructure and income-based funds.
Outlook
The Board is pleased and encouraged by the achievements that TRIG continues to make towards its goals. In this evolving market, the Board works closely with the Managers in assessing a variety of risks and opportunities in the renewables market, whether in the form of the evolution of renewables technologies for investment, operational enhancement possibilities, adjustments to support mechanisms for newly commissioned projects, the potential outcome and impact of Scotland's forthcoming independence referendum, new financing structures or changes in the competitive market for operational projects. Market developments are discussed further in the Managers' Report. Apart from potential economic or political changes that could occur following the Scottish referendum, the Board believes that the principal risks and uncertainties have not changed from those commented on in the Company's Annual Report for the year to 31 December 2013 (available on the website).
Since the period end, TRIG's portfolio has increased with the acquisition of a further three solar PV projects in August, bringing the total generating capacity to 398MW, further extending the company's diversification into solar. Further details are set out in the Managers' Report. The acquisition pipeline continues to be extensive and has included a broad range of both onshore wind assets and solar PV assets from a number of vendors including independent developers, utilities and RES under the Right of First Offer Agreement from which TRIG benefits.
The Company has also completed a tap issue in August, raising £38.6 million before expenses, which has been applied to pay down the borrowings on the acquisition facility. The Board has been delighted by the strong level of support from its existing investor base as well as the addition of some new institutional investors in its offerings, which has enabled the Company to progress with its acquisitions.
We believe that, with the advantages that come from a diversified and well managed portfolio and the ability to capitalise on further investment opportunities, TRIG is well positioned to continue its portfolio growth while delivering long term, consistent and reliable dividends for institutional and other investors seeking an attractive yield-based risk-adjusted return.
Helen Mahy
Chairman
20 August 2014
Managers' Report
Introduction
InfraRed Capital Partners ("InfraRed") as Investment Manager and Renewable Energy Systems ("RES") as Operations Manager, together provide a comprehensive range of management services to address TRIG's strategy in the growing and evolving renewables market. We set out here our Managers' Report covering portfolio developments over the six month reporting period and a summary of key market developments affecting TRIG.
Market Developments
The fundamentals for continued growth in renewables remain in place. These include:
1. the continued need to reduce greenhouse gas emissions supported by national, regional and global decarbonisation initiatives;
2. the desire for energy security heightened by the decommissioning of older fossil-fuel and nuclear plants, diminishing North Sea extractions and geopolitical uncertainty, currently in the Ukraine and the Middle-East; and
3. the ability of the established generating technologies of onshore wind and solar PV to deliver cost-effectively the major share of new UK and European renewables capacity.
It is helpful to keep these fundamentals in mind when, at times, the political debate within the energy sector has appeared to be challenging and to reflect short term political expediencies, which may continue in the build-up to the 2015 general election in the UK.
In the European Union, there is more onshore wind and solar PV being added to the installed base of capacity than any other types of generation. Of a total of 35.2GW of new capacity installations in 2013, wind represented approximately 11.2GW (or 32%) while solar PV represented 11.0GW (31%). New gas facilities represented the bulk of the remainder at 22% with other renewables contributing 9%. Of the wind installations, approximately 86% were onshore. While the volumes of new installations are well ahead of all periods up to 2009, annual EU renewables installations are down on levels seen in the period from 2010 to 2012, largely as a result of a slowdown in solar PV deployment in markets such as Germany and southern Europe which had experienced very high volumes in those preceding years.
The unrest seen in the Ukraine and the Middle-East has the potential to disrupt fuel supplies and emphasises the importance of energy security within European governments' policy, along with other factors such as changes in overall supply and demand of power generation, changes in the capacity market and interconnection, as well as decarbonisation initiatives in the EU and internationally. Renewables will likely again be at the forefront of debate in the run-up to the Paris conference on the United Nations Framework Convention on Climate Change in December 2015, when broad agreement on new long-term decarbonisation measures is to be sought.
UK
In the UK, there is a broad pipeline of new projects under development and/or consented which is expected to provide further investment opportunities in the onshore wind and solar PV markets. For onshore wind, the UK Government estimates a further £3.7 billion to £5.8 billion of investment across the industry under the UK's Energy Market Reform ("EMR") Delivery Plan between 2014 and 2020, to increase installed capacity from 7.3GW at the end of 2013 to between 11GW and 13GW1. For solar PV, the estimated investment in deployment up to 2020 is £11.9 billion to £13.0 billion taking capacity from 2.7GW at end 2013 to between 11GW and 12GW by 2020. While much of this may be in smaller scale domestic, industrial or commercial rooftop sites, larger-scale projects which require a lower subsidy are also expected to deliver, cost-effectively, a significant proportion of the total. However, some caution is needed with regard to the contribution that large-scale solar PV will make. It will likely be competing with other established technologies for a proposed £50 million per annum subsidy budget to be awarded to newly commissioned projects in each year up to 2020 through the "Contracts-for-Difference" feed-in tariff budget allocation, as noted in a draft release by DECC in July 2014. Newly commissioned onshore wind projects, by contrast, continue to have the option to utilise the established ROC subsidy mechanism until 2017.
Another significant topic in the sector concerns prospective changes to the power industry (including renewables) should Scotland secede following the independence referendum scheduled for 18 September 2014. Although Scotland's population is only approximately one-tenth of that of the UK as a whole, Scotland provides around one-third of the UK's existing renewables generating capacity. In particular, Scottish onshore wind is currently the leading segment contributing to the UK's renewables installed base and is projected to supply significant further capacity growth towards meeting 2020 targets. For TRIG, Scotland represents approximately 27% of the Portfolio by value (taking into account the acquisition of the three solar PV projects in August 2014).
The UK Government has not formalised contingency positions for a "yes" vote in the independence referendum. Thus there is an absence of clarity on what aspects of the electricity and renewables regulations and policy would change and what any new arrangements would be following any secession. While there can be no certainty that the politics evident in some pre-referendum positioning could not spill over into enacted policies potentially damaging to the renewables markets (and therefore to TRIG), several factors contribute to a robust view on the future of the subsidy regime in a separate Scotland, should this be the case:
1 DECC / HM Government: Delivering UK Energy Investment (July 2014)
- The capability for Scotland to deliver a substantial part of the UK's overall renewables and power requirements - mainly from onshore wind which generally operates with high capacity factors (and therefore economic efficiency) in Scotland. In contrast, in England the deployment of renewables is running into increasing levels of planning challenges.
- The economic significance of the renewables and broader energy industries in Scotland, coupled with the cost effectiveness of onshore wind in Scotland versus other renewables options of solar PV in England and offshore wind.
- The importance to both the UK and an independent Scotland to honour their commitments. The UK has an excellent and long-standing reputation in the credit markets. The continuing UK and Scotland will have a strong desire and motivation to maintain this standing at this important juncture.
- The likelihood, as generally proposed by industry commentators as a natural outcome, of there being a continuing joint GB electricity market following any independence given the historical position and physical adjacency.
France
In France, after a marked slowdown in the build-out of renewables during 2013, the Government earlier this year revealed plans to boost the country's renewable energy sector with a proposal to increase renewables' share of the energy mix to 32% by 2030 (with a 2020 target of 23%). By 2020 France is expected to increase its installed capacity of wind to around 20GW from 8.3GW in 2013. To put this in context, in 2013 France ranked 5th in terms of European installed wind capacity, behind Germany (33.7GW), Spain (23.0GW), UK (10.5GW) and Italy (8.6GW). The Managers also note a pick-up of activity in the secondary market leading to some higher prices being paid for existing projects in France.
Ireland
The build out of wind projects in the Republic of Ireland maintains the momentum derived from the favourable REFIT regime, expected to be closed to new entrants from 2017. Further news on the replacement scheme is still to come, but it is likely to take the form of a premium feed-in tariff awarded through competitive auctions for certain technologies. The installed base of wind in the Republic of Ireland was 2.0GW in 2013 and is expected to double by 2020 to around 4GW. As in the market in Great Britain, Northern Ireland will see the Renewables Obligation closed to new entrants after March 2017 with the adoption of Contracts-for-Difference programme expected to start from 2015.
In the Single Electricity Market for Northern Ireland and the Republic of Ireland, the authorities are moving towards a model of market arrangements (in terms of pricing of wholesale electricity - aided by improved interconnection over time and trading mechanisms) that is compliant with the European Electricity Target Model by 2016. The detailed design will proceed through 2015. This introduces some added uncertainty into power price forecasts in this market as the new mechanisms are introduced.
Portfolio Update
Portfolio Performance
With the back-drop of the recent unusual weather conditions in TRIG's target markets as well as more broadly in the Northern hemisphere, the Managers are pleased to report the benefits of a diversified portfolio which continues to perform in line with expectations. In the six months to 30 June 2014, the TRIG portfolio (excluding the two onshore wind projects acquired towards the end of June) produced a total of 398.7 gigawatt hours (GWh) of electricity, slightly (4%) below the projected level of production based on the "P50" central estimate for power output as assessed upon acquisition.
The following table sets out the energy production performance of the portfolio by major category for the six months to 30 June 2014 against the P50 central estimate for energy production, as well as a comparison with the five month period to 31 December 2013 and the total performance over 11 months since IPO:
|
TRIG Portfolio: Electricity Production Performance
|
|
||||||
|
|
Performance Against Independent P50 Central Projections At Acquisition |
|
|
||||
|
|
6 months to
|
5 months to
|
11 months to |
Capacity2 at |
|
||
|
GB Wind |
- 4% |
+11% |
|
+3% |
1373 |
|
|
|
NI & ROI Wind |
- 8% |
0% |
|
- 4% |
69 |
|
|
|
France Wind |
- 2% |
+2% |
|
0% |
73 |
|
|
|
GB & France Solar |
+3% |
-4% |
|
+1% |
62 |
|
|
|
Overall Portfolio Performance vs P50 |
-4% |
+5% |
|
0% |
|
|
|
|
Portfolio Production |
398.7 |
344.6 |
|
743.3 |
341 |
|
|
|
|
|
|
|
|
|
|
|
Total electricity production from 1 August 2013 to 30 June 2014 (the first 11 full months of operations since the IPO) was 743.3GWh, on target for the P50 central projection for the same period for the portfolio as a whole.
The performance illustrates the resilience of the portfolio through the fluctuations that can be expected over time in the generation by a portfolio of renewables assets. The windy conditions in the British Isles over the winter months, with prolonged periods of exposure to North Atlantic low pressure systems, saw winter production in excess of long-term averages as defined by the P50 central projections. The spring period generally showed a wind performance close to expectations, following which May and June have been relatively still months. This has been counterbalanced by lower levels of solar irradiation versus expectations in the winter months especially in Southern England, but an outperformance since March with bright weather conditions compared to long-term averages in both the UK and France. Wind in the South of France, affected by the meteorological dynamics relating to the topography of the Mediterranean coastal regions, has been relatively strong in the second quarter after a weak first quarter.
Acquisitions
During the six months to 30 June 2014, TRIG acquired four projects, growing the portfolio by approximately 18% in both installed capacity and value terms.
In March, following the publication of the C share prospectus, TRIG announced investments in an additional two solar PV assets in Southern England. These were both large-scale ground-mounted solar PV generating projects on agricultural sites. The maximum investment consideration for 100% interests in the two projects was approximately £36.3 million including performance adjustments. The investments were funded through cash resources and use of the Company's acquisition facility (subsequently paid down by the C share fund-raising in March) and are without project-level debt, although debt or other structuring may be introduced in due course to optimise the capital structure and returns to the Group.
The two projects are Tamar Heights Solar Park, located near Barnstaple in Devon, with a generating capacity of 11.8MW, and Stour Fields Solar Park, located near Colchester in Essex, with a generating capacity of 18.7MW. Both projects were acquired from a group of private developers and were constructed by Ib Vogt, a specialised German EPC contractor, incorporating modules supplied by Hanwha SolarOne, a leading solar PV module manufacturer. The sites were both connected to the grid in March 2014 and are both accredited under the UK's support banding of 1.6 renewables obligation certificates (ROCs) per MWh. Long term (15-year) power purchase agreements have been put in place with British Gas. The site leases are for 25 years. In addition, TRIG has an option to extend the lease at Stour Fields Solar Park by a further five years.
In June TRIG acquired two onshore wind farms in the UK for approximately £19.1 million, with the price subject to certain value protections and performance adjustments. These were acquired from RES, who also developed the sites, under TRIG's right of first offer agreement with RES.
Tallentire Wind Farm is a project with a 12.0MW rated generating capacity near Cockermouth in Cumbria, England consisting of six Vestas V80 2.0MW wind turbines. The project became operational in May 2013. Meikle Carewe Wind Farm is a project with a 10.2MW rated generating capacity near Aberdeen in Scotland consisting of 12 Gamesa G52-850kW turbines. The wind farm became operational in July 2013. Both projects have lease interests which run for 25 years, have long-term (15 year) PPAs with Statkraft Markets GmbH from 2013 and are subject to a single long-term financing facility with project-level leverage of approximately 59% of the combined enterprise value. They represent acquisitions under the right of first offer agreement between the Company and RES which was entered into prior to the IPO in July 2013. The investments were funded from TRIG's cash resources including proceeds of the C share fund-raising in March.
The acquisitions summarised above represent four of the five pipeline projects highlighted in the C share prospectus, with the fifth project, the Taurbeg Wind Farm in the Republic of Ireland currently being evaluated.
As at 30 June 2014 solar PV projects contributed approximately 26% to the portfolio as a whole by value and 18% by generating capacity.
Since the period end, a further three solar PV projects with an aggregate capacity of 56.6MW have been acquired taking the total capacity of the portfolio to 397.7MW and increasing the solar PV contribution to 39% by value and 30% by generating capacity. These additional acquisitions, announced on 8 August 2014, are of large-scale ground-mounted fully operational solar PV generating projects on agricultural sites in the South and East of England. They were acquired from a joint venture between the British Solar Renewables group, one of the UK's most experienced solar developers with over 150 employees, and Santander. The aggregate valuation of 100% of the interests in the three projects is £73.7 million (or approximately £76 million including working capital). The final consideration payable is subject to certain performance adjustments.
The three acquired projects are a 24.2MW plant at Parley Court Farm, Dorset, a 21.2MW plant at Egmere Airfield, Norfolk and an 11.1MW plant at Penare Farm, Cornwall. The projects have been constructed by Isolux Corsán with modules supplied by ReneSola. All projects have received ROC accreditation at 1.6 ROCs per MWh. Isolux Corsán has been retained to provide operations and maintenance services under an agreement covering the two year warranty period under the EPC. Short term power purchase agreements are already in place and longer term replacements are being considered. The projects do not have project-level debt. The acquisition has been funded by the Group partly from cash resources and partly from utilisation of the revolving acquisition facility which was subsequently substantially repaid via an equity tap issue by TRIG on 11 August 2014.
The Company is focused on owning operational, yielding projects, although there may be opportunities where the Managers consider it advantageous for the Company to be involved in projects prior to their completion and grid connection. Notable is solar PV where projects may be acquired ready to build and the plant built and connected within a period of months. Such projects may be acquired at more attractive prices than buying when an intermediary has financed the construction. The Company's policy is not to have more than 15% of the value of its assets in development or construction at any time. TRIG's portfolio at 30 June 2014 was comprised entirely of operating projects.
The Managers have access to a broad pipeline of renewables projects for acquisition, from a range of vendors in the UK and elsewhere in Northern Europe. Ahead of the expected closing of the final ROC window for new large-scale (greater than 5MW) ground-mounted solar PV projects in the UK in March 2015, the UK solar PV development market continues to be very active in the near term. TRIG is also considering a range of onshore wind projects for possible acquisition from utilities and other third parties as well as RES to increase further the scale and diversification of the Company.
Health and Safety
There were no major incidents during the six months to 30 June 2014 in the investment portfolio projects.
Valuation of the Portfolio
The Investment Manager is responsible for carrying out the fair market valuation of the Group's investment portfolio which is presented to the Directors for their approval and adoption. The valuation is carried out on a six monthly basis as at 30 June and 31 December each year.
For non-market traded investments (being all the investments in the current portfolio), the valuation principles used are based on a discounted cash flow methodology, and adjusted in accordance with the European Venture Capital Associations' valuation guidelines where appropriate to comply with IAS 39, given the special nature of infrastructure investments.
Fair value for each investment is derived from the application of an appropriate discount rate to reflect the perceived risk to the investment's future cash flows to give the present value of those cash flows. The Investment Manager exercises its judgment in assessing both the expected future cash flows from each investment based on the project's expected life and the financial models produced in relation to each project company and the appropriate discount rate to apply. This is the same method as applied at the time of the IPO and at 31 December 2013.
The Directors' Valuation of the portfolio as at 30 June 2014 was £353.3m. This valuation compares to £300.6m as at 31 December 2013.
Valuation Movements
A breakdown of the movement in the Directors' valuation of the portfolio in the period is set out in the table below.
|
Valuation movement during the period to 30 June 2014 |
£m |
£m |
|
|
|
|
|
Valuation of portfolio at 31 December 2013 |
|
300.6 |
|
New investments in the period |
55.5 |
|
|
Cash distributions from portfolio |
(16.3) |
|
|
|
|
|
|
Rebased valuation of portfolio |
|
339.8 |
|
Forex movement on Euro investments (before effect of hedges) |
(1.6) |
|
|
Changes in forecast power prices |
(2.4) |
|
|
Change in economic assumptions |
2.4 |
|
|
Change in discount rate |
- |
|
|
Portfolio return |
15.1 |
|
|
|
|
|
|
Valuation of portfolio at 30 June 20144 |
|
353.3 |
|
|
|
|
|
|
|
|
Allowing for investments of £55.5m and cash receipts from investments of £16.3m, the rebased valuation is £339.8m. The valuation at 30 June 2014 is £353.3m, representing an increase over the rebased valuation of £13.5m (or £13.9m including the foreign exchange gain in the period on hedges held outside the portfolio). In considering this return it should be noted that the investments made on 26 March 2014 (approximately £36.3m) and on 23 June 2014 (£19.1m) were not fully earning in the period.
Each movement between the rebased valuation and the 30 June 2014 valuation is considered in turn below:
(i) Foreign exchange: Appreciation of Sterling versus the Euro has led to a £1.6m loss on foreign exchange in the period in relation to the Euro denominated investments i.e. those located in France and the Republic of Ireland which at 30 June 2014 comprised 15% of the portfolio. This is before the mitigating impact of hedges which are held outside the investment portfolio as follows: the Group enters into forward hedging contracts (selling Euros, buying Sterling) for an amount equivalent to its expected income from Euro denominated investments over the short term, currently approximately the next 18 months. As the Euro depreciated the currency hedge generated a £0.4m gain in the 6 month period to 30 June 2014 and serves to reduce the sensitivity to movements in the Euro/Sterling exchange rate. The impact on net assets of the foreign exchange movement is hence £1.2m after netting off the £0.4m benefit of the foreign exchange hedge.
The Investment Manager keeps under review the level of Euros being hedged, with the objective of minimising variability in shorter term cash flows with a balance between managing the sterling value of cash flow receipts and potential mark-to-market cash outflows.
The impact of foreign exchange movements within power prices is included in the "change in forecast power prices" bar. This is a change from that presented in the 31 December 2013 Report and Accounts when an estimate of the impact of Euro/Sterling exchange rate movements on power prices for the Northern Ireland assets (which sell into a shared market with the Republic of Ireland) was allocated to foreign exchange movements. This revised allocation is consistent with the treatment adopted by other renewables investment companies that do not attempt to separate out currency influences on UK power price forecasts from other factors. For comparison purposes, if the valuation bridge in the 31 December 2013 Report and Accounts (page 24) had been stated on this basis, the foreign exchange movement for that reported period would have been -£1.3m (instead of -£2.1m) and the power price movement would have been +£0.1m (instead of +£0.9m).
(ii) Forecast power prices: Adjustments to the power price forecasts have reduced the valuation of the portfolio by a net £2.4m. The valuation uses updated power price forecasts for each of the markets in which TRIG invests, namely the GB market, the Single Electricity Market of Ireland, and the French market. Changes include adverse currency movements impacting imported fuel costs, reductions in gas prices and, in Ireland, to reflect ongoing consultation around electricity market design that may adversely affect the income payable to wind farms. The weighted average power price used to determine the Directors' valuation is comprised of the blend of the forecasts for each of the three power markets in which TRIG is invested after applying expected Power Purchase Agreement power sales discounts. The forecast assumes an average annual increase in power prices in real terms of approximately 2%.
(iii) Economic assumptions: The change in economic assumptions relates to a change in the assumed UK Corporation Tax rate for UK investments to 20% from April 2015 (previously 21%). This follows legislation to apply this rate in the 2014 Finance Act having been enacted. The valuation of the UK investments has increased by £2.4m as a result of this.
(iv) Discount rates: There have been no changes made to the discount rate valuation methodology applied to the portfolio valuation. The discount rate used for valuing each investment represents an assessment of the rate of return at which infrastructure investments with similar risk profiles would trade at on the open market. The discount rates used are as follows:
|
|
30 June 2014 |
31 December 2013 |
|
Range |
7.8% to 11.0% |
7.8% to 11.0% |
|
Portfolio weighted average |
9.6% |
9.8% |
The portfolio weighted average has reduced by 0.2% due to the greater weighting of operating solar projects within the portfolio. The lower valuation discount rates applied to solar projects reflect the lower generation variability, the higher subsidy element, the simpler operating characteristics of solar (versus wind) and the absence of project debt in the solar projects acquired in the period. The proportion of solar projects is 26% at 30 June 2014 by value, compared with 17% at 31 December 2013.
(v) Portfolio return: The balance of the valuation movement is an uplift of £15.1m. This represents a 4.4% increase, equivalent to a 9.1% annualised return in the rebased value of the portfolio which is consistent with the expected portfolio return from the investments.
Valuation Sensitivities
The Investment Manager has provided sensitivity analysis to show the impact of changes in key assumptions adopted to arrive at the valuation. For each of the sensitivities, it is assumed that potential changes occur independently of each other with no effect on any other base case assumption, and that the investments in the portfolio remain unchanged throughout the model life. All of the NAV per share sensitivities assume that 376 million Ordinary Shares were in issue as at 30 June 2014.
The analysis below shows the sensitivity of the portfolio value to changes in key assumptions as follows:
|
· Discount rate assumptions
The weighted average valuation discount rate applied to calculate the portfolio valuation is 9.6% at 30 June 2014. The sensitivity shows the impact on valuation of increasing or decreasing this rate by 0.5%.
|
· Energy yield assumptions
The base case assumes a "P50" level of output. The P50 output is the estimated annual amount of electricity generation (in MWh) that has a 50% probability of being exceeded in any given period and a 50% probability of being under achieved. Hence the P50 is the expected level of generation over the long term.
The sensitivity illustrates the effect of assuming "P90 10 year" (a downside case) and "P10 10 year" (an upside case) energy production scenarios on the portfolio applied for all future periods. A P90 10 year downside case assumes the average annual level of energy generation that has a 90% probability of being exceeded over a 10 year period. A P10 10 year upside case assumes the average annual level of energy generation that has a 10% probability of being exceeded over a 10 year period. This means that the portfolio's aggregate production outcome for any given 10 year period would be expected to fall somewhere between these P90 and P10 levels with an 80% confidence level, with a 10% probability of it falling below that range of outcomes and a 10% probability of it exceeding that range. The sensitivity is applied throughout the life of each asset in the portfolio (even though this exceeds 10 years in all cases).
|
Energy yield |
P90 (10 year) |
Base P50 |
P10 (10 year) |
|
Implied change in portfolio valuation |
(£43.7m) |
£353.3m |
+£43.4m |
|
Implied change in NAV per ordinary share |
(11.6p) |
102.3p |
+11.5p |
· Power price assumptions
The sensitivity considers a flat 10% movement in power prices for all years, i.e. the effect of adjusting the forecast electricity price assumptions in each of the jurisdictions applicable to the portfolio down by 10% and up by 10% from the base case assumptions for each year throughout the operating life of the portfolio.
|
Power price |
-10% |
Base |
+10% |
|
Implied change in portfolio valuation |
(£29.6m) |
£353.3m |
+£29.5m |
|
Implied change in NAV per ordinary share |
(7.9p) |
102.3p |
+7.8p |
· Inflation assumptions
The projects' income streams are principally a mix of subsidies, which are amended each year with inflation, and power prices, which the sensitivity assumes will move with inflation. The projects' management, and maintenance and tax expenses typically move with inflation but debt payments are fixed. This results in the portfolio returns and valuation being positively correlated to inflation.
The portfolio valuation assumes 2.75% p.a. inflation for the UK (based on the Retail Prices Index) and 2.0% p.a. for each of France and Ireland (Consumer Prices Indices).
The sensitivity illustrates the effect of a 0.5% decrease and a 0.5% increase from the assumed annual inflation rates in the financial model for each year throughout the operating life of the portfolio.
|
Inflation rate |
-0.5% |
Base |
+0.5% |
|
Portfolio valuation |
(£15.5m) |
£353.3m |
+£17.0m |
|
Implied change in NAV per ordinary share |
(4.1p) |
102.3p |
+4.5p |
|
· Operating costs at project company level |
The sensitivity shows the effect of a 10% increase and a 10% decrease in annual operating costs for the portfolio, in each case assuming that the change in operating costs occurs from 1 July 2014 and thereafter remains constant at the new level during the life of the projects.
|
Operating cost |
-10% |
Base |
+10% |
|
Portfolio valuation |
+£12.0m |
£353.3m |
(£12.0m) |
|
Implied change in NAV per ordinary share |
+3.2p |
102.3p |
(3.2p) |
· Euro/Sterling exchange rates
This sensitivity shows the effect of a 10% decrease and a 10% increase in the value of the Euro relative to Sterling used for the 30 June 2014 valuation (based on a 30 June 2014 exchange rate of €1.2494 to £1). In each case it is assumed that the change in exchange rate occurs from 1 July 2014 and thereafter remains constant at the new level throughout the life of the projects.
At the period end 15% of the portfolio is located in France and Ireland comprising Euro-denominated assets. The Group has entered into forward hedging of the expected Euro distributions for the next 18 months. The hedge reduces the sensitivity of the portfolio value to foreign exchange movements and accordingly the impact is shown net of the benefit of the foreign exchange hedge in place5.
5 The Euro/Sterling exchange rate sensitivity does not attempt to illustrate the indirect influences of currencies on UK power prices which are interrelated with other influences on power prices.
|
Exchange rate |
-10% |
Base |
+10% |
|
Portfolio valuation |
(£4.0m) |
£353.3m |
+£4.0m |
|
Implied change in NAV per ordinary share |
(1.1p) |
102.3p |
+1.1p |
· Interest rates applying to project company debt and cash balances
This shows the sensitivity of the portfolio valuation to the effects of changes in interest rates.
We have shown the impact on the portfolio of an increase in interest rates of 2% and a reduction of 1%. The change is assumed with effect from 1 July 2014 and continues unchanged throughout the life of the assets.
The portfolio is relatively insensitive to changes in interest rates. This is an advantage of TRIG's approach of favouring long term structured project financing (over shorter term corporate debt) which is secured with the substantial majority of this debt having the benefit of long term interest rate swaps which fix the interest cost to the projects.
The TRIG acquisition facility was undrawn as at 30 June 2014.
|
Interest rates |
-1% |
Base |
+2% |
|
Portfolio valuation |
+£0.9m |
£353.3m |
(£1.8m) |
|
Implied change in NAV per ordinary share |
+0.2p |
102.3p |
(0.5p) |
It should be noted that all of TRIG's sensitivities above are stated after taking into account the impact of project level gearing on returns.
Tax Rates
The profits of each UK project company are subject to UK corporation tax. On 1 April 2014 the prevailing rate of corporation tax reduced from 23% to 21%. The Government has enacted legislation to reduce the UK corporation tax down to 20% from 1 April 2015. The UK corporation tax assumption for the portfolio valuation is 20% from 1 April 2015.
The profits of each French project company are subject to French corporate tax at the rate of 33.3%, plus an additional 3.3% above the €763,000 threshold.
The profits of the projects located in the Republic of Ireland are taxed at a 12.5% active rate (applicable to general trading - which is the majority of profits) and a 25% passive rate (interest income received).
Financing
In February 2014, the Group entered into a three year £80m revolving acquisition facility with Royal Bank of Scotland and National Australia Bank to fund new acquisitions and to provide letters of credit for future investment obligations should they be required. This type of short term financing is limited to 30 per cent. of the portfolio value. It is intended that any facility used to finance acquisitions is likely to be repaid, in normal market conditions, within a year through equity fundraisings. The acquisition facility was drawn in the period (£33.4m in March 2014) and subsequently repaid with part of the proceeds from the C Share issue noted below. As at 30 June 2014 the facility was undrawn.
The Company raised gross proceeds of £66.2m through the issue of 66.2 million C Shares in March 2014 which converted to 64.0 million new Ordinary Shares on 1 July 2014. The net proceeds from the C share issue were used to repay TRIG's revolving acquisition facility and to acquire further investments.
In addition to the revolving acquisition facility, the projects may have underlying project level debt. There is an additional gearing limit in respect of such debt, which is non-recourse to TRIG, of 50% of the Gross Portfolio Value (being the total enterprise value of such Portfolio Companies), measured at the time the debt is drawn down or acquired as part of an investment. The Company may, in order to secure advantageous borrowing terms, secure a project finance facility over a group of Portfolio Companies. The project-level gearing at 30 June 2014 across the portfolio was 42% and, following the acquisition of the three solar assets in August 2014, this has reduced to 38%.
As at 30 June 2014, the Group had overall net cash of £31.9m, excluding cash held in investment project companies as working capital or otherwise.
Post 30 June 2014, the acquisition facility has been utilised again in connection with the acquisition of the further three solar PV projects announced on 8 August 2014. The facility is to be substantially repaid following a tap issue of 36.7m shares at 105p per share raising gross proceeds of £38.6m on 11 August 2014.
Counterparty Exposures
Given the importance of state subsidies for investment in renewables, TRIG has exposure to the creditworthiness of and policy commitments by national governments and is reliant on the consistency of government policy, for example "grandfathering" within the UK whereby renewables generators continue to receive the same level of subsidy, set upon commissioning, for the duration of the incentive. In addition, each project company enters into a commercial power purchase agreement (PPA) with a utility or energy trading company to enable them to sell the electricity generated and to receive the feed-in tariff or Renewables Obligation Certificate (ROC) subsidy payments. The project companies have entered into PPAs with a range of providers. Each project company enters into a contract for the maintenance of the equipment. In the case of wind, this is usually with the turbine equipment provider. For both wind and solar segments, the projects will generally benefit from equipment provider warranties for a period of time.
The Investment Manager monitors financial creditworthiness, while the Operations Manager's asset management team monitors project performance. TRIG's review processes have not identified any significant counterparty concerns.
Analysis of Financial Results
Accounting
At 30 June 2014, the Group had 24 investments all classified for IFRS reporting purposes as subsidiaries which it was deemed to control by virtue of having the power, directly or indirectly, to govern the financial and operating policies of the project entities. The Company is treated as an Investment Entity for IFRS reporting purposes and therefore does not consolidate the 24 investments it holds but rather accounts for them at fair value. The investments are held for investment purposes and managed as a whole. Further, all debt owed by the project companies is non-recourse to the Company. The Directors note the Exposure Draft on Investment Entities: Applying the Consolidation Exception published for comment in the reported period by the International Accounting Standards Board (IASB). The potential impact this may have, if the accounting standard is amended, is included in Note 2 to the accounts.
Comparatives shown are for the initial period ending 31 December 2013 where the company was established for 7 months but traded for 5 months.
Income and Costs
The income and costs for the period are summarised as follows:
|
|
6 months ended |
Initial period ended |
|
|
£ million |
£ million |
|
Operating income |
13.4 |
15.2 |
|
Acquisition costs |
(0.4) |
(3.2) |
|
Net operating income |
13.0 |
12.0 |
|
Company expenses |
(2.0) |
(1.7) |
|
Foreign exchange gains |
0.4 |
- |
|
Finance costs |
(0.6) |
- |
|
Profit before tax |
10.8 |
10.3 |
|
EPS |
3.3p |
3.4p |
Profit before tax for the 6 month period to 30 June 2014 was £10.8 million, generating earnings per share of 3.3p, which compares to £10.3m for the previous 5 month period. The increases in net operating income and expenses in the 6 month period ending 30 June 2014 as compared to the previous 5 month period ending 31 December 2013 reflect the longer period of account and also increases as additions have been made to the portfolio.
There is strong cash cover for actual and proposed dividends (as reported below) and the EPS for the period of 3.3p provides coverage over the dividend despite the effects of the reductions in forecast power price assumptions, unfavourable weather conditions in the second quarter and weaker foreign exchange, offset in part by the lower forecast UK corporation tax assumption as explained more fully in the Managers' report.
Ongoing Charges
The ongoing charges over the six months to 30 June 2014 are summarised as follows:
|
|
6 months ended 30 June 2014 £000s |
Initial period ended 31 December 2013 £000s |
|
Investment and Operations Management fees |
1,594 |
1,197 |
|
Audit fees |
36 |
38 |
|
Directors' fees and expenses |
74 |
66 |
|
Other ongoing expenses |
340 |
255 |
|
Total expenses |
2,044 |
1,566 |
|
Annual equivalent expenses (x 365/181 (156 in prior period)) |
4,122 |
3,664 |
|
Average net asset value |
349,644 |
304,584 |
|
Ongoing charges |
1.18% |
1.20% |
The Ongoing Charges Percentage is 1.18%. There are no performance fees paid to any service provider. The ongoing charges have been calculated in accordance with AIC guidance and are defined as annualised ongoing charges (i.e. excluding acquisition costs and other non-recurring items) divided by the average published undiluted net asset value in the period.
Balance Sheet
The balance sheet is summarised as follows:
|
|
30 June 2014 |
31 December 2013 |
|
|
£ million |
£ million |
|
Portfolio value |
353.3 |
299.8 |
|
Cash |
31.9 |
16.2 |
|
Other working capital |
(0.8) |
(1.1) |
|
Net assets |
384.4 |
314.9 |
|
Net asset value per share |
102.3p |
101.5p |
Portfolio value grew by £53.5m in the period to £353.3m as a result of new acquisitions in the period (Stour Fields and Tamar Heights solar parks purchased in March and Meikle Carewe and Tallentire wind farms purchased in June), portfolio return in the period (which increases portfolio value) and cash distributions from investments received by the Company (which reduces portfolio value and increase cash balances) as explained more fully in the Manager's report.
Net assets grew £69.5m in the period to £384.4m as a result of raising new equity in the period (net proceeds of £64.8m were raised through the issue of C Shares ), earnings in the period (£10.8m) and a dividend (after deducting scrip issue) of £6.4m was paid. Investment and Operations Manager fees are partly satisfied in shares rather than cash, adding £0.3m to net assets in the period.
The Net Asset Value ("NAV") per share was 101.5p at 31 December 2013, a 2.5p dividend was paid on 31 March 2014 and 3.3p earnings were generated in the period leading to a closing NAV per share of 102.3p
Cash Flow
The Cash Flow is summarised as follows:
|
|
Six months ended 30 June 2014 |
Initial period ended 31 December 2013 |
|
|
£ million |
£ million |
|
Cash received from investments |
16.3 |
13.2 |
|
Operating and finance costs |
(2.1) |
(0.3) |
|
Net cash flow before acquisitions and finance set up costs |
14.2 |
12.9 |
|
Debt arrangement costs |
(1.7) |
- |
|
Foreign exchange gains/(loss) |
0.2 |
- |
|
Issue of share capital (net of costs) |
64.8 |
304.3 |
|
Purchase of new investments (including acquisition costs) |
(55.4) |
(301.0) |
|
Distributions paid |
(6.4) |
- |
|
Cash movement in period |
15.7 |
16.2 |
|
Opening cash balance |
16.2 |
- |
|
Net cash at end of period |
31.9 |
16.2 |
Cash received from investments in the period was £16.3m. The increase in cash received compared with the previous period reflects the increased portfolio with additions to the portfolio made in November 2013, although the additions made in March and June 2014 have not yet contributed to cash received. Net cash flow after operating and finance costs of £14.2m covered dividends paid in the period of £6.4m by 2.2 times. The £6.4m distribution was paid on 31 March 2014 and related to the 5 month period ended 31 December 2013, reflecting a 2.5p dividend per share for the part period.
An amount of £64.8m of new equity was raised in the period and £55.4m was invested in new acquisitions. The acquisition facility was undrawn at the period end and the cash balance at 30 June 2014 was £31.9m.
Gearing
TRIG entered into a three year £80m revolving acquisition facility with Royal Bank of Scotland plc and National Australia Bank Limited on 20 February 2014. The acquisition facility was drawn in the period to fund an acquisition and then repaid from the proceeds of the C share equity issue in April 2014. As at 30 June 2014 the acquisition facility was undrawn.
Gearing is employed within the project companies to enhance returns. The average gearing within the project companies at 30 June 2014 was 42% of the portfolio's Gross Asset Value. The investment policy limits gearing to project company level at 50% and sets an additional gearing limit at Group level of 30% of the portfolio value.
Foreign Exchange Hedging
An amount of 15% of the portfolio is located within France and Ireland and hence is invested in Euro denominated assets. The Group enters into forward hedging contracts (selling Euros, buying Sterling) for an amount equivalent to its expected income from the Euro denominated investments' distributions over the short term, currently approximately the next 18 months.
The Investment Manager keeps under review the level of Euros hedged, with the objective of minimising variability in shorter term cash flows with a balance between managing the Sterling value of cash flow receipts and mark-to-market cash outflows.
As well as addressing foreign exchange uncertainty on the conversion of the expected Euro distributions from investments, the hedge also provides a partial offset to foreign exchange movements in the portfolio value relating to the Euro denominated assets.
Largest Investments
The largest investment is the Hill of Towie UK Wind Farm which accounts for 15% of the portfolio at 30 June 2014. The ten largest investments together represent 71% of the overall portfolio value as at 30 June 2014.
Statement of Directors' Responsibilities
We confirm that to the best of our knowledge:
1. The condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting"; and
2. The Chairman's Statement and the Managers' Report meets the requirements of an interim management report, and includes a fair review of the information required by
a. DTR 4.2.7R, being an indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year; and
b. DTR 4.2.8R, being the disclosure of related parties' transactions and changes therein.
By order of the Board
Helen Mahy
Chairman
20 August 2014
Condensed unaudited consolidated income statement
for the period 1 January 2014 to 30 June 2014
|
|
|
Period ended |
Period ended 31 December 20131 |
|
|
|
Unaudited |
Audited |
|
|
Note |
£'000s |
£'000s |
|
|
|
|
|
|
Investment income |
4 |
6,670 |
3,393 |
|
Gains on investments |
11 |
6,809 |
11,774 |
|
Total operating income |
|
13,479 |
15,167 |
|
|
|
|
|
|
Fund expenses |
5 |
(1,967) |
(1,676) |
|
Acquisition costs |
|
(431) |
(3,205) |
|
Foreign exchange gains/(losses) |
|
372 |
- |
|
Operating profit for the period |
|
11,453 |
10,286 |
|
|
|
|
|
|
Finance costs |
6 |
(656) |
(6) |
|
Finance income |
6 |
16 |
27 |
|
Profit before tax |
|
10,813 |
10,307 |
|
|
|
|
|
|
Income tax credit/(expense) |
7 |
- |
- |
|
Profit for the period |
|
10,813 |
10,307 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the parent |
|
10,813 |
10,307 |
|
|
|
10,813 |
10,307 |
|
|
|
|
|
|
Ordinary shares earnings per share (pence) |
8 |
3.3 |
3.4 |
|
All shares earnings per share (pence) |
8 |
3.2 |
3.4 |
1The period ended 31 December 2013 covers the period from 30 May 2013 (the date of incorporation) to 31 December 2013, although the initial portfolio was not acquired until shortly after the IPO on 29 July 2013.
All results are derived from continuing operations.
There is no other comprehensive income or expense apart from those disclosed above and consequently a consolidated statement of comprehensive income has not been prepared.
Condensed unaudited consolidated balance sheet
as at 30 June 2014
|
|
|
30 June 2014 |
31 December 2013 |
|
|
|
Unaudited |
Audited |
|
|
Note |
£'000s |
£'000s |
|
Non-current assets |
|
|
|
|
Investments at fair value through profit or loss |
11 |
353,348 |
299,792 |
|
Total non-current assets |
|
353,348 |
299,792 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Trade and other receivables |
|
2,266 |
59 |
|
Other financial assets |
|
195 |
- |
|
Cash and cash equivalents |
|
31,917 |
16,196 |
|
Total current assets |
|
34,378 |
16,255 |
|
Total assets |
|
387,726 |
316,047 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(3,303) |
(1,183) |
|
Total current liabilities |
|
(3,303) |
(1,183) |
|
Total liabilities |
|
(3,303) |
(1,183) |
|
Net assets |
|
384,423 |
314,864 |
|
|
|
|
|
|
Equity |
|
|
|
|
Share premium |
13 |
370,736 |
304,324 |
|
Other reserves |
13 |
317 |
233 |
|
Retained reserves |
|
13,370 |
10,307 |
|
Total equity |
|
384,423 |
314,864 |
|
Net assets per Ordinary Share (pence) |
10 |
102.3 |
101.5 |
The interim financial statements were approved and authorised for issue by the Board of Directors on 20 August 2014, and signed on its behalf by:
Jon Bridel,
Director
Condensed unaudited consolidated statement of changes in shareholders' equity
for the period 1 January 2014 to 30 June 2014
|
|
Share premium £'000s |
Other reserves £'000s |
Retained |
Total |
|
Shareholders' equity at beginning of period |
304,324 |
233 |
10,307 |
314,864 |
|
|
|
|
|
|
|
Profit for the period |
- |
- |
10,813 |
10,813 |
|
Dividends paid |
- |
- |
(6,402) |
(6,402) |
|
Scrip shares issued in lieu of dividend |
1,348 |
- |
(1,348) |
- |
|
C Shares issued |
66,154 |
- |
- |
66,154 |
|
Costs of C Share issue |
(1,323) |
- |
- |
(1,323) |
|
Ordinary Shares to be issued in lieu of Management Fees1 |
- |
317 |
- |
317 |
|
Ordinary Shares issued in period in lieu of Management Fees 2 |
233 |
(233) |
- |
- |
|
|
|
|
|
|
|
Shareholders' equity at end of period (unaudited) |
370,736 |
317 |
13,370 |
384,423 |
for the period 30 May 2013 to 31 December 2013
|
|
Share premium |
Other reserves |
Retained reserves |
Total equity |
|
|
£'000s |
£'000s |
£'000s |
£'000s |
|
Shareholders' equity at beginning of period |
- |
- |
- |
- |
|
|
|
|
|
|
|
Profit for the period |
- |
- |
10,307 |
10,307 |
|
Ordinary Shares issued |
310,100 |
- |
- |
310,100 |
|
Costs of Ordinary Share issue |
(5,776) |
- |
- |
(5,776) |
|
Ordinary Shares to be issued in lieu of Management Fees2 |
- |
233 |
- |
233 |
|
|
|
|
|
|
|
Shareholders' equity at end of period (audited) |
304,324 |
233 |
10,307 |
314,864 |
1 In line with the Investment Management Agreement and the Operations Management Agreement, 20 per cent. of the management fees are to be settled in Ordinary Shares. As at 30 June 2014, 319,206 shares equating to £316,971, based on a Net Asset Value ex dividend of 99.3 pence per share (the Net Asset Value at 30 June 2014 of 102.3 pence per share less the interim dividend of 3.0 pence per share) were due but had not been issued. The Company intends to issue these shares on or after 3 September 2014.
2 The £232,997 represents the 235,351 management shares that were accrued at 31 December 2013 and were then issued during the period, on 3 March 2014.
Condensed unaudited consolidated cash flow statement
for the period 1 January 2014 to 30 June 2014
|
|
|
Period ended |
Period ended 31 December 20131 |
|
|
|
Unaudited |
Audited |
|
|
Note |
£'000s |
£'000s |
|
Cash flows from operating activities |
|
|
|
|
Profit before tax |
|
10,813 |
10,307 |
|
Adjustments for: |
|
|
|
|
Investment income |
4 |
(6,670) |
(3,393) |
|
Gains on investments |
11 |
(6,809) |
(11,774) |
|
Foreign exchange gains/(losses) |
|
(372) |
- |
|
Acquisition costs |
|
431 |
3,205 |
|
Management fees settled in shares |
10 |
317 |
233 |
|
Interest payable and similar charges |
6 |
656 |
6 |
|
Interest income |
6 |
(16) |
(27) |
|
|
|
|
|
|
Operating cash flow before changes in working capital |
|
(1,444) |
(1,443) |
|
Changes in working capital: |
|
|
|
|
(Increase)/Decrease in receivables |
|
(95) |
(59) |
|
(Decrease)/Increase in payables |
|
(226) |
1,183 |
|
Cash flow from operations |
|
(1,765) |
(319) |
|
Interest received from investments |
|
3,935 |
1,909 |
|
Dividends received |
4 |
2,424 |
- |
|
Fees and other operating expenses |
|
(281) |
21 |
|
Loanstock and equity repayments received |
|
9,942 |
11,309 |
|
Net cash from operating activities |
|
14,255 |
12,920 |
|
Cash flows from investing activities |
|
|
|
|
Purchases of investments |
|
(54,841) |
(297,843) |
|
Acquisition costs |
|
(571) |
(3,205) |
|
Net cash used in investing activities |
|
(55,412) |
(301,048) |
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issue of share capital during period |
13 |
66,154 |
310,100 |
|
Proceeds from issue of loans and borrowings |
12 |
33,420 |
- |
|
Repayments of loans and borrowings |
12 |
(33,420) |
- |
|
Costs relating to loan acquisition facility |
|
(1,739) |
- |
|
Costs in relation to issue of shares |
|
(1,312) |
(5,776) |
|
Dividends paid to shareholders |
|
(6,402) |
- |
|
Net cash from financing activities |
|
56,701 |
304,324 |
|
Net increase in cash and cash equivalents |
|
15,544 |
16,196 |
|
Cash and cash equivalents at beginning of period |
|
16,196 |
- |
|
Exchange gains on cash |
|
177 |
- |
|
Cash and cash equivalents at end of period |
|
31,917 |
16,196 |
1The period ended 31 December 2013 covers the period from 30 May 2013 (the date of incorporation) to 31 December
2013, although the initial portfolio was not acquired until shortly after the IPO on 29 July 2013.
The accompanying Notes are an integral part of these financial statements.
Notes to the unaudited consolidated financial statements
for the period 1 January 2014 to 30 June 2014
1. General information
The Renewables Infrastructure Group Limited (the "Company") is a closed ended investment company incorporated in Guernsey under Section 20 of the Companies (Guernsey) Law, 2008. The shares are publically traded on the London Stock Exchange under a premium listing. The interim condensed unaudited consolidated financial statements of the Company (the "interim financial statements") as at and for the six months ended 30 June 2014 comprise the Company and its only direct subsidiary being The Renewables Infrastructure Group (UK) Limited ("TRIG UK"), together forming the "Consolidated Group" and, with all subsidiaries, the "Group". The Consolidated Group invests in operational renewable energy generation projects, predominantly in onshore wind and solar PV segments, across the United Kingdom and Northern Europe.
The annual financial statements of the Consolidated Group for the period ended 31 December 2013 were approved by the Directors on 25 February 2014 and are available from the Company's Administrator and on the Company's website http://trig-ltd.com/. The auditor's report on these accounts was unqualified.
2. Key accounting policies
Basis of preparation
The interim financial statements were approved by the Board of Directors on 20 August 2014.
The interim financial statements have been prepared in compliance with the Companies (Guernsey) Law, 2008 and in accordance with both IAS 34 Interim Financial Reporting and International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") using the historical cost basis, except that the financial instruments classified at fair value through profit or loss are stated at their fair values. The accounting policies have been applied consistently in these consolidated financial statements.
The interim financial statements are presented in Sterling, which is the Company's functional currency.
An Exposure Draft on Investment Entities: Applying the Consolidation Exception was published for comment in the reported period by the International Accounting Standards Board (IASB). The proposed amendments to IFRS 10 affect the position on accounting for investment entity subsidiaries engaged in investment-related activities such as those in the TRIG Group. The proposed amendment requires all subsidiaries to be held at fair value rather than being consolidated. The Company currently consolidates its only direct subsidiary, TRIG UK, and holds all other investments at fair value. The net assets of TRIG UK, which at 30 June 2014 principally comprise cash and working capital balances in addition to the investments, would be required to be included in the carrying value of investments. This change would not materially affect Group Net Assets. Currently, TRIG UK's cash, debt and working capital balances are not included in the fair value of investments and are presented within the Group's current assets. At present it is uncertain as to whether the accounting standard will be amended.
The Chief Operating Decision Maker (the "CODM") is of the opinion that the Group is engaged in a single segment of business, being investment in renewable infrastructure to generate investment returns while preserving capital. The financial information used by the CODM to allocate resources and manage the Group presents the business as a single segment comprising a homogeneous portfolio.
The Directors believe that the Consolidated Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the interim report.
The same accounting policies, presentation and methods of computation are followed in these interim financial statements as were applied in the preparation of the Consolidated Group's financial statements for the period ended 31 December 2013. In addition IAS 23 Borrowing Costs has been applied, which states that borrowing costs incurred for the acquisition of any qualifying assets are capitalised and amortised over the useful economic life of the asset. Other borrowing costs are expensed.
The Group's financial performance does not suffer materially from seasonal fluctuations.
3. Financial instruments
|
|
|
30 June 2014 |
31 December 2013 |
|
|
|
£'000s |
£'000s |
|
Financial assets |
|
|
|
|
|
|
|
|
|
Designated at fair value through profit or loss: |
|
|
|
|
|
Investments |
353,348 |
299,792 |
|
|
Other financial assets |
195 |
- |
|
Financial assets at fair value |
353,543 |
299,792 |
|
|
|
|
|
|
|
At amortised cost: |
|
|
|
|
|
Trade and other receivables |
2,266 |
59 |
|
|
Cash and cash equivalents |
31,917 |
16,196 |
|
Financial assets at amortised cost |
34,183 |
16,255 |
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
Designated at fair value through profit or loss: |
|
|
|
|
|
Other financial liabilities (fair value of derivatives) |
- |
- |
|
Financial liabilities at fair value |
- |
- |
|
|
|
|
|
|
|
At amortised cost: |
|
|
|
|
|
Trade and other payables |
3,303 |
1,183 |
|
|
Loans and borrowings |
- |
- |
|
Financial liabilities at amortised cost |
3,303 |
1,183 |
|
The Directors believe that the carrying values of all financial instruments are not materially different to their fair values.
Fair value hierarchy
The fair value hierarchy is defined as follows:
§ Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
§ Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
§ Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
|
As at 30 June 2014 |
|||
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
£'000s |
£'000s |
£'000s |
£'000s |
|
|
|
|
|
|
|
Investments at fair value through profit or loss |
- |
- |
353,348 |
353,348 |
|
Other financial assets |
- |
195 |
- |
195 |
|
|
- |
195 |
353,348 |
353,543 |
|
|
As at 31 December 2013 |
|||
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
£'000s |
£'000s |
£'000s |
£'000s |
|
|
|
|
|
|
|
Investments at fair value through profit or loss |
- |
- |
299,792 |
299,792 |
|
Other financial assets |
- |
- |
- |
- |
|
|
- |
- |
299,792 |
299,792 |
Other financial assets represent the fair value of foreign exchange forward agreements in place at the period end.
Level 2
Valuation methodology
Fair value is based on price quotations from financial institutions active in the relevant market. The key inputs to the discounted cash flow methodology used to derive fair value include foreign currency exchange rates and foreign currency forward curves. Valuations are performed on a six monthly basis every June and December for all financial assets and all financial liabilities.
Level 3
Valuation methodology
The Directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied, and the valuation. All investments are at fair value through profit or loss and are valued using a discounted cash flow methodology.
Discount rates
The discount rates used for valuing each renewable infrastructure investment are based on the appropriate long term government bond yield and a risk premium. The risk premium takes into account risks and opportunities associated with the project earnings.
The discount rates used for valuing the projects in the portfolio are as follows:
|
Period ending |
Range |
Weighted average |
|
30 June 2014 |
7.8% to 11.0% |
9.6% |
A change to the weighted average rate of 9.6% (Dec 2013: 9.8%) by plus or minus 0.5% has the following effect on the valuation.
|
Discount rate
|
-0.5% change
|
Total Portfolio Value |
+0.5% change |
|
Directors' valuation - Jun 2014 |
+£14.1m |
£353.3m |
(£13.2m) |
Sensitivities
As at 30 June 2014, the fair market value of the Group's investments was £353.3 million as noted below.
Note that these sensitivities are not interrelated.
Power Price
The power price forecasts are based on the base case assumptions from the valuation date and throughout the operating life of the portfolio. The base case power pricing is based on the current forecast real price reference curve data provided by a leading power price forecaster, adjusted to reflect the value the market will place on such generation in an arm's length transaction.
A change in the forecast electricity price assumptions by plus or minus 10% has the following effect on the valuation.
|
Power Price
|
-10% change
|
Total Portfolio Value |
+10% change |
|
Directors' valuation - Jun 2014 |
(£29.6m) |
£353.3m |
+£29.5m |
Energy Yield
The portfolio's aggregate production outcome for a 10 year period would be expected to fall somewhere between a P90 10 year exceedance (downside case) and a P10 10 year exceedance (upside case).
The effect of a P90 10 year exceedance and of a P10 10 year exceedance would have the following effect on the valuation.
|
Energy Yield
|
P90 10 year exceedance |
Total Portfolio Value |
P10 10 year exceedance |
|
Directors' valuation - Jun 2014 |
(£43.7m) |
£353.3m |
+£43.4m |
Inflation rates
The portfolio valuation assumes long-term inflation of 2.75% per annum for UK investments (based on the RPI), and 2.00% per annum for France and Republic of Ireland investments (based on the CPI).
|
Inflation assumption
|
-0.5% change
|
Total Portfolio Value |
+0.5% change |
|
Directors' valuation - Jun 2014 |
(£15.5m) |
£353.3m |
+£17.0m |
Operating costs
The table below shows the sensitivity of the portfolio to changes in operating costs by plus or minus 10% at project company level.
|
Operating costs
|
-10% change
|
Total Portfolio Value |
+10% change |
|
Directors' valuation - Jun 2014 |
+£12.0m |
£353.3m |
(£12.0m) |
Currency rates
The spot rate used for the 30 June 2014 valuation, from Euro to Sterling, was 1.2494 (Dec 2013: 1.2046).
A change to this currency rate by plus or minus 10% has the following effect on the net assets of TRIG.
|
Currency rates
|
-10% change
|
Total Portfolio Value |
+10% change |
|
Directors' valuation before hedge impact |
(£5.0m) |
£353.3m |
+£5.0m |
|
Movement in fair value hedges |
+£1.0m |
|
(£1.0m) |
|
Net impact on TRIG net assets |
(£4.0m) |
|
+£4.0m |
The currency movement sensitivities are applied to investments held in Euros i.e. in France and Ireland. Currency movements affecting power curves in the UK are not included. See Managers' Report valuation commentary for further comment on the treatment of currency movement impact on UK investments power price forecasts.
Interest rates
|
Interest rates
|
-1% change |
Total portfolio value |
+2% change |
|
Directors' valuation - Jun 2014 |
+£0.9m |
£353.3m |
(£1.8m) |
Tax rates
The UK corporation tax assumption for the portfolio valuation was 20% (Dec 2013: 21%).
Economic assumptions
The Investment Manager has carried out fair market valuations of the investments as at 30 June 2014. The Directors have satisfied themselves as to the methodology used, the discount rates applied, and the valuation.
The following economic assumptions were used in the discounted cash flow valuations at:
|
|
|
30 June 2014 |
31 December 2013 |
|
UK inflation rates |
|
2.75% |
2.75% |
|
Ireland and France inflation rates |
|
2.00% |
2.00% |
|
UK deposit interest rates |
|
1.00% to 31 March 2018, 3.5% thereafter |
1.00% to 31 March 2018, 3.5% thereafter |
|
Ireland and France interest rates |
|
1.00% |
1.00% |
|
UK corporation tax rate |
|
20.00% |
21.00% |
|
France corporation tax rate |
|
33.3% + 3.3% above €763,000 threshold |
33.3% + 1.1% above €763,000 threshold |
|
Ireland corporation tax rate |
|
12.5% active rate, 25% passive rate |
12.5% active rate, 25% passive rate |
|
Euro/Sterling exchange rate |
|
1.2494 |
1.2046 |
4. Investment income
|
|
For period ended |
For period ended |
|
|
30 June 2014 |
31 December 2013 |
|
|
Total |
Total |
|
|
£'000s |
£'000s |
|
|
|
|
|
Interest from investments |
4,246 |
3,393 |
|
Dividend income from investments |
2,424 |
- |
|
|
6,670 |
3,393 |
5. Fund expenses
|
31 December 2013 |
|
|
|
For period ended |
For period ended |
|
|
30 June 2014 |
31 December 2013 |
|
|
£'000s |
£'000s |
|
|
|
|
|
Fees payable to the Company's auditors for the audit of the Consolidated Group accounts |
20 |
30 |
|
Fees payable to the Company's auditors and its associates for other services: |
|
|
|
Audit-related assurance services |
25 |
- |
|
Audit of underlying subsidiary company |
4 |
8 |
|
Non-audit services |
6 |
- |
|
Investment and management fees (Note 14) |
1,594 |
1,197 |
|
Directors' fees (Note 14) |
72 |
66 |
|
Other costs |
246 |
375 |
|
|
1,967 |
1,676 |
During the period to 30 June 2014, Deloitte LLP provided non-audit services of £6,000 for tax advice.
The Consolidated Group had no employees during the period.
6. Net finance costs
|
|
For period ended |
For period ended |
|
|
30 June 2014 |
31 December 2013 |
|
|
Total |
Total |
|
|
£'000s |
£'000s |
|
|
|
|
|
Interest expense: |
|
|
|
Interest paid on corporate borrowings |
(96) |
- |
|
Commitment fees paid on undrawn facility |
(311) |
- |
|
Amortisation of loan set up costs |
(206) |
- |
|
Other finance costs |
(43) |
(6) |
|
Total finance costs |
(656) |
(6) |
|
|
|
|
|
Interest income: |
|
|
|
Interest on bank deposits |
16 |
27 |
|
Total finance income |
16 |
27 |
|
Net finance income/(costs) |
(640) |
21 |
7. Income tax
Under the current system of taxation in Guernsey, the Company itself is exempt from paying taxes on income, profits or capital gains. Therefore, income from investments is not subject to any further tax in Guernsey, although these investments will bear tax in the individual jurisdictions in which they operate.
8. Earnings per share
Ordinary Share earnings per share is calculated by dividing the profit attributable to equity holders of the Company for the period of £10.2m by the weighted average number of Ordinary Shares in issue during the period, excluding the impact of the C Shares.
All shares earnings per share includes the C Shares in the weighted average denominator from 2 April 2014, the date on which the Company received the C Share proceeds.
Ordinary Share earnings per share
|
|
2014 |
2013 |
|
Profit attributable to the Ordinary Shareholders of the Company |
£10,202,662 |
£10,307,595 |
|
Weighted average number of Ordinary Shares in issue in the period |
310,985,027 |
302,363,338 |
|
Earnings per Ordinary Share (pence) |
3.3 |
3.4 |
All shares earnings per share
|
|
2014 |
2013 |
|
Profit attributable to equity holders of the Company |
£10,813,429 |
£10,307,595 |
|
Weighted average number of Ordinary Shares in issue |
342,816,986 |
302,363,338 |
|
Earnings per Ordinary Share (pence) |
3.2 |
3.4 |
Further details of shares issued in the period are set out in Note 13.
9. Dividends
|
|
Jun 2014 |
Dec 2013 |
|
|
£'000s |
£'000s |
|
|
|
|
|
Amounts recognised as distributions to equity holders during the period: |
|
|
|
Interim dividend for the period ended 31 December 2013 of 2.5 pence per share, paid 31 March 2014 |
6,402 |
- |
|
|
|
|
|
|
|
|
|
Interim dividend for the period ended 30 June 2014 of 3.0 pence per share, payable 30 September 2014 |
12,369 |
- |
On 14 August 2014 (see Note 17), the Company declared an interim dividend of 3.0 pence per share for the period 1 January to 30 June 2014. This interim dividend will be paid based on a record date of 22 August 2014 and on the number of shares in issue at that time being 412,314,718, following the 11 August 2014 tap issue as detailed in Note 17.
10. Net Assets per Ordinary Share
|
|
Jun 2014 |
Dec 2013 |
|
|
£'000s |
£'000s |
|
|
|
|
|
Shareholders' equity at balance sheet date |
384,423 |
314,864 |
|
|
|
|
|
|
'000s |
'000s |
|
Number of shares at balance sheet date, including C shares and management shares accrued but not yet issued |
375,896 |
310,235 |
|
|
|
|
|
Net Assets per Ordinary Share at balance sheet date (pence) |
102.3 |
101.5 |
In line with the Investment Management Agreement and the Operations Management Agreement, 20 per cent. of the management fees are to be settled in Ordinary Shares. As at the balance sheet date, 319,206 shares (2013: 235,351) equating to £316,971 (2013: 232,997), based on a Net Asset Value ex dividend of 99.3 pence (2013: 99.0 pence) per share (the Net Asset Value at 30 June 2014 of 102.3 pence (2013: 101.5 pence) per share less the interim dividend of 3.0 pence (2013: 2.5 pence) per share) were due but had not been issued. The Company intends to issue these shares on or after 3 September 2014.
In view of this, the denominator in the above Net Assets per Ordinary Share calculation is as follows;
|
|
Jun 2014 |
Dec 2013 |
|
|
|
|
|
Ordinary Shares in issue at balance sheet date |
311,558,687 |
310,000,000 |
|
C Shares converted to Ordinary Shares on 1 July |
64,017,608 |
- |
|
Number of shares to be issued in lieu of Management fees |
319,206 |
235,351 |
|
Total number of shares used in Net Assets per Ordinary Share calculation |
375,895,501 |
310,235,351 |
11. Investments at fair value through profit or loss
|
|
Jun 2014 |
Dec 2013 |
|
|
£'000s |
£'000s |
|
Carrying amount at beginning of the period |
299,792 |
- |
|
Investments in the period |
56,378 |
297,843 |
|
Repayments in period |
(9,942) |
(13,218) |
|
Net interest income |
311 |
3,393 |
|
Gains on valuation |
6,809 |
11,774 |
|
Carrying amount at period end |
353,348 |
299,792 |
|
|
|
|
|
This is represented by: |
|
|
|
Less than one period |
- |
- |
|
Greater than one period |
353,348 |
299,792 |
|
Carrying amount at period end |
353,348 |
299,792 |
The gains on investment are unrealised.
Investments are generally restricted on their ability to transfer funds to the Consolidated Group under the terms of their senior funding arrangements for that investment. Significant restrictions include:
- Historic and projected debt service and loan life cover ratios exceed a given threshold;
- Required cash reserve account levels are met;
- Senior lenders have agreed the current financial model that forecasts the economic performance of the project company;
- Project company is in compliance with the terms of its senior funding arrangements; and
- Senior lenders have approved the annual budget for the project company.
All of the projects met their debt covenants during the period.
Details of investments recognised at fair value through profit or loss were as follows:
|
|
|
30 June 2014 |
31 December 2013 |
||
|
Investments (project name) |
Country |
Equity |
Subordinated loanstock |
Equity |
Subordinated loanstock |
|
Roos |
UK |
100% |
100% |
100% |
100% |
|
The Grange |
UK |
100% |
100% |
100% |
100% |
|
Hill of Towie |
UK |
100% |
100% |
100% |
100% |
|
Green Hill |
UK |
100% |
100% |
100% |
100% |
|
Forss |
UK |
100% |
100% |
100% |
100% |
|
Altahullion |
UK |
100% |
100% |
100% |
100% |
|
Lendrums Bridge |
UK |
100% |
100% |
100% |
100% |
|
Lough Hill |
UK |
100% |
100% |
100% |
100% |
|
Milane Hill |
Republic of Ireland |
100% |
100% |
100% |
100% |
|
Beennageeha |
Republic of Ireland |
100% |
100% |
100% |
100% |
|
Haut Languedoc |
France |
100% |
100% |
100% |
100% |
|
Haut Cabardes |
France |
100% |
100% |
100% |
100% |
|
Cuxac Cabardes |
France |
100% |
100% |
100% |
100% |
|
Roussas-Claves |
France |
100% |
100% |
100% |
100% |
|
Puits Castan |
France |
100% |
100% |
100% |
100% |
|
Churchtown |
UK |
100% |
100% |
100% |
100% |
|
East Langford |
UK |
100% |
100% |
100% |
100% |
|
Manor Farm |
UK |
100% |
100% |
100% |
100% |
|
Parsonage |
UK |
100% |
100% |
100% |
100% |
|
Marvel Farms |
UK |
100% |
100% |
100% |
100% |
|
Tamar Heights |
UK |
100% |
100% |
100% |
100% |
|
Stour Fields |
UK |
100% |
100% |
100% |
100% |
|
Meikle Carewe |
UK |
100% |
100% |
100% |
100% |
|
Tallentire |
UK |
100% |
100% |
100% |
100% |
Tamar Heights and Stour Fields were purchased in March 2014 for an aggregate consideration of approximately £36.3 million. Meikle Carewe and Tallentire were purchased in June 2014 for an aggregate consideration of £19.1 million.
12. Loans and borrowings
In the six month period ending 30 June 2014, £33.4 million debt was drawn and subsequently repaid to fund acquisitions.
13. Share capital and reserves
|
|
Ordinary Shares |
Ordinary Shares |
|
|
Jun 2014 |
Dec 2013 |
|
|
'000s |
'000s |
|
Opening balance |
310,000 |
300,000 |
|
Tap issue on 23 November 2013 |
- |
10,000 |
|
Managers shares issued on 25 March 2014 |
235 |
- |
|
Issued as a scrip dividend alternative on 31 March 2014 |
1,323 |
- |
|
Ordinary Shares in issue at 30 June - fully paid |
311,558 |
310,000 |
|
|
|
|
|
C Shares in issue at 30 June - fully paid |
66,154 |
- |
|
|
|
|
|
Ordinary Shares in issue at 30 June - fully paid |
311,558 |
310,000 |
|
C Shares converted to Ordinary Shares on 1 July 2014 |
64,018 |
- |
|
Ordinary Shares Issued at 1 July - fully paid |
375,576 |
310,000 |
At 30 June 2014, there were 311,558,687 Ordinary Shares and 66,154,395 C Shares in issue. On 1 July 2014, the 66,154,395 C Shares converted at a ratio of 0.9677 to 64,017,608 Ordinary Shares, increasing the number of Ordinary Shares from 311,558,687 to 375,576,295.
The holders of the 375,576,295 Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. The Company's shares are issued at £nil par value.
|
Share premium |
|
|
|
Jun 2014 |
Dec 2013 |
|
|
£'000s |
£'000s |
|
Opening balance |
304,324 |
- |
|
Ordinary Shares issued |
1,581 |
310,100 |
|
C Shares issued |
66,154 |
- |
|
Costs of C Share issue |
(1,323) |
(5,776) |
|
Closing balance |
370,736 |
304,324 |
Other reserves
|
|
Jun 2014 |
Dec 2013 |
|
|
£'000s |
£'000s |
|
Opening balance |
233 |
- |
|
Shares issued i.e. transferred to share premium |
(233) |
- |
|
Shares to be issued in lieu of Management Fees (Note 10) |
317 |
233 |
|
Closing balance |
317 |
233 |
Retained reserves
Retained reserves comprise retained earnings, as detailed in the consolidated statement of changes in shareholders' equity.
14. Related party and key advisor transactions
The Investment Manager to the Consolidated Group is appointed by the Investment Management Agreement, dated 5 July 2013, which may be terminated by either party giving not less than 12 months' written notice, no earlier than the fourth anniversary of admission to the London Stock Exchange. The Investment Manager is entitled to 65 per cent of the aggregate management fee (see below), payable quarterly in arrears. The Operations Manager to the Consolidated Group is appointed by the Operations Management Agreement, dated 5 July 2013, which may be terminated by either party giving not less than 12 months' written notice, no earlier than the fourth anniversary of admission to the London Stock Exchange. The Operations Manager is entitled to 35 per cent of the aggregate management fee (see below), payable quarterly in arrears.
The aggregate management fee payable to the Investment Manager and the Operations Manager is 1 per cent of the Adjusted Portfolio Value in respect of the first £1 billion of the Adjusted Portfolio Value and 0.8 per cent in respect of the Adjusted Portfolio Value in excess of £1 billion less the aggregate of the Investment Manager advisory fee and the Operations Manager advisory fee, set out below. The Investment Manager will also be entitled to be paid an advisory fee in respect of the advisory services which it provides to the Company of £130,000 per annum and the Operations Manager will also be entitled to be paid an advisory fee in respect of the advisory services which it provides to the Company of £70,000 per annum, which is deducted from the management fee payable.
The aggregate Investment Manager fee, inclusive of the advisory fee, charged to the income statement for the period was £1,036,117 (2013: £778,300), of which £447,850 (2013: £384,200) remained payable in cash at the balance sheet date. The aggregate Operations Manager fee, inclusive of the advisory fee, charged to the income statement for the period was £557,880 (2013: £419,100), of which £241,150 (2013: £206,900) remained payable in cash at the balance sheet date. In addition, the Operations Manager also received £759,076 (2013: £876,000) for services in relation to Asset Management and other services provided to project companies within the Investment Portfolio that are not consolidated in these interim financial statements.
In line with the Investment Management Agreement and the Operations Management Agreement, 20 per cent. of the management fees are to be settled in Ordinary Shares. As at the balance sheet date, 319,206 shares (2013: 235,351) equating to £316,971 (2013: 232,997), based on a Net Asset Value ex dividend of 99.3 pence (2013: 99.0 pence) per share (the Net Asset Value at 30 June 2014 of 102.3 pence (2013: 101.5 pence) per share less the interim dividend of 3.0 pence (2013: 2.5 pence) per share) were due but had not been issued. The Company intends to issue these shares on or after 3 September 2014.
Meikle Carewe and Tallentire were purchased from the Operations Manager for an aggregate consideration of £19.1 million.
The Directors of the Company received fees for their services. Fees for the Directors for the period were £71,667 (2013: 66,082). The Directors also received £20,000, collectively, for their work in relation to the C Share issue. These costs are share issue costs as opposed to a profit and loss expense. Directors' expenses of £2,092 (2013: £1,058) were also paid in the period.
All of the above transactions were undertaken on an arm's length basis.
15. Guarantees and other commitments
As at 30 June 2014, the Consolidated Group had provided £11.6 million in guarantees to the projects in the Group.
16. Contingent consideration
The Group has performance-related contingent consideration obligations of up to £5.2m relating to acquisitions completed prior to 30 June 2014. These payments become due if the performance of the wind and solar equipment is at levels above that assumed in the investment's base case. The payments, if triggered, would be due in 2015 and 2016. The valuation of the investments in the portfolio does not assume that these above central case performance levels are met, or that the payments become due, and if they were to become due they would be expected to be offset by an improvement in investment valuation arising from the improved performance level. The arrangements are generally two way in that if performance is below base case levels some refund of consideration may become due.
17. Events after the balance sheet date
On 1 July 2014, the 66,154,395 C Shares converted at a ratio of 0.9677 to 64,017,608 Ordinary Shares, increasing the number of Ordinary Shares from 311,558,687 to 375,576,295.
On 8 August 2014, the Consolidated Group acquired three further solar park projects - a 24.2MW plant at Parley Court Farm, Dorset, a 21.2MW plant at Egmere Airfield, Norfolk and a 11.1MW plant at Penare Farm, Cornwall through its wholly owned subsidiary, European Investments Solar Holdings Limited, for a total consideration of approximately £76 million.
On 11 August 2014, the Company issued 36,738,423 Ordinary Shares at a price of 105.0 pence per share, raising £38.2m (net of issue costs), through a cash placing with institutional investors.
On 14 August 2014, the Company declared an interim dividend of 3.0 pence per share for the period 1 January 2014 to 30 June 2014. The total dividend, £12,369,442, payable on 30 September 2014, is based on a record date of 22 August 2014 and the number of shares in issue at that time being 412,314,718.
There are no other events after the balance sheet date, which are required to be disclosed.
This information is provided by RNS
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