AQUILA ENERGY EFFICIENCY TRUST PLC
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
© 2021 AERIF | A
INVESTING WITH IMPACT
AQUILA ENERGY EFFICIENCY TRUST PLC
ANNUAL REPORT 2023
For more information please contact:
Aquila Group
Valentinskamp 70
20355 Hamburg
Germany
Tel.: +49 (0)40 87 50 50-100
Email: info@aquila-capital.com
Web: www.aquila-capital.com
Follow us on
Hamburg · Frankfurt · London · Luxembourg · Madrid · Oslo · Zurich · Invercargill · Singapore · Tokyo
Important Notice: This document serves informational purposes only. It constitutes neither investment advice, an investment service nor the
invitation to make offers or any declaration of intent; the contents of this document also do not constitute a recommendation for any other
actions. The validity of the provided information is limited to the date of preparation of this document and may change at any time for various
reasons, especially market development. The sources of information are considered reliable and accurate, however we do not guarantee the
validity and the actuality of the provided information and disclaim all liability for any damages that may arise from the use of the information.
Historical information cannot be understood as a guarantee for future earnings. Predictions concerning future developments only represent
forecasts. Statements to future economic growth depend on historical data and objective methods of calculation and must be interpreted as
forecasts. No assurances or warranties are given, that any indicative performance or return will be achieved in the future. The terms Aquila
and Aquila Capital comprise companies for alternative and real asset investments as well as sales, fund-management and service companies
of Aquila Group (“Aquila Group” meaning Aquila Capital Holding GmbH and its affiliates in the sense of sec. 15 et seq. of the German Stock
Corporation Act (AktG)). The respective responsible legal entities of Aquila Group that offer products or services to (potential) investors/
customers are named in the corresponding agreements, sales documents or other product information.
A publication of Aquila Capital Investmentgesellschaft mbH. As at 30.04.2024
Read more about our
commitment to sustainability
www.aquila-capital.de/esg/
AEET | ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2023
© 2021 AERIF | 103
Contents
Your Company at a Glance ...........................3
Highlights.........................................3
STRATEGIC REPORT
Chair’s Statement ..................................4
Investment Adviser’s Report .........................6
Environmental, Social and Governance ................19
Investment Policy .................................22
Key Performance Indicators .........................24
Risk Management .................................25
Section 172 Report ................................30
Other Information .................................33
GOVERNANCE
Directors’ Report .................................35
Corporate Governance Statement . . . . . . . . . . . . . . . . . . . . 41
Directors’ Remuneration Report .....................50
Report of the Audit and Risk Committee ...............54
Statement of Directors’ Responsibilities ...............58
FINANCIAL STATEMENTS
Independent Auditors‘ Report .......................59
Consolidated Statement of Profit or Loss and
Comprehensive Income ............................67
Company Statement of Profit or Loss and
Comprehensive Income ............................68
Consolidated Statement of Financial Position ...........69
Company Statement of Financial Position ..............70
Consolidated Statement of Changes in Equity ..........71
Company Statement of Changes in Equity ..............72
Consolidated Statement of Cash Flows ................73
Company Statement of Cash Flows ...................74
Notes to the Financial Statements ....................75
OTHER INFORMATION
Alternative Performance Measures ...................99
Glossary .......................................101
Company Information .............................103
For more information please visit our website
www.aquila-energy-efficiency-trust.com
INVESTING WITH IMPACT
ANNUAL REPORT 2023
Directors (all non-executive)
Miriam Greenwood OBE DL (Chair)
Nicholas Bliss
David Fletcher
Janine Freeman
Registered office
(Registered in England and Wales with
Company number 13324616)
6th Floor
125 London Wall
London
England
EC2Y 5AS
AIFM
FundRock Management Company (Guernsey) Limited
Sarnia House
Le Truchot
St Peter Port
Guernsey
GY1 1GR
Investment Adviser
Aquila Capital Investmentgesellschaft mbH
Valentinskamp 70
D-20335
Hamburg
Germany
Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Administrator and Company Secretary
Apex Listed Companies Services (UK) Limited
6th Floor, 125 London Wall
London
England
EC2Y 5AS
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6AH
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
COMPANY INFORMATION
YOUR COMPANY AT A GLANCE
Investment Objective
FURTHER TO THE ADOPTION OF A NEW INVESTMENT POLICY AT THE 2023 AGM,
AQUILA ENERGY EFFICIENCY TRUST PLC IS BEING MANAGED WITH THE INTENTION
OF REALISING ALL REMAINING ASSETS IN THE PORTFOLIO IN A PRUDENT MANNER
CONSISTENT WITH THE PRINCIPLES OF GOOD INVESTMENT MANAGEMENT AND
WITH A VIEW TO RETURNING CASH TO SHAREHOLDERS IN AN ORDERLY MANNER.
© 2023 AEET | 3
Management
The Company has appointed FundRock Management
Company (Guernsey) Limited (formerly Sanne Fund
Management (Guernsey) Limited) as its Alternative
Investment Fund Manager (“AIFM”) to provide portfolio
and risk management services. The AIFM is part of the
Apex Group.
The AIFM has appointed Aquila Capital Investmentgesellschaft
mbH as its Investment Adviser (“Aquila Capital” or
“Investment Adviser”). The Investment Adviser is part of the
Aquila Group, which was founded in 2001. Since its inception
it has undertaken a range of advisory mandates, mostly
focused on renewable energy infrastructure, including energy
efficiency.
The Board comprises four non-executive Directors, all of
whom are independent of the Investment Adviser, from
relevant and complementary backgrounds offering
experience in the management of listed funds, as well as
in the energy efficiency and infrastructure sectors.
Capital Structure
As at 31 December 2023 the Company’s share capital
comprised 100,000,000 ordinary shares of £0.01 each
(“Ordinary Shares”) (31December 2022: 100,000,000).
The Ordinary Shares are admitted to trading on the Main
Market of the London Stock Exchange and are listed on
the premium segment of the Official List.
Highlights (Consolidated figures)
Financial information
As at
31 December
2023
As at
31 December
2022
NAV per Ordinary Share (pence)
1
94.28 95.23
Ordinary Share price (pence) 57.25 71.00
Ordinary Share price discount to
NAV
1
(%)
(39.3) (25.4)
Dividends per Ordinary Share
(pence)
2
– 3.5
Net assets (in £million) 94.28 95.23
Ongoing charges
1
(%) 3.5 2.6
Performance summary % change % change
NAV total return per Ordinary
Share
2
0.3 0.1
Share price total return per
Ordinary Share
1,2
(17.6) (23.5)
1 These are Alternative Performance Measures (‘‘APMs’’) for the year ended 31 December 2023. Definitions of these APMs and other performance measures used, together with
how these measures have been calculated, are on page 99.
2 Including dividends declared relating to the year under review.
CHAIR’S STATEMENT
Investment Performance
The Company’s NAV at 31 December 2023 was £94.28 million
(£95.23 million as at 31 December 2022). The principal
change in the NAV was caused by the payment of a
dividend of £1.25 million on 20 March 2023 in respect of
the quarter ended 31 December 2022. The Company
declared no dividends in respect of the quarter periods
in 2023 and the Company’s share price, in the context of
the failure of the Continuation Vote on 28 February 2023
and the subsequent successful combined Continuation
Managed Run-Off Resolution on 14 June 2023, traded at
a significant discount to NAV over the year to 31December
2023 resulting in a share price total return of minus 17.6%.
As at 31 December 2023, the Company had investments
of £65.48 million and legal contractual obligations to fund
committed investments of £5.58 million. During the year,
due to the Managed Run-Off status of the Company,
relationships have become strained with some of the
Energy Services Companies (“ESCOs”) which have been
the intermediaries to the Company’s investments. If these
relationships deteriorate further there may need to be
additional impairment to the value of some of the Company’s
investments. Meanwhile, the Investment Adviser continues
to monitor the performance of the Company’s investments
closely.
In light of the successful Continuation Managed Run-Off
Resolution, the Board has been working with its financial
advisers to ensure that the Company is in a position to
present Shareholders with a proposal to return cash. This
has been a complex process and I will discuss this in some
detail later in my letter. We have, however, operated during
the year with the principal intention to preserve cash. This
has resulted in decisions not to proceed (where it was
legally possible) with £14.6 million of potential investments.
This has left only £5.58 million to be invested, the majority
of which was deployed by the end of April 2024.
The difficulty of ensuring a return of capital from assets
that are individually small in size, geographically spread,
contractually complex and in many instances of a long
maturity should not be underestimated. Our advisers have
run an extensive process to seek offers from market
participants for the portfolio of assets which would deliver
value to Shareholders in a shorter time frame than a
Managed Run-Off. The Board has also been open to
entertaining structural proposals which would address
the Company’s size and liquidity, mindful always of the
Shareholders’ desire to see a full return of capital. However,
it has not yet proved possible to find an asset sale or a
structural solution that provides sufficient value in comparison
with the Managed Run-Off. The Board, with the support
of its advisers, continues to seek alternatives to increase
the value returned to Shareholders via the Managed
Run-Off. As announced on 6 March 2024 and detailed
fully in the notice of General Meeting dated 19 April 2024,
the first successful return of capital under the Managed
Run-Off is to be achieved by way of a tender offer at a
fixed price of 94.28 pence per share, subject to the approval
of Shareholders at the General Meeting to be held on
13May 2024.
As mentioned, the Company has been managed over the
year with the principal objective to preserve cash and,
accordingly, we will now, as part of the Managed Run-Off
process, return £17.5 million to Shareholders under the
tender offer. We have decided to return capital to
Shareholders by way of a tender offer as we believe it is
in the interests of the majority of Shareholders and provides
an equitable distribution. We will, however, continue to
keep under review the method of distribution, including
the payment of dividends. Whilst further distributions will
be made as unrestricted cash becomes available, I wish
to stress that a significant part of the portfolio may take
a considerable time to realise.
ON BEHALF OF THE BOARD, I AM PLEASED TO PRESENT THE ANNUAL REPORT (THE
“ANNUAL REPORT”) FOR AQUILA ENERGY EFFICIENCY TRUST PLC, FOR THE YEAR
ENDED 31 DECEMBER 2023.
4 | © 2023 AEET
Costs
I am very mindful of the significant annual additional
costs incurred in the running of the Company. In part,
these costs are a consequence of the substantial processes
involved in working towards a return of capital to
shareholders. Whilst a first tender offer was announced
on 19 April, this only reflects one outcome from the
work to return capital and the Board continues to work
with its advisers to identify other means of delivering
greater value to shareholders. In addition, a further
significant operational cost element derived from the
financial statement preparation process for the year to
31 December 2022 on the part of the Company’s service
providers which was not as efficient as the Board had
anticipated, which remains under review and for which
the Company may seek an element of cost recovery at
the appropriate time. The Board is mindful of the ongoing
risks and costs of managing the run-off process, and is
working to find ways to mitigate these risks.
Dividends
Following the failure of the Continuation Vote in February
2023 we announced that future dividends will only be
paid from net income, and after reviewing cash flow
forecasts, only in respect of six-month periods. The Board
announced on 6 March 2024 that, subject to Shareholder
approval, it will return capital to Shareholders by way of
a tender offer. As a result, no dividend has been declared
in respect of the year ended 31 December 2023. The
Board will continue its policy on future dividends, while
also mindful of the regulations regarding the retention
of Investment Trust status which impact the declaration
and payment of annual dividends.
Miriam Greenwood OBE DL
Chair of the Board
30 April 2024
© 2023 AEET | 5
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
INVESTMENT ADVISER’S REPORT
Investment Adviser’s Background
The Company’s AIFM, FundRock Management Company
(Guernsey) Limited (formerly Sanne Fund Management
(Guernsey) Limited), has appointed Aquila Capital
Investmentgesellschaft mbH as the Investment Adviser to
the AIFM in respect of the Company.
The Investment Adviser offers advice on potential Energy
Efficiency Investments in line with the Company’s Investment
Policy as approved by the Continuation Managed Run-Off
Resolution. Aquila Capital Investmentgesellschaft mbH is
part of Aquila Group, an investment and asset development
company focused on generating and managing essential
assets on behalf of its clients. Founded in 2001 by Dieter
Rentsch and Roman Rosslenbroich, Aquila Group currently
manages and/or advises assets worth around €14.6 billion
on behalf of institutional investors worldwide (as at
31 December 2023). Daiwa, one of Asia’s largest investors,
is a minority shareholder in the Aquila Group.
By investing in clean energy and sustainable infrastructure,
Aquila Group contributes to the global energy transition
and strengthens the world’s infrastructure backbone.
The Company initiates, develops and manages essential
assets along their entire value chain and lifetime. Aquila
Group’s primary objective is to generate performance for
its clients by managing the complexity of essential assets.
Currently, Aquila Group manages wind energy, solar
photovoltaic (“PV”) and hydropower assets of 19.8 gigawatts
(“GWs”). Additionally, 2.2 million square metres of sustainable
real estate and green logistics projects have been completed
or are under development. Aquila Group also invests in
energy efficiency, carbon forestry and data centres. Aquila
Group has been committed to climate change for more
than 15 years. Sustainability has always been part of the
company’s value system and is an integral part of its
investment strategies, processes and management of its
assets. The company has around 750 employees from
60 nations, operating in 19 offices in 17 countries worldwide.
6 | © 2023 AEET
Alex Betts has over 30 years’ experience in private equity
and over 15 years in resource efficiency and has invested
in a range of industries, geographies and stages. Based
in London, he joined Aquila Capital from Adaxia Capital
Partners (“Adaxia”). Prior to Adaxia Alex was a member
of the private equity team at Climate Change Capital
(“CCC”), which span out into Adaxia. Prior to CCC he was
Head of Royal Dutch Shell’s corporate venture capital unit
and a former partner of Montagu Private Equity. He is
British and graduated in Classics from Oxford University.
Franco Hauri has over 20 years’ experience in private equity
with over 15 years in resource efficiency, of which the last
six years have been focused on investing in energy efficiency
projects. Based in Zurich, he joined Aquila Capital from
Adaxia. Franco is a former member of the private equity
team at CCC, an Investment Adviser at NanoDimension,
a venture capital firm investing in nanotechnology, and a
consultant with Bain & Company. Franco holds an MBA
from Harvard Business School and a master’s degree in
finance, accounting and controlling from the University
of St. Gallen (HSG). He is Swiss and speaks English, German,
Italian, Spanish and French.
Alex Betts
Senior Investment Manager
Franco Hauri
Senior Investment Manager
Investment Activity
At the start of 2023, the Investment Adviser was focused
on achieving full deployment of the Company’s capital.
However, after the failure of the Continuation Vote on
28 February 2023 and following the success of the Continuation
Managed Run-Off Resolution on 14 June 2023, the Investment
Adviser has supported the managed run-off of the Company’s
portfolio and preparations for a potential sale of the
Company’s assets announced on 16 August 2023.
While pre-existing legally binding commitments are being
honoured, the Investment Adviser has taken opportunities
where possible to withdraw the Company from £14.6million
of commitments extant as at 31 December 2022 to invest
into three Spanish projects. In addition, in October 2023
an agreement was reached to withdraw from a partially
invested Solar PV investment, which was valued at £2.1million
at 31 December 2022 and had an unfunded commitment
of £4.5million (see “Investments in Spain” section below),
and receive repayment of the original investment of £1.5million
plus interest.
During 2023, £21.8million was deployed, taking total
invested capital, before redemptions and value adjustments,
to £69.5million. £14.4million was deployed in 13
commitments which had already been made as at
31 December 2022 and the balance of £7.4million to nine
new commitments that were concluded by 28 February
2023, the date of the failed Continuation Vote. These new
investments comprised:
n three Spanish Solar PV investments with three new
ESCOs for a total commitment of £4.7million, of
which £4.2million was deployed as at 31 December
2023;
n two additional rooftop Solar PV projects in Italy, with
a total investment of £1.3million; these projects are
with Noleggio Energia with whom a further
deployment of £0.7million, committed to in 2022,
was made during 2023 with the final deployment of
£0.5million completed in January 2024. The
Company has completed seven projects with this
ESCO involving total deployment of £4.2million.
n three lighting investments in the UK with two new
ESCOs involving total commitments of £1.8million,
of which £1.6million was deployed as at
31December 2023; and
n a third UK wind power project involving an
additional £0.3million investment, taking total
commitments with this ESCO to £2.0million.
The Company now forecasts a further £5.6million (including
expected transaction costs) will be invested into existing
commitments after 31 December 2023. The majority of
this capital was deployed by the end of April 2024, leaving
only £1.2million to be deployed through the remainder
of 2024.
Overall, the remaining investments have been performing
satisfactorily with only a small number of exceptions,
which have required significant provisions, including:
n a full provision of £1.4million against a Solar PV
investment, which was being developed in Spain due
to the insolvency of the ESCO developing the project
and refusal of the ESCO’s client to proceed with the
project which had been partly funded by the
Company;
n a provision of £1.1million, equal to 82% of the
investment value, prior to the provision, as at
31December 2023, against the sub-metering
investment in Germany due to the insolvency of the
company servicing the contracts which were
financed by the Company; and
n an additional provision against the EGA Energy
investment of £0.4million, taking the total provision
to 50% of the investment cost.
Two of the provisions were caused by the insolvency of
the ESCO as opposed to the counterparty making payments
under the contracts financed by the Company. The Investment
Adviser continues to monitor closely not only the receipt
of payments due under contracts and the financial status
of the counterparties making the payments but also the
status of the ESCOs which developed or which are
developing and managing the Company’s investments in
those particular projects. This oversight of ESCOs and the
maintenance of relationships with the ESCOs remains an
important activity since the ESCOs in many cases had been
expecting, before the failure of the Continuation Vote,
that the Company would finance multiple other projects.
As at 31 December 2023, the Company’s cash position,
including cash held as collateral for foreign exchange
hedging, was £29.1million. Notwithstanding the remaining
investment commitments, the cash position is forecast to
increase significantly due to the expected realisations of
Superbonus investments, which were valued at £30.9million
as at 31 December 2023 and which are forecast to be
realised in full by 31 December 2024. Realisations of
Superbonus investments continue to be subject to timing
uncertainties due to the bureaucracy inherent in the
schemes – see further below under “Investments in Italian
“Superbonus” projects”.
© 2023 AEET | 7
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Portfolio Overview
As at 31 December 2023, the Company’s portfolio of
35 Energy Efficiency Investments was diversified across
geographies (Italy, Spain, Germany and the United Kingdom),
technologies, counterparties and ESCO partnerships.
The Company’s portfolio is characterised by projects with
(i) a low technology risk through the use of proven
technologies; (ii) medium to long-term contracts providing
for predictable cash flows; and (iii) counterparties with
good creditworthiness.
i) Projects by Technology
Sub-meters
CHP
Lighting
Wind
Heating
Biogas/BioLNG
Water management
Solar PV
Building Retrofit
0.4%
1.6%
2.7%
3.0%
3.4%
7.3%
15.3%
15.7%
50.7%
% of investment values by technology – as of 31 December 2023
ii) Projects by Tenor
15-20
10-15
5-10
2-5
0-2
1.2%
14.7%
35.4%
1.6%
47.1%
% of investment values by maturity (years) – as of 31 December 2023
Years
iii) Projects by Country
United Kingdom
% of investment value by country – as of 31 December 2023
Germany
Spain
Italy
53.3%
26.4%
13.1%
7.3%
iv) Projects by Investment Grade
Default
BB-
BB+ – BB
BBB+ – BBB-
A-
A+ – A
AAA – AA-
1.1%
0.8%
26.6%
52.9%
9.6%
5.6%
3.4%
% of investment values by credit rating – as of 31 December 2023
Approximately 72% of the Company’s investments by value
at the year end had investment grade counterparties, as
assessed using either the Investment Adviser’s credit analysis
or external agencies. For projects which are non-investment
grade, there are typically additional protections. These
protections include the ability to export power to the grid,
and to extend the maturity of a contract with the ESCO
and the underlying counterparty to recover missed payments.
The latter is possible because the Company’s financing
agreements are of a shorter duration than the useful life
of equipment installed and, in many cases, of a shorter
duration than the contract between the ESCO and the
counterparty. The credit quality and performance of the
Company’s portfolio is discussed further below in respect
of valuations and expected credit loss provisions.
The Company’s portfolio also benefits from a combination
of fixed and variable return cash flows. While approximately
84% of the total investment value provides a fixed rate of
return from contractual cash flows, approximately 16% by
investment value has variable cash flows linked to power
production and power prices, or inflation indexation. In
many cases, these variable return investments have significant
fixed income elements, for example feed-in tariffs or fixed
power prices in Power Purchase Agreements. In addition,
certain investments have downside protections, for example,
minimum contractual returns in order to reduce the risk of
lower than forecast cash flows. The Company’s portfolio
of investments is expected to achieve an unleveraged
average return of 8.6% per annum, an increase from the
yield of 8% per annum reported in the audited Annual
Report and Accounts for the year ended 31 December
2022.
INVESTMENT ADVISER’S REPORT
CONTINUED
8 | © 2023 AEET
Investments in Italy (£34.9 million value at
year end)
In the year ended 31 December 2023, the Company
committed £1.3million to two new rooftop Solar PV projects
developed by Noleggio Energia, with which the Company
has now made seven investments. During the year,
£13.0million was deployed to both these new investments
and other existing commitments in Italy, the majority of
which, £10.9million, was deployed into Superbonus projects.
As at 31 December 2023, total investment value in Italy
was £34.9million across a total of 13 investments and there
was £0.5million of outstanding commitments, which was
deployed in January 2024.
1) Investments in Italian “Superbonus” projects (£30.9
million value at year end)
The net cash deployed in Superbonus projects increased
from £18.1million as at 31 December 2022 to £29.0million
as at 31 December 2023. Significant progress has been
made on the 109 individual projects within the five clusters
such that construction has been completed on 105 of these
projects to date, with the remaining four projects forecast
to be completed by the end of June 2024. Fourteen projects
have been fully completed with payments totalling £2.9million
for those tax credits received, of which £0.9million was
received in 2023 and £2.0million in January, February and
April 2024. Regarding the remaining projects, the ESCOs
are experiencing delays in receiving certification of the tax
credits although as at the end of April 2024 a large majority
of the 109 projects had secured tax credit certification,
significant progress from the position as at the end of
September 2023. The ESCOs are also experiencing delays
with final payments from the buyers of the tax credits,
which is understood to be primarily due to the large number
of tax credits which buyers are processing. As a result of
the delays, the ESCOs are expecting the majority of the
capital deployed to be redeemed by the end of 2024. The
Investment Adviser has considered whether these delays
represent a significant increase in the credit risk of these
investments and,following detailed enquiries with the ESCOs
managing these projects, has concluded that at this stage
there has been no significant change in credit risk. See
note4 on page 85 for further information regarding the
assessment of Superbonus projects.
“Superbonus” is an incentive measure introduced by the
Italian Government through Decree “Rilancio Nr. 34” on
19 May 2020, which aims to make residential buildings
(condominiums and single houses) more energy efficient
through improvements to thermal insulation and heating
systems. When qualifying measures are completed, ESCOs
delivering the measures are awarded a tax credit equal to
110% of the cost of the measures. These tax credits can
then be sold to banks, insurance companies and other
corporations and, thus, projects can be financed without
the need for a financial contribution from landlords.
The projects which the Company committed to finance
are being managed by three ESCOs: Enerstreet, Enerqos
Energy Solutions and Sol Lucet. The projects involve a
range of energy efficiency measures including insulation,
the replacement of heating systems with more efficient
solutions and energy efficient windows.
2) Solar PV investments for self-consumption in Italy
(£4.0 million value at year end)
As at 31 December 2023, the Company had invested
£4.6million in eight rooftop Solar PV projects with an
aggregate capacity of 5.1 MWp. Following completion of
the final project in January 2024 with an investment of
£0.5million, all of these projects are operational and cash
paying such that as at 31 December 2023, £0.5million
of capital had been redeemed. These projects enable
companies to reduce their energy expenses and CO
2
emissions and avoid grid losses through the self-consumption
of the electricity produced.
2.i) Projects with Noleggio Energia
Of these eight Solar PV projects which the Company has
committed to finance, seven projects have been developed
by the ESCO Noleggio Energia, which was established in
2017 and is an Italian company that specialises in providing
operating leases for energy efficiency and renewable
energy projects for commercial and industrial clients in
Italy. These projects are all structured as the purchase of
receivables from operating leases with maturities of seven
or ten years, with a weighted average maturity of eight
and a half years outstanding, and all use very similar
documentation. Noleggio Energia has transferred to the
SPV the monthly receivables from these operating lease
agreements, which provide for fixed rates of return with
a weighted average return of 7.9% per annum.
© 2023 AEET | 9
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
The projects with Noleggio Energia at year end are summarised below:
Counterparty Description
Investment
Value
£k
Capacity
kWp Credit Rating
Initial Term
Yrs
Acetificio Galletti
Producer of vinegars, dressings, pickles and other
food products
208 238 BB- 7
Enofrigo
Manufacturer of wine cabinets and hot and cold
food display units
89 127 BBB+ – BBB- 7
Tecnocryo
Manufacturer of machines for handling cryogenic
fluids
1,130 1,000 BB+ – BB 10
Ali Group Manufacturer of food service equipment 294 443 BBB+ – BBB- 7
Orlandi
Manufacturer of non-woven products for a range of
applications
355 876 BB+ – BB 10
Marangoni Manufacturer of tyre retreading systems and products 809 1,000 BB+ – BB 10
Carpigiani Manufacturer of machinery to produce ice cream 427 479 BBB+ – BBB- 5
Total 3,312 4,163
INVESTMENT ADVISER’S REPORT
CONTINUED
2.ii) Project with CO-VER Power Technologies
In January 2022, the Company refinanced the acquisition
of an existing rooftop Solar PV plant in Ascoli Piceno
(Central Italy) with a generating capacity of 902 kWp. The
investment, with an original cost of £0.7million, is based
on the purchase of receivables generated by an energy
service contract between the leading Italian engineering
firm CO-VER Power Technologies (“CO-VER”) and its
subsidiary Futura APV S.r.l. (“Futura”). The contract governs
the management of an operating roof-mounted Solar PV
plant until April 2028. Thereafter, the investment is based
on a feed-in tariff for an additional six years, aggregating
to a twelve-year tenor. The investment, which generated
total cash receipts of £0.2million in the period from
inception of the investment until the year end, is forecast
to generate a return of 6.5% per annum based on the
year end valuation of £0.7million. The valuation remains
equal to the original cost due to the discount rate used
for the valuation at the year end being lower than the
forecast return at the time of the original investment.
CO-VER has a successful 20-year history in developing
industrial projects in the areas of energy storage systems,
co/tri-generation plants and renewable energies. Futura
is the owner of the PV plant which benefits from feed-in
tariffs payable by Gestore dei Servizi Energetici (“GSE”).
GSE is a joint stock company managed by the Italian
Government which is responsible for promoting and
developing the growth of renewable assets in Italy. GSE
currently has a credit rating of BBB+ from the Italian
Government.
Investments in Spain (£8.6 million value at
year end)
In the year ended 31 December 2023, the Company
deployed £6.8million into projects in Spain, to complete
five projects which were committed as at 31 December
2022 and to finance a further three Solar PV projects in
Spain with three new project developers. The largest of
these projects was a £3.4million project at the site of a
Spanish agricultural company. At the year end there were
unfunded commitments to investments in Spain of
£1.2million. £0.6million is forecast to be deployed before
the end of the third quarter of 2024 to complete a building
energy efficiency investment programme, which received
investment of £2.1million in the year ended 31 December
2023. The balance of £0.5million will complete the
financing of Solar PV projects for an ESCO with whom
the Company completed on the first tranche of its
commitment in March 2023.
1) Solar PV investments in Spain (£6.3 million value at
year end)
The Company has committed capital to finance the
development of ten Solar PV installation projects throughout
Spain with nine project developers. Two of the projects
have been structured to provide fixed rates of return while
the remaining eight projects have been structured under
Power Purchase Agreements (“PPAs”) with maturities of
up to 18 years and have variable revenues, often subject
to a combination of production fluctuations, power price
changes and inflation. In addition, excess production
beyond the on-site demand may be injected into the grid.
10 | © 2023 AEET
These variable revenue risks are mitigated by conducting
technical due diligence prior to making commitments and
by contracted prices within the PPAs.
Seven of these investments are now fully operational while
one project is operating at one site and the Company has
an outstanding commitment of £0.5million to another
site. This commitment is payable at completion of the
project provided that certain conditions are met. As referred
to in the Investment Activity section above, one project
has been realised and one project will not proceed and it
has been necessary to take a £1.4million provision, equal
to 100% of the cost, against this investment. The developer
of this project filed for insolvency protection in November
2023 having received £1.4million as a down payment on
the estimated full project cost of £2.8million.
2) Building Energy Efficiency Investments in Spain
(£2.3 million value at year end)
The Spanish Government has established incentive schemes
to promote energy efficiency measures in buildings, including
the “Programa de Rehabilitacion Energetica de Edificios”
(“PREE”). PREE is a €402.5million incentive scheme in Spain
which is designed to promote and reward energy efficiency
improvements for condominiums and other buildings,
improving their energy rating by at least one energy class.
Under this scheme, the Company has committed £2.8million
to fund the refurbishment of condominiums, which is being
managed by a leading ESCO specialised in designing and
implementing energy efficiency and renewable energy
projects in Spain. The investment cash flows are based on
the purchase of receivables generated by the underlying
energy saving contracts between the ESCO and the
“Comunidad de Proprietarios”; the legal entities which
represent each of the owners of the apartments in a
residential building. The receivables have been rated with
the S&P equivalent of A+/A. £2.2million has been deployed
as at 31 December 2023 and the balance is forecast to be
deployed in full by the end of June 2024.
Investments in Germany (£17.3 million value at
year end)
In the year ended 31 December 2023, no further investments
were made in Germany except for the settlement of
£0.1million of transaction costs. The Company has four
investments in Germany, across four distinct technologies
including sub-metering technologies, water management
solutions, heat pumps and Bio-LNG. There remained an
outstanding legal commitment at the Year End to invest
£3.7 million to finance the installation of liquefaction
equipment at a biogas plant in Northern Germany. This
amount was deployed in April 2024 following receipt of
all necessary permits.
Three of the investments in Germany provide for fixed
rates of return while the other, a biogas investment, has
a variable return above a fixed rate of 5% per annum,
which is equivalent to 8% of revenue generated by the
project, capped at £1.1million across eight years. This
arrangement results in an overall forecast return from this
project of 7.6% per annum based on the year end valuation
of £4.8 million.
Three of the investments are performing in line with the
contracts. However, the sub-metering investment, which
had a book value of £1.5million as at 30 June 2023, before
the receipt of £0.2million in July 2023, required a significant
provision of £1.1million to reduce the holding value to
£0.2million following the insolvency of the service provider
in October 2023. While the Company’s investment is
through a special purpose subsidiary of the service provider
(“SPV”), which owns sub-metering and other services
contracts with various landlords and which is not in
insolvency, the insolvency requires the SPV to secure an
alternative company to service the contracts. This search
is in progress with the support of an industry expert.
Unfortunately, it is likely that a new servicer will not wish
to take on one of the major contracts, as a result of which
the SPV is likely to lose c.35% of the contractual income
stream due to the difficulties of servicing the contract,
reducing total future revenue to £1.1million. In addition,
an alternative servicer is likely to require a higher percentage
of revenues than the service provider required, which
combined with the likely loss of income requires a provision
against the investment.
Investments in the United Kingdom
(£4.7 million value at year end)
In the year ended 31 December 2023, the Company
committed £2.0million to four new investments. The four
new investments, developed by two new and one existing
ESCO relationship, comprised:
n two groups of lighting investments for an industrial
company and schools, totalling £1.2million, of which
£0.1million remains to be deployed;
n another group of 17 lighting investments for a range
of schools and industrial companies, totalling
£0.5million, which has been fully deployed; and
n an investment of £0.3million into a fifth operating
wind power project.
As at 31 December 2023, total cash deployed to investments
in the UK was £5.3million, with £0.1million of commitments
outstanding for lighting investments. Deployment is
expected in the first half of 2024.
© 2023 AEET | 11
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
INVESTMENT ADVISER’S REPORT
CONTINUED
The CHP investment for a food producer, Vale of Mowbray,
to which £0.9million had been deployed and, as previously
reported in the Half-Yearly Financial Report for the six months
to 30 June 2023 and in the 2022 Annual Report, this
investment remains on hold because Vale of Mowbray
was placed into administration. Discussions continue
between Ega Energy, the developer of the original project,
and the new owner of the site, a cold store logistics
business. However, the new owner of the site has not yet
decided whether or how to proceed with the CHP investment.
Ega Energy remains confident that it will be able to deploy
the CHP equipment either at this site or at the sites of
other potential clients in the UK. Nevertheless, the Company
has increased the provision against this investment from
£0.06million as at 31 December 2022 to £0.48million
at the year end and the Company is forecasting that no
further capital will be deployed to this investment.
The UK investments in the wind power projects are variable
return investments due to the variability of power production
and export tariffs, which are renewed each year, although
a significant percentage of revenue is based on feed-in
tariffs which benefit from annual inflation adjustments.
The other UK investments which are in CHP and lighting
projects are all fixed return investments albeit the lighting
projects with one of the ESCOs have annual inflation
adjustments.
Valuations and Expected Credit Loss Provisions
as at 31 December 2023
As at 31 December 2023, the Company’s investments had
a book value of £65.5million, with investments held at
amortised cost valued at £55.0million and investments
held at fair value through profit or loss valued at £10.5million
(see Note 3 of the Accounts).
The investments held at amortised cost are net of expected
credit loss provisions of £1.9million, which increased by
£1.8million from £0.1million as at 31 December 2023.
The principal reasons for the increase were the provision
of £1.1million made against the sub-metering investment
in Germany, and a provision of £0.5million against the
Ega Energy Vale of Mowbray investment. Apart from these
projects, the Company has not experienced payment
issues of material significance on the receivables due to
be paid to it in the year.
The change in valuation of the investments held at fair
value through profit or loss was impacted primarily by:
(i) the realisation of a partially completed investment in a
Spanish Solar PV project; and (ii) a full provision of £1.4million
against another Solar PV investment in Spain.
In October 2023, the Company received repayment in full
plus interest of an investment in a partially completed
investment in a Spanish Solar PV project. This investment
had involved an initial investment of £1.5million in August
2022, which was part of a total commitment of £6.3million
as at 31 December 2022. The valuation as at 31 December
2022 was marked up from its cost of £1.5million to
£2.1million but as at 30 June 2023 was marked down to
£0.8million, primarily due to lower forecast power prices.
The repayment of the cost of the investment plus interest,
totalling £1.7 million, has resulted in a capital loss over
the year but a capital gain from the position as at 30June
2023 of £0.8million.
The Company has taken a full provision of £1.4million
against a Solar PV investment, which was being developed
in Spain due to the insolvency of the ESCO developing
the project and refusal of the ESCO’s client to proceed
with the project which had been partly funded by the
Company.
At the year end the remaining ten fair value investments
comprised:
n the Bio-LNG investment in Germany with a value of
£4.8million;
n six Solar PV projects in Spain with an aggregate
value of £3.1million;
n two wind projects in the United Kingdom with an
aggregate value of £1.9million; and
n a Solar PV project in Italy with a value of £0.7million.
12 | © 2023 AEET
The performance of these remaining ten fair value investments with a value as at year end of £10.5million, summarised
in the chart below, resulted in an increase in fair value of 2.1%.
31/12/2023
Others
Change in discount rates
FX effect
Distributions to AEET
Valuation timing
Business plan update
31/12/2022
0% 20% 40% 60% 80% 100% 120%
-3.01%
7.35%
-3.25%
-1.39%
2.30%
0.10%
102.09%
100.00%
The valuation increase was driven primarily by:
n valuation timing, which is the time value of money
effect between the two valuation dates, which had a
positive effect of +7.4%; and
n an overall reduction in the discount rates applied to
the valuations, which had a positive effect of +2.3%.
Lower discount rates were primarily due to the completion
of construction of Solar PV projects in Spain and thus a
reduction in construction risk, together with reductions
in risk-free rates.
Offsetting these factors were:
n distributions from these investments, -3.3%;
n FX effects, -1.4%; and
n business plan updates, -3.0%.
Business plan updates comprise changes to power price,
inflation and production forecasts. The principal change
was lower forecast power prices in the short term, which
reversed a positive increase in valuations as at 31 December
2022. The impact of this was softened by the relatively
low exposure of the Company’s projects to power prices
due to PPA terms and FiTs.
© 2023 AEET | 13
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
INVESTMENT ADVISER’S REPORT
CONTINUED
Summary of Investments as at 31 March 2024
Description
Receivables
Weighted
Avg. Credit
Rating
Term
Years Technology Status Country
Value
£k
Commitment
o/s
£k
Receivables (fixed) from a 238 kWp
rooftop Solar PV project installed on
the production facilities of a food
manufacturer in Lombardy.
BB- 7 Solar PV Operating Italy 208 0
Receivables (fixed) from a 127 kWp
Solar PV project installed on the
production facilities of a manufacturer
in Veneto.
BBB+ / BBB- 7 Solar PV Operating Italy 89 0
Receivables (fixed) from sales of tax
credits generated under the Italian
Superbonus, which supports energy
efficiency retrofits (insulation, more
efficient heating etc) of residential
buildings.
BB+ / BB 2 Building
Retrofit
Construction Italy 5,326 0
Receivables (fixed) from sales of tax
credits generated under the Italian
Superbonus, which supports energy
efficiency retrofits (insulation, more
efficient heating etc) of residential
buildings.
BBB+ / BBB- 2 Building
Retrofit
Construction Italy 9,846 0
Receivables (fixed with RPI) from
lighting as a service contracts with
sixUK companies.
BBB+ / BBB- 5 Lighting Operating United
Kingdom
232 0
Receivables (fixed/variable) from a
901.6 kWp rooftop Solar PV project at
a site in Ascoli Piceno, Central Italy.
BBB+ / BBB- 12 Solar PV Operating Italy 694 0
Receivables (fixed) from sales of tax
credits generated under the Italian
Superbonus, which supports energy
efficiency retrofits (insulation, more
efficient heating etc) of residential
buildings.
A+ / A 2 Building
Retrofit
Construction Italy 1,332 0
Receivables (fixed) from a 1,000 kWp
rooftop Solar PV project to be installed
at a manufacturer’s production facility
in Lombardy.
BB+ / BB 10 Solar PV Operating Italy 1,130 0
Receivables (fixed) from sub-metering
hardware and services contracts with
landlords of multi-occupancy
buildings.
Default 9 Sub-meters Operating Germany 245 107
14 | © 2023 AEET
Description
Receivables
Weighted
Avg. Credit
Rating
Term
Years Technology Status Country
Value
£k
Commitment
o/s
£k
Receivables (fixed) from CHP Energy
Services Agreement with a major
conference centre in Wales.
BBB+ / BBB- 6 CHP Operating United
Kingdom
139 0
Receivables (fixed) from CHP Energy
Services Agreement with a food
manufacturer in North East England.
Default 7 CHP Construction United
Kingdom
475 0
Receivables (fixed) from sales of tax
credits generated under the Italian
Superbonus, which supports energy
efficiency retrofits (insulation, more
efficient heating etc) of residential
buildings.
BB+ / BB 2 Building
Retrofit
Construction Italy 7,402 0
Receivable from a PPA with a poultry
producer for three Solar PV Plants
around Zaragoza, Northern Spain,
with a total capacity of c. 400 kWp.
BB+ / BB 15 Solar PV Construction Spain 319 0
Receivables (fixed) from CHP Energy
Services Agreement with a hotel near
Birmingham.
BB+ / BB 8 CHP Operating United
Kingdom
429 0
Receivables (fixed) from sales of tax
credits generated under the Italian
Superbonus, which supports energy
efficiency retrofits (insulation, more
efficient heating etc) of residential
buildings.
BBB+ / BBB- 2 Building
Retrofit
Construction Italy 6,965 0
Receivables from PPAs with a
manufacturer of irrigation products
and a manufacturer of doors and
kitchen cabinets for 3 solar PV plants
with a total capacity of c.950 kWp in
Valladolid and Toledo.
BBB+ / BBB- 18 Solar PV Operating Spain 652 0
Receivables (fixed) from two solar PV
plants around Barcelona, Spain, with
a total capacity of c.210 kWp,
between a Spanish developer and a
manufacturer of bread and pastry
products and a provider of IT services
to universities.
BB+ / BB 10 &
12
Solar PV Operating Spain 133 0
© 2023 AEET | 15
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
INVESTMENT ADVISER’S REPORT
CONTINUED
Description
Receivables
Weighted
Avg. Credit
Rating
Term
Years Technology Status Country
Value
£k
Commitment
o/s
£k
Receivables (fixed) from a 443 kWp
rooftop Solar PV project installed on
the production facilities of a food
service equipment manufacturer in
Veneto, Northern Italy.
BBB+ / BBB- 7 Solar PV Operating Italy 294 0
Purchase of receivables generated by
PPA form a Solar PV plant with a
capacity of c.1,600 kWp between a
Spanish developer and a Spanish
ceramic tiles manufacturer near
Valencia.
BBB+ / BBB- 15 Solar PV Operating Spain 1,000 0
Receivables of FiTs and export tariffs
generated from threeoperating wind
turbines in the UK with a total capacity
of 166 kWp, of which the generated
energy is used for self-consumption and
for export to the grid.
BBB+ / BBB- 10.6 Wind Operating United
Kingdom
410 0
Subscription for a Note for the
refinancing of an operating biogas
plant in north-eastern Germany and
an upgrade to a Bio-LNG facility. The
Note provides for a fixed return plus
an agreed share of revenues from the
facility.
A- 8.25 Biogas /
Bio-LNG
Operating
(Phase 2
construction)
Germany 4,770 3,704
Receivables (PPA with fixed price)
from a rooftop Solar PV project with
a capacity of c.350 kWp for an
agricultural cooperative specialised in
the production and marketing of
extra virgin olive oils in Granada.
BB- 15 Solar PV Operating Spain 311 0
Receivables (fixed) from Solar PV plant
in self-consumption for a total
installed capacity of 875.6 kWp
located at the site of a non-wovens
manufacturer in Lombardy,
NorthernItaly.
BB+ / BB 10 Solar PV Operating Italy 799 0
Summary of Investments as at 31 March 2024 continued
16 | © 2023 AEET
Description
Receivables
Weighted
Avg. Credit
Rating
Term
Years Technology Status Country
Value
£k
Commitment
o/s
£k
Receivables from service agreements
related to the water management
between the developer and
condominiums and multi-family
homes, mainly managed by large
property managers via a Note
structure.
BBB+ / BBB- 10 Water
management
Operating Germany 10,044 0
Receivables generated by two energy
saving contracts between the
developer and five Spanish
condominiums located in the proximity
of Madrid, Guadalajara and Gerona,
as well as subsidies generated under
the incentive scheme.
A+ / A 15 Building
Retrofit
Construction Spain 2,306 584
Acquisition of receivables of FiTs and
export tariffs generated from
4 operating wind turbines in
Scotland, with a total capacity of
c.250 kWp.
A- 14 Wind Operating United
Kingdom
1,531 0
Subscription for a Junior Note issued
by the largest heating installer in
Germany, entitling the Noteholder to
receivables generated through service
and maintenance contracts for heat
pump systems for the residential
sector throughout Germany.
AAA / AA- 15 Heating Operating Germany 2,233 0
Receivables (fixed) from Solar PV
installations for a leading agricultural
business engaged in the cultivation
of grapevines, cereals, onions, olives,
almonds and peas with a total
capacity of c.4,000 kWp near
Valencia.
BBB+ / BBB- 10 Solar PV Operating Spain 3,044 67
Receivables from PPAs with a
manufacturer of acoustical insulation
products and a manufacturer of
textiles for two Solar PV plants in
self-consumption for a total installed
capacity of c.870 kWp located
around Alicante.
BB+ / BB 14 &
15
Solar PV Operating Spain 659 0
© 2023 AEET | 17
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
INVESTMENT ADVISER’S REPORT
CONTINUED
Description
Receivables
Weighted
Avg. Credit
Rating
Term
Years Technology Status Country
Value
£k
Commitment
o/s
£k
Purchase of receivables generated
from PPA and grid sales agreement
for a Solar PV plant with a capacity
of c.200 kWp for a perfume retailer
in Malaga.
BB+ / BB 18 Solar PV Operating Spain 145 509
Receivables (fixed) generated from
the installation and operation of
metering and LED projects with
eleven different counterparties in
theUK.
BB+ / BB 5 to 7 Various Operating United
Kingdom
716 41
Receivables (fixed payments indexed
to CPI) from a roof-mounted Solar PV
plant with a total capacity of c.1,000
kWp for a developer and distributor of
materials and technologies for tyre
re-treading in Central Italy.
BB+ / BB 10 Solar PV Operating Italy 809 7
Receivables (fixed) from a roof-
mounted Solar PV plant with a total
capacity of c.480 kWp for an ice
cream machine manufacturer in
Northern Italy.
BBB+ / BBB- 5 Solar PV Operating Italy 427 7
Receivables (fixed) generated from
refinancing the installation of LED
lighting projects for 17 different
clients in the UK. The various
operating lease agreements range
from five to ten years.
BBB+ / BBB- 10 Lighting Operating United
Kingdom
407 0
Receivables (fixed) generated from
refinancing the installation of a LED
lighting project for a UK logistics
business. The lease agreement has a
five-year maturity.
BBB+ / BBB- 5 Lighting Operating United
Kingdom
411 0
Notes:
The values in the table above are as at 31 December 2023 plus, where applicable, the cost of investment made in the period from 1 January 2024 to 31 March 2024 using the
foreign exchange rate as at 31 December 2023 of EUR1.1535:£1.
The term is the original maturity of the investment.
Status and commitment outstanding are the positions as at 31 March 2024.
Summary of Investments as at 31 March 2024 continued
18 | © 2023 AEET
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)
Introduction
The Company’s goal is to generate attractive returns for
investors by reducing Primary Energy Consumption (“PEC”).
The Company seeks to achieve this through investing
principally in a diversified portfolio of energy efficiency
projects with high-quality counterparties. The Company
investments positively impact the environment by reducing
the amount of carbon dioxide produced, by decreasing
PEC and by increasing the amount of renewable energy
used. The synergies
1
generated by the reduction of PEC
and simultaneously using renewable energy sources further
decrease CO
2
emissions.
This is reflected across the investment philosophy and
approach of both the Company and its Investment Adviser,
Aquila Capital, who are both of which dedicated to the
green energy transition. The Company is committed to
being a responsible investor, ensuring that environmental,
social and governance criteria are incorporated into
day-to-day investment decisions as well as generating a
positive impact for society. By reducing PEC, the Company
often improves life standards for end users; for example,
better lights, easier maintenance, reduced danger, security
of supply and, very importantly, the reduction of emissions
like Nitrogen Oxides.
Over the year ended 31 December 2023, the portfolio
performed as follows
2
:
n
6,566 tonnes of avoided CO
2
emissions (“tCO
2
e”); and
n 23,639 MWh of energy saved,
n
for total emission savings equivalent to 2,873 passenger
flights around the world.
Method of Calculation for Energy Savings (kWh)
and Avoided CO
2
Emissions (tCO
2
e)
The energy savings (in kWh) and avoided CO
2
emissions
(intCO
2
e) are reported to Aquila Capital by third parties,
including the development companies, ESCOs and other
third parties. These reports are supported by asset-level
documentation of individual methodologies. Aquila Capital
has reviewed the individual methodologies for technical
consistency and reconciled the reported values for plausibility.
Where quantification of likely energy savings and avoided
CO
2
emissions is not clear, for example, with the Superbonus
projects in Italy and the Bio-LNG, water metering and
heat pump projects in Germany, no estimations are included
in the avoided CO
2
emissions and energy savings
statisticsabove.
Only energy savings and avoided CO
2
emissions for
operational projects are considered on a pro-rata basis
for the time of operation during the reporting period.
Avoided CO
2
emissions are estimated in gross terms and
derived from energy savings in kWh using a conversion
factor (except CHP, see below) which measures the grid’s
emission intensity. Emissions incurred during the life cycle
of the light bulbs such as materials sourcing, manufacturing,
installation, maintenance etc. are not available. The reported
metrics are estimations based on assumptions. For technical
reasons, it is not possible or feasible to observe or measure
actual energy or emission avoidance in real-time.
n
LED/Lighting: Savings estimates are derived based on
technical, product-specific attributes provided by the
product manufacturer. Lighting assets are typically not
connected to a distinct circuit. These solutions are
designed according to the requirements of a given
functional unit, i.e. office, street or space, which varies
on asset level. Changes in the number of light bulbs
or lumen are not considered.
n
Solar PV: Electricity production is translated into
emissions avoidance with a conversion factor (see
above). Production estimates for Solar PV assets are
evaluated during technical due diligence processes.
n
CHP: Avoided CO
2
emissions are calculated directly by
comparing the asset’s emissions based on the feedstock
used for a specific plant with a reference co-generation
unit’s emission factor.
n
Metering: Metering solutions are being applied to a
large portfolio of individual households. Annual average
household consumption is estimated, and a developer’s
specific savings estimate is applied to the average
household consumption.
© 2023 AEET | 19
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)
CONTINUED
ESG Approach
The Company has adopted Aquila Capital’s ESG Integration
Policy
3
, ensuring that environmental, social and governance
criteria were incorporated into day-to-day investment
decisions as well as generating a positive contribution for
society. The Company investment approach is focused on
investments in energy efficiency projects located primarily
in Europe. These investments are predominantly into
proven technologies that deliver energy savings for
commercial, industrial and public sector buildings. Prior
to the adoption of the New Investment Policy, the Company
sought to invest in projects for the long term with a focus
on optimising and improving the assets’ PEC (and, of
course, the Company’s investments continue to meet this
initial objective). Technologies include:
n LED Lighting Systems;
n Solar PV;
n HVAC/Buildings;
n Smart Metering/Sub-metering; and
n Bio LNG.
Environmental Contribution
The Company’s investments are focused on reducing PEC,
which should lead to significant reductions in greenhouse
gas emissions. In addition, local production of energy
(CH P, biomass boilers, Solar PV) reduces transportation
energy losses and grid over-utilisation. Smart meters and
other control technologies enable a better visibility and
management of energy and therefore represent a basis
for energy savings.
Social Contribution
Energy efficiency measures not only reduce PEC, but
typically also have a positive impact on health and quality
of life for different stakeholders, such as employees and
users of public facilities. This is largely achieved through
the installation of advanced solutions for lighting, heating,
cooling, ventilation and the associated control units.
Allproject developers are required to adhere to local,
regional and national health and safety laws, to train and
educate employees accordingly, to make sure casualties
and injuries are avoided. Aquila Capital’s ESG Integration
Policy, as adopted by the Company, has sought to exclude
suppliers and manufacturers that do not meet Aquila
Capital’s criteria (exclusion of certain sectors/subsectors,
or companies that, for example, use unfavourable labour
conditions). For all counterparties a rating has been
performed (in collaboration with a third-party rating
agency) assessing the creditworthiness of the relevant
counterparty as well as a “Know Your Client” check for
the relevant parties involved to increase transparency of
the counterparties’ activities.
Governmental Contribution
The Company’s business partners are required to adhere
to the requirements of the relevant social security and tax
authorities. The Company’s business partners are required
to provide evidence that they adhere to anti-bribery and
corruption laws.
Due Diligence
The Investment Adviser performed detailed ESG due
diligence for each asset prior to investment. The investment
management team followed a structured screening, due
diligence and investment process designed to ensure that
investments are reviewed and compared on a consistent
basis. Execution of this process was facilitated by the
team’s deep experience in energy efficiency project
investing. As part of this process, the Investment Adviser,
as relevant for each investment, considered:
n
total PEC reduction, and implied CO
2
emissions reduced
and/or avoided; and/or
n
total energy production from renewable and
non-renewable sources.
1 International Renewable Energy Agency (Irena), “Synergies between renewable energy and energy efficiency” (2017), available at: https://www.irena.org/publications/2017/
Aug/Synergies-between-renewable-energy-and-energy-efficiency#:~:text=Renewables%20would%20account%20for%20about,country%2C%20sector%20and%20
technology%20levels
2 Passenger flights around the world: This number is derived from passenger flight emissions data retrieved on 4 April 2023 from the International Civil Aviation Organization;
https://applications.icao.int/icec/Home/Index. The total emissions associated with a passenger flight around the world based on a standard itinerary from New York to Dubai,
Bangkok, Sydney, Los Angeles and back to New York in the economy class is 2,285.80 kg CO
2
.
3 For details please refer to: https://www.aquila-capital.de/fileadmin/user_upload/ESG_report/Aquila_Group_ESG_Integration_Policy.pdf
20 | © 2023 AEET
Governance Framework
The Company has an independent Board of Directors,
with FundRock Management Company (Guernsey) Limited
(formerly Sanne Fund Management (Guernsey) Limited)
as the AIFM. The Board of Directors supervises the AIFM,
which is responsible for making recommendations in
relation to any investment proposals put forward by the
Investment Adviser. The Investment Adviser is fully regulated
and supervised by BaFin in Germany. The Company
maintains a comprehensive risk register which is regularly
updated and reviewed by the AIFM and the Board of
Directors. The Company has established procedures to
deal with any potential conflicts of interest in circumstances
where Aquila Capital (or any affiliate) is advising both the
AIFM (for the Company) and other Aquila Capital managed
funds. In the context of an investment decision, these
procedures may include a fairness opinion in relation to
the valuation of an investment, which is obtained from
an independent expert.
Monitoring of ESG
The Company’s commitment to and compliance with the
Company’s established ESG approach is monitored on a
continuous basis throughout the lifecycle of investments,
as they become operational. This includes:
n
ongoing monitoring of the PEC based on the energy
consumption and deriving from that the CO
2
savings,
where appropriate, monitoring additional environment
and ESG relevant developments both at the portfolio
and asset level; and
n
annual reporting, including ESG aspects, to relevant
stakeholders including ad-hoc reporting of any material
and urgent issues identified in the monitoring process.
The Company has been awarded the Green Economy
Mark from the London Stock Exchange. The Green Economy
Mark identifies London-listed companies and funds that
generate between 50% and 100% of total annual revenues
from products and services that contribute to the global
green economy.
Aquila Capital Investmentgesellschaft mbH
30 April 2024
© 2023 AEET | 21
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
INVESTMENT POLICY
As at the date of this Annual Report, the Company’s Investment
Policy (including defined terms) is as adopted at the June
2023 AGM pursuant to the Continuation Managed Run-Off
Resolution, which replaced the previous investment objective
and policy in its entirety and is set out below.
The Company will be managed with the intention of
realising all remaining assets in the portfolio in a prudent
manner consistent with the principles of good investment
management and with a view to returning cash to
Shareholders in an orderly manner.
The Company will pursue its investment objective by
effecting an orderly realisation of its assets in a manner
that seeks to achieve the best balance for Shareholders
between maximising the value received from those assets
and making timely returns of capital to Shareholders. This
process might include sales of individual assets, mainly
structured as loans/receivables, or groups of assets, or
running off the portfolio in accordance with the existing
terms of the assets, or a combination.
The Company will cease to make any new investments or
to undertake capital expenditure except where, in the
opinion of both the Board and the Investment Adviser
(or,where relevant, the Investment Adviser’s successors):
n
the investment is a follow-on investment made in
connection with an existing asset in order to comply
with the Company’s pre-existing obligations; or
n
failure to make the follow-on investment may result in
a breach of contract or applicable law or regulation by
the Company; or
n
the investment is considered necessary to protect or
enhance the value of any existing investments or to
facilitate orderly disposals,
and in these circumstances the Company will observe the
following restrictions when making any such investments:
n
no more than 20 per cent. of its Gross Asset Value will
be invested in any single asset;
n
no more than 20 per cent. of its Gross Asset Value will
be invested in Energy Efficiency Investments with the
same counterparty;
n no investments will be made outside of Europe; and
n
no more than 7.5 per cent. of its Gross Asset Value,
inaggregate, will be invested in Equity Investments,
and at all times such investments will only be made
with appropriate Shareholder protections in place.
Any cash received by the Company as part of the realisation
process prior to its distribution to Shareholders will be
held by the Company as cash on deposit and/or as cash
equivalents.
The Company will not undertake new borrowing.
As required by the Listing Rules, any material change to
the Investment Policy of the Company will be made only
with the approval of Shareholders by way of ordinary
resolution.
Currency and Hedging
The Company does not use hedging or derivatives for
investment purposes. The functional currency of the
Company is Sterling. With many of its investment assets
in euros the Company uses a series of regular forward
foreign exchange contracts to provide protection against
movements in the Sterling exchange rate. Under these
arrangements the Company is required to provide £2.5 million
in cash as collateral for these forward foreign exchange
contracts.
Cash Management
Cash held pending investment in Energy Efficiency
Investments or for working capital purposes will either be
held in cash or invested in cash, cash equivalents, near
cash instruments, bearer bonds and/or money market
instruments (“Cash and Cash Equivalents”). There is no
restriction on the amount of Cash and Cash Equivalents
that the Company may hold and there may be times when
it is appropriate for the Company to have a significant
Cash and Cash Equivalents position. For the avoidance of
doubt, the restrictions set out above in relation to investing
in UK listed closed-ended investment companies do not
apply to money market type funds.
22 | © 2023 AEET
Changes To and Compliance With the Investment
Policy
As required by the Listing Rules, any material changes to the
Company’s Investment Policy as set out above will require
the approval of Shareholders by way of an ordinary resolution
at a General Meeting and the approval of the FCA.
Compliance with the above restrictions will be measured
at the time of investment and non-compliance resulting
from changes in the price or value of assets following
investment will not be considered as a breach of the
investment restrictions.
In the event of a breach of the investment guidelines and
the investment restrictions set out above, the AIFM shall
inform the Board upon becoming aware of the same and
if the Board considers the breach to be material, notification
will be made to a Regulatory Information Service.
© 2023 AEET | 23
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
KEY PERFORMANCE INDICATORS
Efficient Return of Capital
In line with the Managed Run-Off status of the Group,
the Board is focused on the efficient return of capital to
Shareholders.
As announced on 6 March 2024, the Board proposes to
return no less than £17.5 million to Shareholders by way
of a tender offer at a fixed price of 94.28 pence per share
which is the Company’s last published NAV per share (the
“Tender Offer”). Eligible Shareholders will each be able
to elect to tender that proportion of their holding, at the
time, as is represented by their entitlement under the
Tender Offer, or such lower number as they wish.
On 19 April 2024, the Board published a circular, which
includes further details of the Tender Offer (including the
amount to be returned to Shareholders in the Tender Offer
and the maximum number of shares to be acquired).
AGeneral Meeting will be convened on 13 May 2024 to
approve the Tender Offer.
As and when sufficient cash has been accumulated, the
Board’s current intention is there will be further tender
offers to Shareholders.
Discount of Share Price to NAV
The Board monitors the price of the Company’s shares in
relation to their NAV and the premium or discount at
which they trade. The share price closed at a 39.3%
discount to the NAV as at 31 December 2023.
Following the failed Continuation Vote in February 2023,
a new Investment Policy to reflect the managed run-off
of the Company was put to Shareholders at the AGM in
June. Following the approval of the Continuation Managed
Run-Off Resolution, the Board continued to review the
strategic options for the portfolio. On 16 August 2023,
the Company announced a process to market-test a
portfolio sale which was conducted by Stifel Nicolaus
Europe Limited (“Stifel”). As announced on 6 March 2024,
despite interest from a number of parties who entered
into the sale process, the Board has not received a definitive
proposal which it believes could deliver greater value to
Shareholders than the Managed Run-Off. Given the
complexity and the very long-dated nature of some of
the investments, the Board is continuing to seek and
evaluate any other strategic proposals which would deliver
greater value to its Shareholders than would otherwise
be achieved under the Managed Run-Off.
Maintenance of a Reasonable Level of Ongoing Charges
The expenses of managing the Group are carefully monitored
by the Board. The Board receives and reviews management
accounts which contain an analysis of expenditure which
are reviewed at quarterly Board meetings. The Board
reviews the ongoing charges on a quarterly basis. Expenses
were higher in 2023 due to the cost of the market-testing
process announced on 16 August 2023 and the ongoing
significant involvement of advisers following the failure
of the Continuation Vote in February 2023. Based on the
Group’s average net assets during the year ended 31
December 2023, the Group’s ongoing charges figure
calculated in accordance with the AIC methodology was
3.5% (31December 2022: 2.6%).
THE BOARD MEASURES THE COMPANY’S SUCCESS IN ACHIEVING ITS
INVESTMENT OBJECTIVE BY REFERENCE TO THE KEY PERFORMANCE
INDICATORS (“KPIS”) DESCRIBED BELOW:
24 | © 2023 AEET
RISK MANAGEMENT
Principal Risks and Uncertainties
During the year under review, the Company has carried
out a robust assessment of its principal and emerging risks
and the procedures in place to identify any emerging risks
are described below.
Procedures to identify principal or emerging risks:
The Board regularly reviews the Company’s risk matrix,
with a focus on ensuring that the appropriate controls are
in place to mitigate each risk. The experience and knowledge
of the Board is important, as is advice received from the
Board’s service providers, specifically the AIFM, which is
responsible for the risk and portfolio management services
and outsources the portfolio management to the Investment
Adviser. Each service provider has a role with respect to
the identification of risks:
1. Investment Adviser: the Investment Adviser submits a
quarterly report on the investment portfolio to the
Board which includes risks faced by the projects in the
portfolio, plus an update on hedging;
2. Alternative Investment Fund Manager: following advice
from the Investment Adviser and other service providers,
the AIFM maintains a register of identified risks including
emerging risks likely to impact the Company;
3. Broker: provides advice periodically specific to the
Company on the Company’s sector, competitors and
the investment company market whilst working with
the Board and Investment Adviser to communicate
with Shareholders;
4. Company Secretary: briefs the Board on forthcoming
legislation/regulatory change that might impact on the
Company; and
5. Association of Investment Companies (‘‘AIC’’):
theCompany is a member of the AIC, which provides
regular technical updates as well as drawing members’
attention to forthcoming industry and regulatory issues.
Procedure for oversight
The Audit and Risk Committee undertakes a review at
least twice a year of the Company’s risk matrix and a
formal review of the risk procedures and controls in place
at the AIFM and other key service providers to ensure that
emerging (as well as known) risks are adequately identified
and, so far as is practicable, mitigated.
© 2023 AEET | 25
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
RISK MANAGEMENT
CONTINUED
Principal Risks
The Board considers the following to be the principal risks faced by the Company along with the potential impact of
these risks and the steps taken to mitigate them.
Portfolio
Principal Risks Potential Impact/Description Mitigation
Counterparty/
credit
The risk that the Company has allocated funds to a
counterparty that defaults on its obligations.
This could impact the financial performance of the
Company and its ability to meet dividends as well as
achieving its intended goals and returns for its investors.
The Company has sought to invest mostly, although not exclusively,
in projects where the counterparties have an investment grade or
near investment grade rating. The Investment Adviser uses third
party credit rating service providers to support its credit risk
assessments.
Continued monitoring of the investments and the associated
counterparties/service providers, including the use of credit rating
data providers, allows the Investment Adviser to identify and
address these risks early. The Investment Adviser has sought to
mitigate credit risks, for example, in the case of Solar PV investments,
by the counterparty having the opportunity to sell electricity to
the grid or other customers where possible. The Investment Adviser
has also sought to structure investments whereby contracts can
be adapted/extended to accommodate periods of payment defaults.
Diversification of counterparties and service providers reduces the
potential impact is limited. In addition, a diversified portfolio
provides further mitigation.
Concentration
risk
The risk that the concentration of investments in a limited
number of countries, counterparties, geographical markets,
tenure and currencies could expose the Company to
unnecessary fluctuations in a narrow range of markets.
This risk could negatively impact the Company’s performance
and ability to meet strategic targets.
The AIFM and the Investment Adviser continuously monitor the
existing portfolio and any proposed investments (in advance of
completion) against the Company’s portfolio concentration limits
and Investment Policy. This mitigates the risk by ensuring that
concentration limits and asset diversification limits are observed.
Environmental/
Social/
Governance
(“ESG”)
Failure to adequately consider ESG implications when
making and monitoring investments could lead to
reputational risk: exposure to greenwashing claims and
potentially have an adverse impact on the portfolio’s
ability to achieve its targeted returns.
The Investment Adviser has performed detailed due diligence on
ESG for each asset prior to recommendation and continues to
capture and monitor ESG data relating to the operation of the
assets.
General standards including IFS Performance Standards,
IFCEnvironmental Health and Safety Guidelines (‘‘EHS’’) and
Equator Principles as well as local health and safety and social laws
are reviewed on a regular basis for all assets depending on the
location and development status of each asset.
26 | © 2023 AEET
Economic and Markets
Principal Risks Potential Impact/Description Mitigation
Discount
management
Market sentiment has moved the share price to a persistent
discount to Net Asset Value.
There is a risk that the Company will not be able to find
ways to bring the share price back to NAV, leading to
Shareholders being unable to realise their investments
through the secondary market at Net Asset Value or at
market price.
Loss of market confidence in the Board/Investment
Adviser.
The Company’s Broker monitors the market for the Company’s
shares and reports at quarterly Board meetings. The Company has
the authority, if appropriate, to purchase Ordinary Shares in the
market with the result of, amongst other things, enhancing the Net
Asset Value per Ordinary Share.
The Board and Broker maintain engagement with Shareholders and
ensure good market information is available to investors.
Following the successful continuation and managed run-off vote in
June 2023, the Board, with its advisers, is considering strategic options
to maximise value for Shareholders. For more information regarding
the continuation and managed run-off of the Company, please see
the Chair’s Statement on pages 4 and 5.
Interest rates/
inflation
Changes to interest rates may impact the valuation of
the investment portfolio by impacting the valuation
discount rate. This in turn may have an adverse impact
on the attractiveness of returns.
Although energy prices have fallen from the heights they
reached in mid-2022, the current geopolitical environment
uncertainty in Europe could in turn lead to increased
price volatility again in the future.
The Company’s investments, which provide in many cases for fixed
returns, are not significantly exposed to inflation and interest rate
movements because the income streams from investments are not
subject to significant deductions for operating costs associated
with the investments. While there may be O&M costs these are
not a high percentage of revenues and so any inflationary pressures
on such costs are not expected to have a significant impact.
Furthermore, the Company has not taken on indebtedness to
finance its investments and so there is no risk of the costs of
indebtedness negatively impacting the revenues from investments.
Were the Company to take on indebtedness it may use derivative
instruments such as futures, options and swaps to protect the
Company from fluctuations in interest rates.
The Investment Adviser manages the correlation of cash flows to
inflation and resilience to the economic environment.
The Investment Adviser has sought to incorporate RPI adjustments
in investment documentation where possible.
In addition, investing in energy efficiency assets can in some cases
provide an effective protection against inflation, as many such
assets benefit from rising electricity prices with no burden on the
cost side in relation to the use of resources.
Changes to
subsidies or
other support
mechanisms for
the Company’s
investments
The value of the Company’s investments may be adversely
affected if subsidies or other support mechanisms, on
which such investments may depend, are changed
negatively.
Diversification of investments by technology and geography
mitigates the impact of any such risks. Many of the investments
which the Investment Adviser seeks do not rely on subsidies or
other support mechanisms.
Act of war/
sanctions
As evidenced with conflict in the Ukraine and the Middle
East, various sanctions may be imposed. There is a
possibility that there could be supply delays for Operations
and Maintenance (“O&M”), sanction considerations,
volatile markets and general uncertainty. More difficult
energy markets are expected along with inflationary
pressures on inputs.
It has also led to short-term price increases and more
focus on renewable energy infrastructure.
Possible change to the world order and globalisation.
Conflict brings uncertainty to the commodities market
and how price levels of modules and other hardware
will be impacted directly or indirectly.
The Company does not have any direct exposure in Ukraine, Russia
or the Middle East, there are also no direct business relationships
with counterparties from these countries; therefore assessments
lead the Company to the conclusion that its investments in Europe
are not impacted directly at this time.
© 2023 AEET | 27
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
RISK MANAGEMENT
CONTINUED
Operational
Principal Risks Potential Impact/Description Mitigation
Service provider
risk
Risks that the Company’s third party service providers
do not perform to the appropriate standards.
Potential lack of resource, experience or depth in the
Investment Adviser’s team to manage the Company’s
investments. This may be exacerbated by the Managed
Run-Off status of the Company which will lead, in time,
to reduced fees for the Investment Adviser.
Possible conflicts with other private Aquila clients and
private investing vehicles which Aquila cannot disclose
to the Board or the AIFM.
The Investment Adviser is dependent on key people to
identify, acquire and manage the Company’s investments.
The Board continues to monitor the quality of services provided
by all of its service providers, and in particular the Investment
Adviser. Where it is deemed that work carried out by any service
provider is of insufficient quality, the Board will procure additional
services from other service providers with a view to ensuring the
required standard of portfolio management and reporting is
maintained. The Board will reserve its right to recover the cost of
such additional services from the current service providers.
Additionally, through the Management Engagement Committee,
the Board conducts a formal assessment of each key service
provider’s performance once a year. To assist its ability to properly
oversee the Company’s service providers, the Board requires each
service provider to notify it as soon as reasonably practicable
following any material breach of its contract with the Company.
The Investment Adviser has substantial resources.
The Company and AIFM are made aware of and review potential
conflicts of interest at the time of each investment being made.
Conflicts of interest and investment allocation policies are in place
and agreed with the Board.
The strength and depth of the Investment Adviser’s resources
mitigate the risk of a key person departure and provides the ability
to draw skills from other areas if needed.
IT security
A hacker or third party could obtain access to the Investment
Adviser or any other service provider and destroy data
or use it for malicious purposes resulting in reputational
damage and possible GDPR concern.
Data records could be destroyed, resulting in an inability
to make investment decisions and/or monitor investments.
Service providers have been carefully selected for their expertise
and reputation in the sector. Each service provider has provided
assurances to both the AIFM and the Company on their cyber
policies and business continuity plans along with external audit
reviews of their procedures where applicable.
The AIFM, Administrator and Board include Cyber Risk in their
reviews of counterparties.
Principal Risks continued
28 | © 2023 AEET
Financial
Principal Risks Potential Impact/Description Mitigation
Portfolio
valuation
The principal component of the Company’s balance sheet
is its portfolio of energy efficiency assets. The Investment
Adviser is responsible for preparing a fair market value
of the investments where such investments have variable
returns. Fair value calculations rely on projections, which
involve estimates of the future, which are inherently
judgemental.
There is a risk that these valuations and underlying
assumptions such as discount rates being applied are not
a fair reflection of an open market valuation, therefore
the investment portfolio could be over or under valued.
Investments with fixed returns are measured at amortised
cost and subject to expected credit loss provisions, which
are based on numerous assumptions and judgements.
The Investment Adviser has experience in undertaking valuations
of renewable sustainability/energy transition assets.
The AIFM and the Board review and interrogate the valuations and
underlying assumptions provided by the Investment Adviser.
It should be noted that valuations are held at fair value and at
amortised cost and not at net realisable value.
Emerging Risks
Principal Risks Potential Impact/Description Mitigation
Capital
Preservation
During the run-off, there is a risk that overdistribution
of cash will leave the Company short of sufficient liquidity
to meet ongoing expenditure.
The Board, Investment Adviser and AIFM will review the ongoing
liquidity requirements and cashflow forecasts of the Company
prior to making distributions to ensure that sufficient funds are
maintained throughout the run-off process.
Relations with
ESCOs during
managed run-off
Entering a managed run-off has strained relations with
some ESCOs who may have expected further business
from AEET over time, giving rise to further counterparty/
credit risk for the Company.
Communications with the ESCOs from the Investment Adviser take
into account these considerations and professional advice has been
sought by the Company where needed.
The Board and Investment Adviser will continue to monitor relations
with ESCOs as the run-off progresses.
© 2023 AEET | 29
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
SECTION 172 REPORT
In accordance with section 172 of the Companies Act 2006
(the “Act”), the Board has a duty to promote the long-term
success of the Company for the benefit of its Shareholders
as a whole and, in doing so, the Board is required to consider
the likely consequences of its actions over the long term
and on other stakeholders and the environment.
The Directors are required to describe how they have had
regard to matters set out in section 172 of the Act.
Employees and Stakeholders
As an externally managed investment company, the Company
does not have any employees. Its main stakeholders are as
set out in the diagram below which explains the relationship
between the Company and each of its stakeholders. The
Company’s stakeholders are the Board, Shareholders,
Investment Adviser, AIFM, Administrator, Company Secretary,
Broker, Legal Adviser and its Registrar. The Board believes
the best interests of the Company are aligned with its
stakeholders as all parties aim to ultimately benefit from
achieving the Company’s investment objectives in compliance
with regulatory, legal, ethical and commercial standards.
Investment
Adviser
Board
Shareholders
Company
Secretary
Administrator
Registrar
Broker
AIFM
Investments
ESCOs
Legal
Advisers
Company
Company’s Operating Model
The Company was listed on the Main Market of the London
Stock Exchange on 2 June 2021. The Company can hold
investments directly or through subsidiaries.
Engagement with Key Service Providers
The Board has identified that its key service providers are
the Company’s AIFM, Administrator, Corporate Secretary,
Brokers, Legal Advisers, Registrar, PR Consultants and
Investment Adviser.
In order to ensure strong working relationships, the
Company’s key service providers are invited to attend the
regular Board meetings to present their respective reports.
The Board seeks to maintain constructive relationships
with the Company’s key service providers on behalf of
the Company through regular communications, meetings
and the provision of relevant information and update
meetings. This enables the Board to exercise effective
oversight of the Company’s activities.
On at least an annual basis, the Board has committed to
undertake a thorough evaluation of each of its service
providers during which it considers their performance
against the terms of their engagement, including each
service provider’s fees, to ensure that each remain competitive
within the market. Additionally, on an annual basis, the
Board reviews the internal reports produced on behalf of
those service providers that are key to the Company’s
day-to-day administration (the AIFM, Administrator and
Registrar) to ensure that there have been no failings in
their systems or procedures considered relevant to the
Company’s operations.
The Investment Adviser is the most significant service
provider to the Company and a description of its role can
be found on page 36. The Board receives regular reports
from the Investment Adviser, discusses the portfolio at
each Board meeting and maintains a constructive dialogue
between meetings. The Investment Adviser’s remuneration
is charged only on committed capital (being the sum of
funds actually invested and funds committed for investment
in Energy Efficiency Investments).
30 | © 2023 AEET
Engagement with Shareholders
Shareholders’ views are considered by the Board at their
quarterly meetings and assist in the Board’s decision-
making process.
During the Investment Strategy Review described in the
Chair’s Statement on pages 4 and 5 and following the General
Meeting held on 14 June 2023, the Board and the Company’s
Broker engaged constructively with major Shareholders and
a number of meetings took place where Shareholders’
expectations were communicated to the Board.
In addition, and in order to help the Board in its aim to act
fairly between the Company’s members, the Board seeks
to ensure effective communication is provided to all
Shareholders. The Board encourages Shareholders to attend
the Annual General Meeting on 12 June 2024 at which the
Board and representatives of the Investment Adviser will
be available to meet Shareholders in person and to answer
questions. The Annual Report has been issued to Shareholders
and will be available to view on the Company’s website
(www.aquila-energy-efficiency- trust.com) as are the
Company’s factsheets and press releases.
Board Decisions
Continuation Vote, Managed Run-Off and review
of strategic options
As set out in the 2022 Annual Report and Accounts, the
Company held a General Meeting on 28 February 2023,
at which Shareholders had the opportunity to vote on an
ordinary resolution on the continuation of the Company.
This resolution was unsuccessful.
In response to the failed continuation vote in February
2023, the Board proposed a change of investment policy
(the “New Investment Policy”) whereby the Company
would be placed into a managed run-off. This resolution
was successfully passed at the Company’s AGM on 14June
2023. In accordance with the New Investment Policy, the
Company entered a continuation and managed run-off
of its portfolio (“Managed Run-Off”) meaning that it is
not making any new investments (save for the limited
circumstances as set out in the New Investment Policy)
and its investing activity is solely in respect of funding
legal commitments to existing investments.
The Board has continued to assess proposals and will
continue to do so in the context of delivering greater value
to Shareholders in a shorter timeframe than would otherwise
be achieved under the Managed Run-Off. On 16 August
2023, the Company announced a process to market-test
a portfolio sale which was conducted by Stifel Nicolaus
Europe Limited (“Stifel“). An extensive number of UK and
international investors were approached through this process
which completed in early February. As announced on 6
March 2024, despite interest from a number of parties who
entered into the sale process, the Board did not receive a
definitive proposal which it believed could deliver greater
value to shareholders than the Managed Run-Off.
As announced on 6 March 2024 and 19 April 2024, the
Board has proposed to return, £17.5 million to shareholders
by way of a tender offer at a fixed price of 94.28 pence
per share which is the Companys last published NAV per
share (the “Tender Offer”). This is subject of the approval
of shareholders at the General Meeting on 13 May 2024.
As and when sufficient cash has been accumulated, the
Board‘s current intention is there will be further tender
offers to shareholders.
Investments
The Board was presented with each investment opportunity
identified by the Investment Adviser, unless these fell
under the authority delegated to the AIFM to approve
investments within certain agreed criteria (“Delegated
Authority”). These had undergone a process of analysis
and challenge by the AIFM, including considerations
relating to environmental, social and governance issues.
The Board considered each approved proposal against
the Company’s investment objectives, Investment Policy
and strategy. Following the failure of the Continuation
Vote on 28 February 2023, no new commitments were
made from that date, but contractually committed sums
were invested to honour existing contractual obligations.
As at 31 December 2023, the total amounts committed and
deployed were £74.9 million and £69.5 million, respectively.
Further details for these acquisitions can be found in the
Investment Adviser’s report on pages 6 to 18.
© 2023 AEET | 31
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Appointment of new Broker
The Board appointed Stifel Nicolaus Europe Limited (“Stifel”)
as sole financial adviser and sole corporate broker, with
effect from 15 March 2023.
Decisions Following Year End
Investments
Following the year end, £4.19 million was deployed in the
period up to 30 April 2024.
SECTION 172 REPORT
CONTINUED
32 | © 2023 AEET
© 2023 AEET | 33
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Task Force on Climate-Related Financial
Disclosures (“TCFD”)
The Company notes the TCFD recommendations on
climate-related financial disclosures. As stated above, the
Company is an investment trust with no employees, internal
operations or property and, as such, is exempt from TCFD
disclosure requirements.
Anti-Bribery, Corruption and Tax Evasion
It is the Company’s policy to conduct all of its business in
an honest and ethical manner. The Company takes a
zero-tolerance approach to bribery and corruption and is
committed to acting professionally, fairly and with integrity
in all its business dealings and relationships wherever it
operates. The Company does not tolerate the criminal
facilitation of tax evasion. The Company’s AIFM, Investment
Adviser, Company Secretary and Administrator have
confirmed that anti-bribery policies and procedures are
in place and that they do not tolerate bribery. The Company’s
policy and the procedures that implement it are designed
to support that commitment.
Conflicts of Interest
As required by law, a Director must avoid a situation where
he or she has an interest that conflicts with the Company’s
interests. The Company’s Articles of Association provide
the Directors with the authority to authorise potential
conflicts of interest. The Directors are able to impose limits
or conditions when giving authorisation if they think this
is appropriate. The procedure observed by the Board in
considering dealing with conflicted matters is as follows:
n
any Board member so conflicted must recuse themself
from the discussion involving the relevant conflict;
n
only Directors who have no interest in the matter being
considered are able to debate the matter and take the
relevant decision; and
n in taking the decision, the Directors must act in a way
they consider, in good faith, will be most likely to
promote the Company’s success.
The Directors have declared any potential conflicts of
interest to the Company. These are entered into the
Company’s register of potential conflicts, which is reviewed
regularly by the Board. The Directors are obliged to advise
the Company Secretary as soon as they become aware
of any potential conflicts of interest.
The Company has established procedures to deal with
any potential conflicts of interest in circumstances where
Aquila Capital is advising both the AIFM (for the Company)
and other Aquila Capital managed funds that are
counterparties to the Company. These procedures may,
on a case-by-case basis, include:
n
identifying whether potential conflicts of interest exist
on individual transactions and the nature of the potential
conflicts of interest;
n
establishing that an individual transaction has been
negotiated on arm’s length commercial terms;
n
separate teams at the Investment Adviser being established
in relation to any proposed transaction to represent
the Company and the relevant counterparty;
n
a fairness opinion on the value of the Energy Efficiency
Investments to be obtained from an independent expert;
n
a due diligence and reporting package from relevant
professional advisers on which the Company (or other
applicable vehicles) can place reliance;
n
the AIFM operating its own risk management system
and internal control system as well as monitoring approved
systems operated by the Investment Adviser; and
n
any conflict of interest arising in the course of the
transaction being resolved in accordance with procedures
agreed between the Investment Adviser and the AIFM,
subject to Board agreement.
OTHER INFORMATION
34 | © 2023 AEET
Employees
The Company has no employees. As at 31 December 2023
the Company had four Directors, of whom two were
female and two were male. The Board’s policy on diversity
is contained in the Corporate Governance Statement (see
page 41).
Viability Statement
In accordance with the UK Corporate Governance Code
(“UK Code”) and the Listing Rules, the Directors have assessed
the prospects of the Company over a longer period than the
12 months required by the ‘Going Concern’ provision.
In reviewing the Company’s viability, the Directors have
assessed the viability of the Company for the period to
31December 2026 (the “Look-forward Period”).
Following the AGM held in June 2023, and in accordance
with the New Investment Policy, the Company entered a
managed run-off of its portfolio, meaning that it is not
making any new investments (save for in limited circumstances
as set out in the New Investment Policy) and its investing
activity is solely in respect of funding legal commitments to
existing investments (the “Managed Run-Off”). The Board
has continued and will continue to review strategic options
in respect of the Company’s assets to realise the maximum
value for Shareholders in the shortest possible time, recognising
the inherent difficulties in the construction of the portfolio,
including the number of individual investments, multiple
geographies and long tenors. On 16 August 2023, the
Company announced a process to market-test a portfolio
sale which was conducted by Stifel Nicolaus Europe Limited
(“Stifel”). An extensive number of UK and international
investors were approached through this process which
completed in early February. As announced on 6 March
2024, despite interest from a number of parties who entered
into the sale process, the Board did not receive a definitive
proposal which it believed could deliver greater value to
shareholders than the Managed Run-Off. As announced on
6 March 2024 and 19 April 2024, the Board has proposed
to return £17.5 million to shareholders by way of a tender
offer at a fixed price of 94.28 pence per share (the “Tender
Offer”). This is subject to the approval of Shareholders at
the General Meeting on 13 May 2024.
As referred to above, the Company is operating currently
under a Managed Run-Off with the term of some of the
Company’s assets being several years. While the Company
is continuing to explore other strategic options, there remains
no certainty that any of these options will materialise and
be put to Shareholders for consideration. Accordingly, the
Directors recognise that these conditions indicate the existence
of material uncertainty which may cast significant doubt
about the Group and Company’s viability over the look
forward period.
Notwithstanding the above, the Board believes that the
Look-forward Period, being approximately three years, is an
appropriate time horizon over which to assess the viability
of the Company, particularly when taking into account the
long-term nature of the maturity of the Company’s assets,
which is modelled over three years and the principal risks
outlined above. In considering the prospects of the Company,
the Directors looked at the key risks facing the Company,
focusing on the likelihood and impact of each risk as well as
any key contracts, future events or timescales that may be
assigned to each key risk.
The Directors have a reasonable expectation that the Company
has adequate resources to: continue in operation; realise the
Company’s assets in an orderly manner; and meet its liabilities
as they fall due, over the Look-forward Period.
Outlook
The outlook for the Company, including the future
development and performance of the Company, is discussed
in the Chair’s Statement on page 4 and the Investment
Adviser’s Report on page 6.
Strategic Report
The Strategic Report set out on pages 4 to 34 of this
Annual Report was approved by the Board of Directors
on 30 April 2024.
For and on behalf of the Board
Miriam Greenwood OBE DL
Chair of the Board
30 April 2024
OTHER INFORMATION
CONTINUED
DIRECTORS’ REPORT
The Directors present their report and financial statements
for the year ended 31 December 2023.
Corporate Governance
The Corporate Governance Statement on pages 41 to 49
forms part of this report.
Introduction and Status
The Company is incorporated in England and Wales as a
public limited company and is domiciled in the United
Kingdom. It is an investment company as defined in section
833 of the Act and has a premium listing on the London
Stock Exchange.
The Company received approval as an investment trust
from HMRC. The Company must meet eligibility conditions
and ongoing requirements in order for investment trust
status to be maintained. In the opinion of the Directors,
the Company has met the conditions and requirements for
approval as an investment trust for the year ended
31December 2023, and the Directors, under advice, expect
the affairs of the Company to continue to satisfy the
conditions of an investment trust. The Company seeks to
continue to operate as an investment trust in accordance
with sections 1158 and 1159 of the Corporation Tax Act
2010 (as amended by section 42(2) of the Finance Act 2011).
Greenhouse Gas Emissions (“GHG”) and Streamlined
Energy and Carbon Reporting (“SECR”)
As the Company has outsourced operations to third parties,
there are no significant GHG emissions to report in relation
to the operation of the Company. In relation to the
Company’s investments, the level of GHG emissions arising
from a low volume of electricity imports and from operation
and maintenance activity is not considered material for
disclosure purposes. The Company as a low user (<40,000
kWh) falls below the threshold to produce an energy and
carbon report under the SECR framework.
Retail Distribution of Investment Company Shares via
Financial Advisers and Other Third-party Promoters
As a result of the Financial Conduct Authority (“FCA”)
rules determining which investment products can be
promoted to retail investors, certain investment products
are classified as ‘non-mainstream pooled investment
products’ and face restrictions on their promotion to retail
investors.
The Company has concluded that the distribution of its
shares, being shares in an investment trust, is not restricted
as a result of the FCA rules described above.
The Company currently conducts its affairs and intends
to do so for the foreseeable future so that the exclusion
continues to apply. The Company’s Ordinary Shares are
eligible for inclusion in a stocks and shares ISA.
Articles of Association
Life of the Company
For more information on the unsuccessful Continuation
Vote, see the Chair’s Statement on pages 4 and 5.
Alternative Investment Fund Manager (“AIFM”)
The Company is classified as an Alternative Investment
Fund under the Alternative Investment Fund Managers
Directive (“AIFMD”) and is therefore required to have an
AIFM. FundRock Management Company (Guernsey) Limited
(formerly Sanne Fund Management (Guernsey) Limited)
is the AIFM of the Company.
The AIFM is responsible for the portfolio management of
the Company’s assets, including the following services:
• monitoring the Energy Efficiency Investments in
accordance with the Investment Policy;
• evaluating investment opportunities identified by the
Investment Adviser and making relevant recommendations
to the Board; and
• acting upon instructions from the Board with regard
to the execution of transactions on behalf of the
Company.
© 2023 AEET | 35
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
DIRECTORS’ REPORT
CONTINUED
Under the terms of the AIFM Agreement, the AIFM is
required to provide risk management services to the
Company, including:
• assisting the Board with the establishment of a risk
reporting framework; monitoring the Company’s
compliance with its Investment Policy and the Investment
Restrictions in accordance with the AIFM risk management
policies and procedures and providing regular updates
to the Board; and
• carrying out a risk analysis of the Company’s exposures,
leverage, counterparty and concentration risk; and
analysing market risk and liquidity risk. The AIFM will be
required to record details of executed transactions, carry
out reporting obligations to the FCA and prepare investor
reports. In addition, the AIFM is required to assist the
Board in establishing, maintaining and reviewing valuation
policies for the purpose of calculating the NAV.
The AIFM is entitled to:
• a management fee of £87,500 per annum plus an
additional amount which is equal to 0.015% per annum
of the Net Asset Value of the Company that exceeds
£250million;
• an additional fee of £3,000 per annum in respect of
each jurisdiction in which a marketing notification has
been made in accordance with the UK AIFMD and the
EU AIFM Directive; and
• the reimbursement of the investment advisory fee
payable by the AIFM to the Investment Adviser.
The AIFM Agreement is terminable by either party on not
less than six months’ notice in writing. The AIFM Agreement
may be terminated earlier by the AIFM with immediate
effect in certain circumstances.
The AIFM has the benefit of an indemnity from the
Company in relation to liabilities incurred by the AIFM in
the discharge of its duties other than those arising by
reason of gross negligence, wilful misconduct or fraud of
or by the AIFM.
Investment Adviser
The AIFM has appointed Aquila Capital Investmentgesellschaft
mbH as the Investment Adviser to provide investment
advisory services to the AIFM in respect of the Company
pursuant to the Investment Advisory Agreement.
The Investment Adviser is responsible for certain investment
advisory services to the Company, including sourcing
potential opportunities in which the Company may invest,
as well as ongoing monitoring of the Energy Efficiency
Investments.
The Company will benefit from the advisory services
provided to the AIFM by the Investment Adviser in respect
of the Company and its Energy Efficiency Investments.
The Investment Advisory Agreement will continue in force
for an initial period of four years from the date of Admission.
The Investment Advisory Agreement will continue thereafter
on a rolling basis and may be terminated following the
initial period on twelve months’ notice in writing.
The AIFM has also agreed to indemnify the Investment
Adviser for losses that the Investment Adviser may incur
in the performance of its duties pursuant to the Investment
Advisory Agreement that are not attributable to the fraud,
gross negligence or wilful default of the Investment Adviser
determined by a court of competent jurisdiction.
Under the Investment Advisory Agreement, entered into
at the time of IPO, the following fee is payable to the
Investment Adviser:
(i) 0.95% per annum of the NAV (plus VAT) of the Company
up to and including £500million; and
(ii) 0.75% perannum of the NAV (plus VAT) of the Company
above £500million.
Under the Investment Advisory Agreement, the Investment
Adviser is entitled to an advisory fee based on the Company’s
NAV. As announced on 21 April 2022, the Investment
Adviser agreed to amend the Investment Advisory Agreement
such that any advisory fees payable are charged only on
committed capital (being the sum of funds actually invested
and funds committed for investment in Energy Efficiency
Investments), with this amendment to be applied
retrospectively from the time of the Company’s IPO.
36 | © 2023 AEET
Company Secretary and Administrator
Apex Listed Companies Services (UK) Limited has been
appointed to provide company secretarial and administration
services to the Group. The AIFM, Company Secretary and
Administrator are part of the Apex group of companies.
Alternative Investment Fund Portfolio Managers’
Directive
In accordance with the AIFMD, the AIFM must ensure that
an annual report containing certain information on the
Company is made available to investors for each financial
year. The investment funds sourcebook of the FCA (the
“Sourcebook”) details the requirements of the annual
report. All the information required by those rules is
included in this Annual Report or will be made available
on the Company’s website.
Continuing Appointment of the Investment Adviser
The performance of the Investment Adviser is subject to
rigorous review by the Board. The continuing appointment
of the Investment Adviser is recommended by the Board.
Share Capital
As at 31 December 2023, the Company’s issued share
capital comprised 100,000,000 Ordinary Shares (31December
2022: 100,000,000).
Voting rights
Each Ordinary Share entitles the holder to one vote.
AllOrdinary Shares carry equal voting rights and there
are no restrictions on those voting rights. Voting deadlines
are stated in the Notice of Meeting and Form of Proxy
and are in accordance with the Act.
Restrictions
There are no restrictions on the transfer of shares, nor are
there any limitations or special rights associated with
regard to control attached to the Ordinary Shares. There
are no agreements between holders regarding their transfer
known to the Company, no restrictions on the distribution
of dividends and the repayment of capital, and no agreements
to which the Company is a party that might affect its
control following a successful takeover bid.
Results and Dividend
The Group’s revenue profit after tax for the year amounted
to £0.9million (31 December 2022: £0.34million). Following
the failure of the February 2023 Continuation Vote, the
Board announced that future dividends will only be paid
from net income, and after reviewing cash flow forecasts,
only in respect of six-month periods, not quarterly periods.
An interim dividend was not paid in respect of the period
ended 30 June 2023 and the Board has decided that, in
the current circumstances, a dividend will not be paid in
respect of the year ended 31 December 2023. As announced
on 6 March 2024 and 19 April 2024, the Board proposes
to return no less than £17.5million to Shareholders by way
of a tender offer at a fixed price of 94.28 pence per share,
which is the Company’s last published NAV per share (the
“Tender Offer”). This is subject to the approval of Shareholders
at the General Meeting on 13 May 2024.
© 2023 AEET | 37
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
DIRECTORS’ REPORT
CONTINUED
Notifiable Shareholders
As at 31 December 2023, the Directors have been formally notified of the following interests in the Company’s Ordinary
Shares, comprising 3% or more of the issued share capital of the Company:
Shareholder Holding
Percentage
held
Date
notified
Rathbones Investment Management Ltd 22,889,862 22.89 22/09/2023
Pangaea Life Umbrella S. A., SICAV-RAIF* 12,978,637 12.98 23/02/2022
Schroders Plc 12,124,934 12.12 17/09/2021
Stichting Juridisch Eigendom Privium Sustainable Impact Fund 6,000,000 6.00 02/06/2021
Marmarkon 4 S.à r.l. 5,847,819 5.85 28/06/2021
City of Bradford – West Yorkshire Pension Fund 5,000,000 5.00 03/06/2021
* Aquila Capital acquired the shares on behalf of Lion Umbrella Fund I A.A. SICAV-RAIF at IPO, because the latter was not in a position to complete an order in their own name
within the required amount of time before the order book closed at IPO, into their own account. The off-market transaction was settled at the initial IPO price.
Since year end, no further notifications have been received by the Company.
Shareholder Engagement
The Board is mindful of the importance of engaging with the Company’s Shareholders to gauge their views on topics
affecting the Company. The Chair engaged closely with the major Shareholders during the year to discuss their
expectations and requirements.
The Company’s Annual General Meeting will be held on 12 June 2024 at 2:00pm at the offices of CMS Cameron
McKenna Nabarro Olswang LLP located at Cannon Place, 78 Cannon Street, London EC4N 6AF. Shareholders are
encouraged to attend the Annual General Meeting of the Company. Proxy voting figures will be made available shortly
after the AGM on the Company’s website.
Appointment of Auditors
The Company’s auditors, PricewaterhouseCoopers LLP (“PwC”), having expressed their willingness to continue in office
as auditors, will be put forward for appointment at the Company’s Annual General Meeting and the Board will seek
authority to determine their remuneration for the forthcoming year.
Going Concern
The Directors have adopted the going concern basis in preparing the financial statements. The following is a summary
of the Directors’ assessment of the going concern status of the Group and Company.
The Group and Company continue to meet day-to-day liquidity needs through their cash resources. The Directors have
a reasonable expectation that the Group and Company have adequate resources to continue in operational existence
for at least twelve months from the date of approval of these financial statements.
In reaching this conclusion, the Directors have considered the Group’s investment commitments, cash position, income
and expense flows. As at 31 March 2024, the latest practicable date before publication of this report, the total
commitments were £4.92million. The value of investments as at 31 December 2023 was £65.5million and has not
changed materially since that date. The investments are mostly fully operational and income producing. As at 31 March
2024, the Group had cash of £31.2 million (including the £2.5million held as collateral for FX hedging). The Directors
reviewed downside scenarios which assumed some delay in cash receipts and are satisfied that the Group and the
Company would continue to meet its obligations as they fall due. Total expenses for the year were £3.30million (excluding
impairment losses) (2022: £2.4million), which represented approximately 3.49% of average net assets during the year
(2022: 2.63%). At the date of approval of these financial statements, based on the aggregate of investments and cash
held, the Group and Company have substantial operating expenses cover.
38 | © 2023 AEET
At the Annual General Meeting of the Company (the
“AGM”) held on 14 June 2023, Shareholders voted in
favour of the Company’s change of investment policy
(the“New Investment Policy”). Following the AGM, and
in accordance with the New Investment Policy, the Company
entered a continuation and managed run-off of its portfolio
(“Managed Run-Off”), meaning that it is not making any
new investments (save for the limited circumstances as
set out in the New Investment Policy) and its investing
activity is solely in respect of funding legal commitments
to existing investments.
The Continuation and Managed Run-Off Resolution was
put forward as a resolution to Shareholders in response
to the outcome of the Company’s Continuation Vote held
in February 2023, which did not pass.
On 6 March and 19 April 2024, the Company announced,
subject to the approval of Shareholders, a return of capital
to Shareholders by way of a tender offer of not less than
£17.5million.
As referred to above, the Group is operating currently
under a Managed Run-Off with the term of some of the
Group’s assets being several years. The Company is
continuing to explore other strategic options, such as an
asset sale or structural solution, there remains no certainty
that any of these options will materialise and be put to
Shareholders for consideration, or on the potential timing
of other strategic options.
Accordingly, the Directors recognise that these conditions
indicate the existence of material uncertainty which may
cast significant doubt about the Group and Company’s
ability to continue as a going concern. Based on the
assessment and considerations above, the Directors have
concluded that the financial statements of the Group and
the Company should be prepared on a going concern
basis. The financial statements do not include the adjustments
that would result if the Group and the Company were
unable to continue on a going concern basis.
Auditor Information
Each of the Directors at the date of the approval of this
report confirms that:
I. so far as the Director is aware, there is no relevant
audit information of which the Company’s auditors
are unaware; and
II. the Director has taken all steps that he/she ought to
have taken as director to make himself/herself aware
of any relevant information and to establish that the
Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
Annual General Meeting (“AGM”)
The following information is important and requires your
immediate attention. If you are in any doubt about the
contents of this document or what action you should take,
you should consult your stockbroker, bank manager, solicitor
or other appropriate independent financial adviser authorised
under the Financial Services and Markets Act 2000 (as
amended) (“FSMA”) if you are resident in the United
Kingdom or, if not, another appropriately authorised
independent financial adviser.
The Company’s AGM will be held on 12 June 2024 at the
offices of CMS Cameron McKenna Nabarro Olswang LLP
located at Cannon Place, 78 Cannon Street, London
EC4N6AF. Full details of the AGM, the resolutions proposed
and how to vote by proxy are described in the Notice of
AGM, which can be found on the Company’s website.
Shareholders are welcome at any time to submit questions
they may have to aeetcosecmbx@apexfs.group.
Resolutions relating to the following items of special business
will be proposed at the forthcoming AGM to be held on
12 June 2024.
© 2023 AEET | 39
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Special Resolution 9
Authority for the Company to purchase its own
shares
This resolution replaces the authority given at last year’s
Annual General Meeting for the Company to make market
purchases of its own Ordinary Shares as permitted by the
Companies Act 2006. The Directors recommend that an
authority to purchase up to a maximum of (i) in the event
that the Tender Offer has not taken place in accordance
with its terms, 14,990,000 Ordinary Shares; or (ii) in the
event that the Tender Offer has taken place in accordance
with its terms, 12,207,596 Ordinary Shares, representing
approximately 14.99 per cent. of Ordinary Shares in issue
as at (i) 29 April 2024, being the latest practicable date
prior to the publication of the Notice of Annual General
Meeting, or (ii) following completion of the Tender Offer,
(subject to the condition that not more than 14.99 per
cent. of the Ordinary Shares in issue, excluding treasury
shares, at the date of the AGM are purchased) be granted.
Any Ordinary Shares purchased will either be cancelled
or, if the Directors so determine, held in treasury. At the
date of this document, the Company did not hold any
shares in treasury.
The price per Ordinary Share that the Company may pay
is set at a minimum amount of the nominal value of each
Ordinary Share and a maximum amount of the higher of:
(i) 105% of the average of the previous five business days’
middle market prices as derived from the Daily Official
List of the London Stock Exchange; and (ii) the higher of
the price of the last independent trade of an Ordinary
Share and the highest current independent bid for an
Ordinary Share on the trading venue where the purchase
is carried out. Unless otherwise authorised by Shareholders,
Ordinary Shares will not be issued at less than NAV and
Ordinary Shares held in treasury will not be sold at less
than NAV.
This authority would continue to provide flexibility in the
management of the Company’s capital resources. The
Directors will only exercise this authority if the Directors
believe that such exercise would be likely to achieve the
best balance for Shareholders between maximising the
value received from the Company’s assets and making
timely returns of capital to Shareholders.
In light of the Continuation and Managed Run-Off of the
Company, the Directors do not consider it necessary to
seek authority from Shareholders to issue additional new
Ordinary Shares at the AGM.
Resolution 10
Authority to call General Meetings (other than
Annual General Meetings) on 14 clear days’ notice
The minimum notice period for General Meetings of the
Company is 21 days unless Shareholders approve a shorter
period for General Meetings (other than an Annual General
Meeting), which cannot be less than 14 clear days. The
Board believes that it is in the best interests of Shareholders
to have the ability to call meetings on 14 clear days’ notice
on matters requiring urgent approval and resolution10 seeks
such approval.
In accordance with the Companies (Shareholders’ Rights)
Regulation 2009, the Company will offer Shareholders
the ability to vote by electronic means. This facility will be
accessible to all Shareholders, should the Board call a
General Meeting at 14 clear days’ notice. Short notice will
only be used by the Board under appropriate circumstances.
If given, the approval would be effective until the Company’s
next Annual General Meeting.
Outlook
The outlook for the Company, including the future
development and performance of the Company, is discussed
in the Chair’s Statement on page 4 and the Investment
Adviser’s Report on page 6.
By order of the Board
Sinead van Duuren
For and on behalf of
Apex Listed Companies Services (UK) Limited
Company Secretary
30 April 2024
DIRECTORS’ REPORT
CONTINUED
40 | © 2023 AEET
Corporate Governance Framework
Responsibility for good governance lies with the Board.
The governance framework of the Company reflects the
fact that it is an investment company with no employees
and outsources investment management and other key
functions to external service providers.
Statement of Compliance and Application of the AIC
Code’s Principles
The Board has considered the principles and provisions of
the Association of Investment Companies (“AIC”) Code
of Corporate Governance issued in February 2019 (the
“AIC Code”). The AIC Code addresses the principles and
provisions set out in the UK Corporate Governance Code
(“UK Code”), as well as setting out additional provisions
on issues that are of specific relevance to the Company.
The Board considers that reporting against the AIC Code,
which has been endorsed by the Financial Reporting
Council, provides more relevant information to Shareholders.
The AIC Code is available on the AIC website (www.theaic.
co.uk) and the UK Code can be found on the Financial
Reporting Council’s website (www.frc.org.uk). The AIC
Code includes an explanation of how it adapts the principles
and provisions set out in the UK Code to make them
relevant for investment companies.
Compliance
Throughout the year ended 31 December 2023 the
Company complied with the recommendations of the AIC
Code and the relevant provisions of the UK Code except,
as explained below, where the Company does not believe
it appropriate to comply.
The UK Code includes provisions relating to the role of
the chief executive, executive Directors’ remuneration and
the need for an internal audit function. For reasons set
out in the AIC Code, the Board considers these provisions
are not relevant to the Company as it is an externally
managed investment company. In particular, all of the
Company’s day-to-day management and administrative
functions are outsourced to third parties. As a result, the
Company has no executive Directors, employees or internal
operations. The Company has therefore not reported
further in respect of these provisions.
BOARD LEADERSHIP AND PURPOSE
The Company is an investment company and its investment
objective and policy are set out on page 22. Any material
change to the Investment Policy requires Shareholder
approval.
The Company is governed by a Board of Directors, all of
whom are non-executive, and it has no employees. The
business model adopted by the Board to achieve the
Company’s objective has been to contract the services of
the Investment Adviser and AIFM to manage the portfolio
and the risks associated in accordance with the Board’s
strategy and under its oversight. The Board monitors
adherence to the Company’s Investment Policy and regularly
reviews the Company’s performance in meeting its
investment objective.
All other functions are provided by third parties under the
oversight of the Board.
The Board reviews the performance of the AIFM and
Investment Adviser and its other key service providers on
an ongoing basis.
CORPORATE GOVERNANCE STATEMENT
© 2023 AEET | 41
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
CORPORATE GOVERNANCE STATEMENT
CONTINUED
Experience and Contribution of Directors
As at the date of this report, the Board of Directors consists of four non-executive Directors, whose biographies are
included below.
Miriam Greenwood OBE DL
Non-executive Chair*
Appointed on 19 April 2021
With qualifications as a barrister and in corporate finance,
Miriam spent more than 30 years working for a number
of leading investment banks and other financial institutions.
In previous roles, she served as a non-executive Director
of the UK energy regulator OFGEM and on the Board of
a number of publicly quoted companies and was also a
founding partner of SPARK Advisory Partners, an independent
corporate advisory business.
Miriam is currently senior independent director of Canopius
Group Limited, a non-executive director of Canopius
Managing Agents, Encyclis Holdco Limited and Liontrust
Asset Management plc, and an Adviser to the Mayor of
London’s Energy Efficiency Fund.
A Deputy Lieutenant of the City of Edinburgh, Miriam
was awarded an OBE for services to corporate finance in
2000.
David Fletcher
Non-executive Director, Senior
Independent Director*
Appointed on 29 April 2022
David was Group Finance Director of Stonehage Fleming
Family & Partners, a leading independently owned multi-
family office, having joined in 2002. Prior to that, he spent
20 years in investment banking with JPMorgan Chase,
Robert Fleming & Co. and Baring Brothers & Co Limited,
latterly focused on financial services in the UK (asset
management and life insurance). He started his career with
Price Waterhouse and is a chartered accountant. He is the
Chair of JPMorgan Claverhouse Investment Trust plc. He is
also a director and Audit Committee Chairman at Ecofin
US Renewables Infrastructure Trust plc. David is a graduate
of Oxford University.
42 | © 2023 AEET
Nicholas Bliss
Non-executive Director*
Appointed on 9 April 2021
Nicholas established and led the global infrastructure and
transport sector group at the international law firm
Freshfields Bruckhaus Deringer LLP, where he was a partner
for over 20 years and also served on the Partnership
Council, the supervisory board of the firm. During this
period he led on mandates involving some of the most
notable infrastructure projects across the UK, Europe,
Africa and the Gulf. In particular, he was heavily involved
in the development and application of PFI, PPP and other
project finance techniques to the delivery of major
infrastructure projects. Since leaving Freshfields, he has
developed an expertise in both advising and acting as an
independent director in “distressed situations” at SPV
corporates owned by infrastructure funds or industrials.
Among his other engagements, he is Of Counsel at
Chatham Partners LLP, a Hamburg-based infrastructure/
energy/real estate “boutique” law firm.
Janine Freeman
Non-executive Director*
Appointed on 2 November 2022
Janine is an experienced, senior energy industry executive
and non-executive director with over 20 years in the energy
industry. Driving investment in clean energy infrastructure
has been her primary focus for much of that time. Janine
is currently a non-executive director and Audit and Risk
Committee Chair at Harmony Energy Income Trust plc.
Until April 2023, she also held a further non-executive
role as the non-executive Chair at Public Power Solutions
Ltd, a company which developed solar, battery and EV
charging sites in the UK. Janine recently led the sale of
this business to new investors. Prior to this, Janine worked
for three years as a director at PwC within the Deals team,
where she led on Net Zero Investment Strategy & Deals.
This work at PwC included advising on M&A in the
European energy efficiency infrastructure sector. At National
Grid plc, where Janine spent 16 years, she was a member
of the UK Executive Committee and the GB Electricity
System Operator Executive Committee. Janine achieved
her Chartered Accountancy qualification (ACA) at Deloitte
& Touche, where she worked within both the audit and
restructuring departments.
*All the Directors are members of each Committee.
© 2023 AEET | 43
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
CORPORATE GOVERNANCE STATEMENT
CONTINUED
Board Committees
The Board decides upon the membership and chairmanship of its Committees.
Audit and Risk Committee
The Committee has formal terms of reference which clearly
define roles and responsibilities. It meets at least three
times a year or more often if required. A separate report
of the work of the Committee during the year under
review is set out on pages 54 to 57. The Committee
comprises all the independent non-executive Directors
and is chaired by David Fletcher. In accordance with the
AIC Code, the Chair of the Board is a member of the Audit
and Risk Committee as she was independent on appointment
and she remains so.
Remuneration Committee
The Committee has formal terms of reference which clearly
define roles and responsibilities. It meets at least once a
year or more often if required. Its principal duties include
(i) agreeing the policy for the remuneration of the Directors
and reviewing any proposed changes to the policy; (ii) reviewing
and considering ad hoc payments to the Directors in relation
to duties undertaken over and above normal business; and
(iii) if required, appointing independent professional
remuneration advice. The Committee comprises all the
independent non-executive Directors and is chaired by
David Fletcher.
44 | © 2023 AEET
Nomination Committee
The Committee has formal terms of reference which
clearly define roles and responsibilities. It meets at least
once per annum however, given the continuation and
managed run-off status of the Company, the Committee’s
duties were discharged by the Board during the year
ended 31 December 2023. Its principal duties include:
i. identifying individuals qualified to become Board
members and selecting the director nominees for
election at General Meetings of the Shareholders or
for appointment to fill vacancies;
ii. determining director nominees for each Committee
of the Board;
iii. considering the appropriate composition of the Board
and its Committees; and
iv. undertaking an annual performance evaluation of the
Board and its Committees.
The Nomination Committee comprises all the independent
non-executive Directors and is chaired by Miriam Greenwood.
Management Engagement Committee
The Committee has formal terms of reference which clearly
define roles and responsibilities. It meets at least once a
year or more often if required. Its principal duties include
regularly reviewing the contracts, the performance and
the remuneration of the Company’s key service providers.
The Management Engagement Committee comprises all
the independent non-executive Directors and is chaired
by Nicholas Bliss.
Decision Making
The Board is responsible for the overall stewardship of the
Company’s affairs and has adopted a schedule of matters
specifically reserved for decision by the Board. Strategic
issues and all operational matters of a material nature are
considered at its meetings, including reviewing the
Company’s performance by reference to the Company’s
key performance indicators.
The Board has access to independent advice at the
Company’s expense where it judges it necessary in order
to discharge its responsibilities properly.
Prior to being presented to the Board, each transaction
was considered by the AIFM who reviewed it against an
agreed set criteria of items to ensure it was suitable for
the Company’s long-term success and in Shareholders’
best interests.
Meeting attendance during the year ended 31 December 2023
Board
Audit and Risk
Committee
Management
Engagement
Committee
Remuneration
Committee
Miriam Greenwood 8/8 6/6 1/1 2/2
David Fletcher 8/8 6/6 1/1 2/2
Nicholas Bliss 8/8 5/6 1/1 1/2
Janine Freeman 8/8 6/6 1/1 2/2
© 2023 AEET | 45
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
CORPORATE GOVERNANCE STATEMENT
CONTINUED
In addition, a number of ad hoc Board and Committee
meetings were held during the year under review to deal
with administrative matters and the formal approval of
documents, investment proposals and to consider the
valuation of the Company’s portfolio which were considered
time critical.
Directors’ Share Dealings
The Directors comply with the Share Dealing Code adopted
by the Company in accordance with UK Market Abuse
Regulations (the “Share Dealing Code”) in relation to their
dealings in Ordinary Shares. The Board is responsible for
taking all proper and reasonable steps to ensure compliance
with the Share Dealing Code by the Directors.
DIVISION OF RESPONSIBILITIES
The independent Board is responsible to Shareholders for
the overall management of the Company. The following
sets out the division of responsibilities between the Chair,
the Board and its Committees.
Role of the Chair
The Chair leads the Board and is responsible for its overall
effectiveness in directing the Company. The Chair sets
the agenda for the Board and, in conjunction with the
Company Secretary, ensures that accurate, timely and
clear information is circulated to the Directors five working
days prior to the meeting. The Board has implemented
various policies and procedures to ensure the Company
runs effectively and efficiently.
An open, informed and transparent environment is
promoted at each Board meeting and the Chair maintains
open communication channels with the other Directors,
AIFM, Investment Adviser and Company Secretary between
Board meetings.
Senior Independent Director
The Senior Independent Director provides a sounding
board to the Chair, and serves as an intermediary for the
other Directors and Shareholders.
Role of the Board
All Board members are independent non-executive
Directors, who continue to be independent of the AIFM
and Investment Adviser. The Board is responsible for the
governance of the Company, notwithstanding any delegation
of responsibilities to third parties. It has oversight over the
management and conduct of the Company’s business,
strategy and development. The Board determines the
Investment Objective and Investment Policy as well as risk
appetite and has overall responsibility for the Company’s
activities, including review of investment activity and
performance. The Board ensures the maintenance of a
sound system of internal controls and risk management
(including financial, operational and compliance controls)
and reviews the overall effectiveness of systems in place.
The Board is responsible for approval of any changes to
the capital, corporate and/or management structure of
the Company. The Board members offer strategic guidance
and specialist advice, whilst providing constructive and
effective challenge, especially to the decisions of the
Investment Adviser. The Board scrutinises and assesses
the performance of third party service providers (including
the AIFM and Investment Adviser).
As set out in the Company’s announcement on 6 March
2024, which provided an update on the return of capital
to Shareholders, the principal objectives of the Board are
the implementation of the Tender Offer, the run-off of
the portfolio and the continuing evaluation of any strategic
proposals. The Board does not routinely involve itself in
day-to-day business decisions. The AIFM is responsible
for the risk management of the Company pursuant to
AIFMD and the Investment Adviser for portfolio management.
46 | © 2023 AEET
Appointment and Replacement of Board
The rules concerning the appointment and replacement
of Directors are contained in the Company’s Articles of
Association which require that a Director shall be subject
to election at the first AGM after appointment and re-
election at least every three years thereafter. However, in
accordance with the UK Corporate Governance Code, the
Board has resolved that all Directors shall stand for annual
re-election at each AGM.
Independent Advice
A procedure has been adopted for Directors, in the
furtherance of their duties, to take independent professional
advice at the expense of the Company. No professional
advice has been independently sought during the year
ended 31 December 2023. The Directors have access to
the advice and services of the Company Secretary.
Role of Committees
The role of each Committee is described in their respective
terms of reference, which can be found on the Company’s
website.
COMPOSITION, SUCCESSION AND EVALUATION
Composition
At the date of this report, the Board consists of four
independent non-executive Directors including the Chair.
All of the Directors are independent of the Investment
Adviser and are able to allocate sufficient time to the
Company to discharge their responsibilities effectively.
The Directors have a broad range of relevant experience
to meet the Company’s requirements and their biographies
are shown on pages 42 and 43.
In line with the AIC Code, the Board has decided that
each Director should be subject to annual re-election by
Shareholders, although this is not required by the Company’s
Articles of Association.
The Board recommends that all the Directors should be
elected for the reasons highlighted in the Notice of Annual
General Meeting.
Board Diversity
The Company’s policy is that the Board should have an
appropriate level of diversity in the boardroom with the
overriding aim of ensuring that the Board is composed of
the best combination of people for ensuring effective
oversight of the Company and constructive support and
challenge to the Investment Adviser. All Board appointments
will be made on merit and have regard to diversity including
factors such as ethnicity, gender, skills, background and
experience. There will be no discrimination on the grounds
of gender, religion, race, ethnicity, sexual orientation, age
or physical ability. As at 31 December 2023, the Company
had four Directors, two of whom were female and two
of whom were male. As at the date of this report, the
Company has four Directors, two female and two male.
The Board takes account of the FCA’s Listing Rule (LR9.8.6R
(9)(a)) concerning public disclosures on whether a company
has met the following targets on board diversity:
a) at least 40% of individuals on the board are women;
b) at least one of the senior board positions (defined by
the FCA as either the chair, senior independent director,
chief executive or chief financial officer) is held by a
woman; and
c) at least one individual on the board is from a minority
ethnic background.
As at 31 December 2023, the Board meets the criteria of
two of the three targets as a) 50% of the Board are
women, and b) the Chair of the Board is a woman. The
Board does not meet target c) as no Board members are
from a minority ethnic background. There have been no
new appointments to the Board in 2023, however the
Board would seek to include candidates from minority
ethnic backgrounds on a shortlist as part of the recruitment
of a new Director.
© 2023 AEET | 47
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
CORPORATE GOVERNANCE STATEMENT
CONTINUED
The below tables set out the diversity data required under LR 9.8.6R(10) as at 31 December 2023. As an externally managed
investment company, the Board employs no executive staff, and therefore does not have a chief executive officer (“CEO”)
or a chief financial officer (“CFO”), both of which are deemed senior board positions by the FCA.
The following information has been provided by each Director. There have been no changes since 31 December 2023.
Board diversity as at 31 December 2023
Gender
Number of
Board members
Percentage of
the Board
Number of
senior positions
on the Board
Men 2 50% 1
1
Women 2 50% 1
2
Prefer not to say – – –
Ethnic background
Number of
Board members
Percentage of
the Board
Number of
senior positions
on the Board
White British or Other White (including minority white groups) 4 100% 2
1,2
Asian/Asian British 0 0 0
Prefer not to say – – –
1 David Fletcher is Senior Independent Director.
2 Miriam Greenwood is Chair of the Board.
Board Tenure and Succession
The Directors recognise that independence is not a function of service or age and that experience is an important
attribute within the Board. To ensure continuity, the Board has adopted a succession plan that allows for a gradual
refreshment. Accordingly, the Board may decide to recommend a Director with more than nine years’ service for
re-election at the Company’s AGM.
Performance Evaluation
An internal annual performance evaluation was conducted on the Board, the Chair and the Committees for the year
ended 31 December 2023.
The evaluation was conducted by the Chair and the Senior Independent Director. The results of the Board performance
evaluation were positive and demonstrated that the Directors were committed to the fulfilment of their duties and with
a high level of engagement.
A policy of insurance against Directors’ and Officers’ liabilities is maintained by the Company.
AUDIT, RISK AND INTERNAL CONTROL
Audit
The Audit and Risk Committee monitors the performance, objectivity and independence of the external auditors and this
is assessed before the approval of the Annual Report. In evaluating the auditors’ performance, the Audit and Risk Committee
examines the robustness of the audit process, the independence and objectivity of the auditors and the quality of delivery.
The Audit and Risk Committee satisfies itself that the Annual Report taken as a whole is fair, balanced and understandable.
The assessment of the performance during the year ended 31 December 2023 and the judgements, estimates and
assumptions made throughout the Annual Report are considered formally as a committee agenda item.
48 | © 2023 AEET
Risk
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Company,
including those that would threaten its business model,
future performance, solvency or liquidity. The principal
risks and how they are being managed are set out in the
Strategic Report on pages 25 to 29.
Internal Control
The AIC Code requires the Board to review the effectiveness
of the Company’s system of internal controls. The Board
recognises its ultimate responsibility for the Company’s
system of internal controls and for monitoring its
effectiveness. The system of internal controls is designed
to manage rather than eliminate the risk of failure to
achieve business objectives. It can provide only reasonable
assurance against material misstatement or loss. The Board
has undertaken a review of the aspects covered by the
guidance and has identified risk management controls in
the key areas of business objectives, accounting, compliance,
operations and secretarial as being matters of particular
importance upon which it requires reports from the relevant
key service providers. The Board believes that the existing
arrangements, set out below, represent an appropriate
framework to meet the internal control requirements. The
Directors reviewed the effectiveness of the internal control
system throughout the year ended 31 December 2023.
Financial aspects of internal control
These are detailed in the Report of the Audit and Risk
Committee on page 54.
Other aspects of internal control
The Board will hold at least four regular meetings each
year, plus additional meetings as required. Between these
meetings there is regular contact with the AIFM, the
Investment Adviser, the Administrator and Company
Secretary.
The Administrator and Company Secretary, Apex Listed
Companies Services (UK) Limited, reports separately in
writing to the Board concerning risks and internal control
matters within its remit, including internal financial control
procedures and company secretarial matters. Additional
ad hoc reports are received as required and Directors have
access at all times to the advice and services of the Company
Secretary, which is responsible to the Board for ensuring
that Board procedures are followed and that applicable
rules and regulations are complied with. Contact with the
Investment Adviser, the AIFM and the Administrator
enables the Board to monitor the Company’s progress
towards its objectives and encompasses an analysis of the
risks involved. The effectiveness of the Company’s risk
management and internal controls systems is monitored
regularly and a formal review, utilising a detailed risk
assessment programme, takes place at least annually. This
includes review of the internal controls and the reports
of the Administrator, the AIFM and the Registrar.
Based on the work of the Audit and Risk Committee, and
the reviews of the reports received by the Audit and Risk
Committee on behalf of the Board, the Board has concluded
that there were no material control failures during the
year under review and up to the date of this report.
REMUNERATION
The Remuneration Committee comprises all the Directors
of the Board. It meets at least annually and is responsible
for considering and making appropriate recommendations
to the Board in relation to Directors’ remuneration.
The Company does not have any executive Directors or
employees and, as a result, operates a simple and transparent
remuneration policy with no variable element, that reflects
the non-executive Directors’ duties, responsibilities and
time spent.
© 2023 AEET | 49
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
DIRECTORS’ REMUNERATION REPORT
Annual Chair’s Statement
I am pleased to present the Remuneration Committee
(the “Committee”) Report for the year ended 31 December
2023. It is set out in two sections: a) Remuneration Policy–
a summary of our current Policy which was approved at
the Company’s General Meeting in July 2022; and
b)Remuneration Implementation Report – a description
on how the Directors’ Remuneration Policy has been
implemented during the year under review.
The Remuneration Committee Report for the year to
31December 2023 has been prepared in accordance with
sections 420-422 of the Act, Schedule 8 of the Large and
Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008, as amended (the “Regulations”)
and the Listing Rules. The law requires the Company’s
auditors to audit certain sections of the Remuneration
Report; where this is the case, the relevant section has
been indicated as such. The Remuneration Committee
met twice during the year under review.
General Meeting Approval of the Remuneration Policy
and Remuneration Implementation Report
The Company’s Remuneration Policy was approved by
Shareholders at the Company’s General Meeting on
25July2022. In accordance with the requirements of
Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008, as
amended (the “Regulations”), the Remuneration Policy is
required to be put to Shareholders for approval every
three years, unless a material variation to the Remuneration
Policy is proposed, in which case Shareholder approval
will be sought to amend the policy.
Remuneration Policy
Directors are remunerated in the form of fees, in respect
of their appointments as non-executive Directors of the
Company and as non-executive Directors of Attika Holdings
Limited, a wholly owned subsidiary of the Company, with
the split of fees between these appointments agreed
between the parties in writing. Directors’ fees are payable
in quarterly instalments in arrears. The Company’s Articles
of Association limit the fees payable to the Directors in
aggregate to £500,000 per annum. Subject to the overall
limit, the Company’s policy is that the fees payable to the
Directors should reflect the time spent by the Board on
the Company’s affairs and the responsibilities borne by
the Directors and should be sufficient to promote the
long-term success of the Company. All Directors, including
any new appointments to the Board, are paid at the same
rate, apart from the Chair of the Board (who is also Chair
of the Nomination Committee), the Chair of the Audit
and Risk Committee (who is also Chair of the Remuneration
Committee and the Senior Independent Director), and
the Chair of the Management Engagement Committee
who are paid a higher fee in recognition of their additional
responsibilities. As provided for in clause 107 of the Articles
of Association and in accordance with the relevant provisions
of the AIC Code, as well as each Director’s appointment
letters, the Directors are entitled to an additional fee where
a Director undertakes any special duties, or services outside
their ordinary duties as a Director.
The policy is to review fee rates annually, although such
review will not necessarily result in any change to the
rates. As part of this process reference is made to the fees
paid to the directors of other similar investment trust
companies.
Consideration of Shareholders’ Views
The General Meeting which was held on 25 July 2022
was the first opportunity for Shareholders to vote on the
Directors’ Remuneration Policy. The Remuneration Policy
was approved with 99.93% votes in favour.
Effective Date
The Remuneration Policy was effective from 25 July 2022,
being the date at which the Policy was approved by
Shareholders at the Company’s General Meeting. At the
Annual General Meeting on 14 June 2023, the Directors’
Remuneration Report as set out in the 2022 Annual Report
was approved with 99.89% in favour.
Remuneration Implementation Report
Directors’ remuneration
During the year ended 31 December 2023, the Remuneration
Committee undertook a review of Directors’ fees.
With effect from 1 July 2023, each of the Directors was
entitled to receive a fee of £43,676 per annum
(31December 2022: £40,478) with the Chair of the
Board (who is also Chair of the Nomination Committee)
entitled to receive an additional fee of £26,643 per
annum (31 December 2022: £19,692). With effect from
1 July 2023, the Chair of the Audit and Risk and
Remuneration Committees was appointed by the Board
as Senior Independent Director of the Company and in
total received an additional fee of £11,297 per annum,
which included a fee for his new role as Senior Independent
Director (31 December 2022: £5,470). The Management
Engagement Committee Chair received an additional
fee of £5,902 per annum (31 December 2022: £5,470).
50 | © 2023 AEET
The other Director, who was not Chair of the Management
Engagement Committee, received an additional fee of
£5,902 per annum to reflect her role and significant
involvement in reviewing the first time production of the
consolidated accounts for the year ended 31 December
2022 and the subsequent monitoring.
Each of the Directors’ fees are in respect of their
appointment as a non-executive Director of the Company
and their appointment as non-executive Director of Attika
Holdings Limited. The Board also considered that the
split of Directors’ fees between the Company and Attika
Holdings Limited of 70%/30% respectively remained
appropriate with effect from 1 July 2023.
The Board believes that the level of increase and resulting
fees appropriately reflects the level of demands on the
individual Directors (in particular, as a result of the failure
of the Continuation Vote on 28 February 2023 and the
processes that the Board then undertook in assessing the
various potential options for realising value for Shareholders),
prevailing market rates for an investment trust of the
Company’s size and complexity, the increasing complexity
of regulation and resultant time spent by the Directors on
matters, and it will also enable the Company to continue
to attract appropriately experienced Directors in the future.
Directors receive fixed fees and do not receive bonuses
or other performance-related remuneration, share options,
pension contributions or other benefits apart from the
reimbursement of allowable expenses. No commissions
or performance-related payments will be made to the
Directors by the Company.
No Director has waived or agreed to waive any emoluments
from the Company or any subsidiary undertaking.
During early 2023 the Board was focused on achieving
the milestones set following discussions with Shareholders
in April 2022, which included the full commitment and
deployment of the IPO proceeds.
The decision by Shareholders to vote against Continuation
at the end of February 2023 means that the duties of the
Directors were beyond those normally expected as part
of their appointment. Therefore, in accordance with
Principle 8 of the AIC Code, it was decided that provision
should be made for additional fees. In view of the additional
duties and responsibilities, the Remuneration Committee
decided, immediately following the Continuation Vote
and before detailed work commenced on reviewing the
options to implement Shareholders’ wishes, to increase
with effect from 1 March 2023 the monthly fees of the
Chair of the Board and the Chair of the Audit and Risk
Committee by £2,500 and £1,900 respectively and by
£1,150 for the Chair of the Management Engagement
Committee and £1,010 for the other non-executive Director.
This was set out in detail in the Remuneration Report
within the Annual Report for the year ended
31 December 2022.
With effect from 1 July 2023, and taking into account the
approval by Shareholders of the Managed Run-Off
resolution at the June 2023 Annual General Meeting, and
the continuing review of strategic options for the portfolio,
including the possible sale of assets and other options,
these monthly fees have been maintained and increased
to £2,930 for the Chair of the Board, £2,291 for the Chair
of the Audit and Risk Committee, Chair of the Remuneration
Committee and Senior Independent Director and £1,239
for the other Directors.
The standard fees for Directors are reviewed annually
and the additional monthly fees are subject to regular
review.
Directors’ Remuneration
The table below (audited) provides a single figure for the total remuneration of each Director.
Date of
appointment to
the Board
Fees for the
year ended
31 December
2023
1
(£)
Taxable
benefits Total
Fees for the
yearended
31December
2022
1
(£)
Miriam Greenwood 19 April 2021 92,852 – 92,852 57,585
Nicholas Bliss 9 April 2021 59,794 – 59,794 42,226
David Fletcher 29 April 2022 71,861 – 71,861 30,557
Janine Freeman 2 November 2022 56,512 – 56,512 6,642
Total 281,019 – 281,019 137,010
1 Including fees in respect of directorships in Attika Holdings Limited.
© 2023 AEET | 51
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Directors’ Service Contracts, Term and Loss of Office
The Directors do not have service contracts with the Company.
The Directors have appointment letters which provide for
an initial term of three years. In accordance with the AIC
Code, each member of the Board will seek annual re-election
by Shareholders at the AGM. There are no agreements in
place to compensate the Board for loss of office.
Directors’ Indemnities
Subject to the provisions of the Act, the Company has
agreed to indemnify each Director against all liabilities which
any Director may suffer or incur arising out of or in connection
with any claim made or proceedings taken against him, or
any application made by him, on the grounds of his negligence,
default, breach of duty or breach of trust in relation to the
Company or any associated company.
Performance
The following chart shows the performance of the Company’s
NAV and share price (total return) by comparison to the
FTSE All Share index for the period since the Company
was listed. The Company does not have a specific benchmark
but has deemed the FTSE All Share index to be the most
appropriate comparator for its performance.
-25
-20
-15
-10
-5
0
5
10
Jun-21 Dec-21 Dec-22Jun-22 Dec-23Jun-23
Total return (%)
AEET share price AEET NAV FTSE All Share index
No additional expenses were paid to the Directors (2022: £nil). None of the above fees were paid to third parties.
The annual percentage change in remuneration in respect of the financial years prior to the current year in respect of
each Director is as follows:
% change
2022 to 2023
% change
2021to 2022
1
Miriam Greenwood
2
61.24 –
Nicholas Bliss
3
41.60 –
David Fletcher
4
135.17 –
Janine Freeman
5
750.83 –
1 The fees received for the period to 31 December 2021 and the year to 31 December 2022 are not comparable as they cover different durations and two Directors joined the
Board in 2022. Accordingly, a year-on-year percentage change has not been included in the table above.
2 The 61.24% increase in 2023 for Miriam Greenwood arose mainly from the introduction of an additional monthly fee to reflect the extra duties and responsibilities as Chair
of the Board arising from the failed Continuation Vote at the end of February 2023, the approval of the Managed Run-Off resolution at the end of June 2023 and the continuing
review of strategic options for the portfolio as detailed in this Remuneration Report.
3 The 41.60% increase in 2023 for Nicholas Bliss arose mainly from the introduction of an additional monthly fee to reflect the extra duties and responsibilities arising from
the failed Continuation Vote at the end of February 2023, the approval of the Managed Run-Off resolution at the end of June 2023 and the continuing review of strategic
options for the portfolio as detailed in this Remuneration Report.
4 The 135.17% increase in 2023 for David Fletcher arose mainly from (i) his appointment part-way through 2022 (29 April 2022), (ii) the introduction of an additional monthly
fee to reflect the extra duties and responsibilities arising from the failed Continuation Vote at the end of February 2023, the approval of the Managed Run-Off resolution at
the end of June 2023 and the continuing review of strategic options for the portfolio and (iii) his appointment to the role of Senior Independent Director of the Board on
1July2023 as detailed in this Remuneration Report.
5 The 750.83% increase in 2023 for Janine Freeman arose mainly from (i) her appointment part-way through the year as a Director on 2 November 2022, (ii) the introduction
of an additional monthly fee to reflect the extra duties and responsibilities arising from the failed Continuation Vote at the end of February 2023, the approval of the Managed
Run-Off resolution at the end of June 2023 and the continuing review of strategic options for the portfolio and (iii) to reflect her role and particular involvement on the Audit
and Risk Committee as detailed in this Remuneration Report.
DIRECTORS’ REMUNERATION REPORT
CONTINUED
52 | © 2023 AEET
Relative Importance of Spend on Pay
The following table sets out the total level of Directors’
remuneration compared to the distributions to Shareholders
by way of dividends and share buybacks, the Investment
Adviser’s fees and operating expenses incurred by the
Company.
Year ended
31 December
2023
Year ended
31 December
2022
Spend on Directors’ fees 281,019 143,472
Company’s operating
expenses and advisory fees
2,972,000 2,537,000
Dividends paid and
payable to Shareholders
1,250,000 2,250,000
The disclosure of the information in the table above is
required under the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment) Regulations
2013 with the exception of the investment advisory fees
and operating expenses which have been included to
show the total expenses of the Company.
Directors’ Holdings (Audited)
At 31 December 2023 and at the date of this report the
Directors had the following holdings in the Company.
There is no requirement for Directors to hold shares in
the Company. All holdings were beneficially owned.
Shares
Connected
person Total
Miriam Greenwood 24,000 – 24,000
David Fletcher 42,425 14,181 56,606
Nicholas Bliss 20,000 – 20,000
Janine Freeman
– – –
Remuneration Consultants
Remuneration consultants were not engaged by the
Company during the year under review or in respect of
the Remuneration Report.
Recruitment Agencies
The Board has not paid and will not pay any incentive fees
to any person to encourage them to become a Director
of the Company.
Statement
On behalf of the Board and in accordance with Part 2 of
Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment) Regulations
2013, I confirm that the above Remuneration Policy and
Remuneration Implementation Report summarises,
asapplicable, for the year ended 31 December 2023:
a) the major decisions on Directors’ remuneration;
b) any substantial changes relating to Directors’ remuneration
made; and
c) the context in which the changes occurred and decisions
have been taken.
David Fletcher
Chair of the Remuneration Committee
30 April 2024
© 2023 AEET | 53
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Introduction
I am pleased to present the Audit and Risk Committee (the
“Committee”) Report for the year ended 31 December 2023.
At least once a year the Committee Chair meets with the
external auditors without any representative of the Investment
Adviser or Administrator being present. The Committee’s
effectiveness will be reviewed on an annual basis as part of
the Board’s performance evaluation process.
Role and Composition
The role of the Committee is to ensure that Shareholder
interests are properly protected in relation to the application
of financial reporting and internal control principles and
to assess the effectiveness of the audit. The Committee’s
role and responsibilities are set out in full in its terms of
reference which are available on request from the Company
Secretary and can be found on the Company’s website
(www.aquila-energy-efficiency-trust.com). A summary of
the Committee’s main responsibilities and how it has
fulfilled them is set out below. Review of the Company’s
internal control and risk management falls within the terms
of reference of the Committee.
The Committee comprises all the Directors and the Board
is satisfied that the Committee has sufficient and recent
financial experience, and as a whole, has competence
relevant to the sector in which the Company operates to
discharge its functions effectively. In accordance with the
AIC Code, the Chair of the Board is a member of the
Committee as she was independent on appointment and
she remains so. The experience of the members of the
Committee can be assessed from the Directors’ biographies
set out on pages 42 and 43.
Main Activities of the Committee
The Committee met formally six times during the year under
review and twice after the year end. PwC, the external
auditors, attended two meetings in 2023 and twice after
the year end. The AIFM’s risk function provided reports on
their monitoring programme for these meetings.
The matters considered, monitored and reviewed by the
Committee during the course of the year under review
included the following:
• a detailed analysis of the Company’s semi-annual NAVs
and factsheets and underlying assumptions;
• monitored the Company’s revenue reserves and
recommended appropriate dividend levels to the Board;
• monitored and reviewed the Company’s emerging and
principal risks and internal controls;
• considered the ongoing assessment of the Company
as a going concern;
REPORT OF THE AUDIT AND RISK COMMITTEE
• considered the appointment, independence, objectivity
and remuneration of the auditors;
• reviewed the audit plan;
• approved the accounting principles including the
investment entity status, the valuation methodology
including fair value and amortised cost;
• monitored the preparation and timetable for the
production of the Annual Report and Accounts;
• monitored the integrity of the financial statements of
the Company, including its annual and half-yearly
reports, and any other formal announcements relating
to its financial performance, and reviewed and reported
to the Board on significant financial reporting issues
and judgements contained within them; and
• considered the financial and other implications on the
independence of the auditors arising from the provision
of non-audit services.
In the half-year report to Shareholders for the six months
to June 2023, the Chair referred to the additional costs
associated with the production of the Company’s 2022
Annual Report and Accounts, including the additional
cost in respect of preparing the consolidated accounts for
the first time. The results for the year ended 31 December
2023 include significant audit fees in both the year ended
31 December 2022 which were not budgeted for or
included in that year’s results and in the year ended 31
December 2023 due to the increase in scope of the audit
and the need to audit consolidated financial statements.
The budgeted audit fees for the current year reflect the
amount of work now expected to be undertaken given,
inter alia, the number of assets owned by the Company
following deployment, the different valuation methodologies
for the assets and the complexities involved. The results
for the year ended 31 December 2023 also include
significant professional fees relating to the two Continuation
Votes and the consequences of the votes. The Board
continues to consider whether there is scope to recoup
at least some of these increased costs from its service
providers.
Going Concern
The Committee reviewed the Company’s going concern
assessment and concluded that although there are conditions
that indicate the existence of material uncertainty which may
cast significant doubt about the Company’s ability to continue
as a going concern, it is appropriate for the Company’s
financial statements to be prepared on a going concern basis
as described in the Directors’ Report on page 38.
54 | © 2023 AEET
Internal Control and Risk
During the year under review, the Committee, together
with the AIFM and other service providers, carefully
considered the Company’s matrix of risks and uncertainties
(including emerging risks) and appropriate mitigating
actions. The procedure for identifying emerging risks can
be found on page 25 and the Company’s principal risks
can be found on pages 26 to 29.
The Committee also considered the internal control reports
of its AIFM, Investment Adviser, Administrator and Registrar.
The Committee reviewed these reports and concluded
that there were no significant control weaknesses or other
issues that needed to be brought to the Board’s attention.
Financial Aspects of Internal Control
The Directors are responsible for the internal financial control
systems of the Company and for reviewing its effectiveness.
The aim of the internal financial control system is to ensure
the maintenance of proper accounting records, the reliability
of the financial information upon which business decisions
are made and used for publication, and that the assets of
the Company are safeguarded.
The Board has contractually delegated to external agencies
the services the Company requires, but they are fully informed
of the internal control framework established by each relevant
service provider which provide reasonable assurance on the
effectiveness of internal financial controls.
The Statement of Directors’ Responsibilities in respect of the
financial statements is on page 58 and a Statement of Going
Concern is on page 38. The Report of the Independent
Auditors is on pages 59 to 66.
Financial Statements and Material Accounting
Matters
The Committee reviewed the financial statements and
considered the following material accounting issues in
relation to the Company’s financial statements for the
year ended 31 December 2023.
Investment Entity Status
As a result of the development of the portfolio of investments,
the actual investments made and the structure of those
investments, many of which were receivables purchase
investments with fixed rates of return, the Committee
determined that this required judgement and re-assessment
of the Company’s investment entity status for the year
ended 31 December 2022. As a result of this re-assessment,
which identified that fixed rate of return investments
constituted a substantial proportion of the pipeline of
investments and resultant actual investments, the Committee
determined that as from 1 January 2022 the Company
was no longer an investment entity. This has continued
to be the position in 2023.
Valuation and Existence of Investments
The Company’s accounting policy is to designate investments
at fair value through profit or loss, or at amortised cost
less expected credit loss provisions, whichever is appropriate,
adjusted by any foreign exchange differences. Investments
with variable returns are measured at fair value and
investments with a fixed return structure are measured
at amortised cost. Therefore, the most significant risk in
the Company’s financial statements is the carrying value
of the Company’s investments because fair values, the
effective interest method and expected credit loss provisions
have been arrived at using a number of judgements. The
Committee reviewed the procedures in place for ensuring
the accurate valuation and existence of investments and
approved the valuation of the Company’s investments
and their existence at the year end with the Investment
Adviser, the AIFM and other service providers.
The Board has approved a Valuation Policy which sets out
the valuation process. The process includes a valuation by
the Investment Adviser of the Company’s investments on
an annual basis as at 31 December each year. These
valuations are updated as at 30 June each year. The
valuation principles used to calculate the fair value of the
assets are based on International Private Equity and Venture
Capital Valuation Guidelines.
Fair value for each investment is derived from the present
value of the investment’s expected future cash flows,
using reasonable assumptions and forecasts for revenues
and operating costs, and an appropriate discount rate.
For those investments measured at amortised cost the
Company has used the effective interest method and has
calculated an expected credit loss provision in accordance
with IFRS 9.
The Audit and Risk Committee has satisfied itself with the
investment valuation, the calculation of amortised cost
values and expected credit loss provisions.
Recognition of Income
Income may not be accrued correctly. Calculations of
investment income using the effective income method
have been provided to the Company by the Investment
Adviser. The Committee reviewed the Administrator’s
procedures for recognition of income and reviewed the
treatment of income receivable in the year under review.
© 2023 AEET | 55
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Tax Status
The Company may suffer tax on gains on the realisation
of investments if investment trust status is not maintained.
The Committee reviewed the compliance of the Company
during the year under review, against the eligibility
conditions and ongoing requirements it must meet in
order for investment trust status to be maintained.
Calculation of the Investment Adviser’s Fees
The Committee reviewed the Investment Adviser’s fees
and concluded that they have been correctly calculated.
Details of the Investment Adviser’s fees can be found in
Note 6 to the financial statements.
Internal Audit
The Committee has considered the need for an internal
audit function and considers that this is not appropriate
given the nature and circumstances of the Company as an
externally managed investment company with external
service providers. The Committee keeps the need for an
internal audit function under periodic review.
Audit Arrangements
PwC were selected as the Company’s auditors at the time
of the Company’s launch. The auditors were formally
engaged in November 2021. This is Richard McGuire’s
third year as the Company’s audit partner. The appointment
of the auditors will be reviewed annually by the Committee
and the Board and is subject to approval by Shareholders.
Inaccordance with the Financial Reporting Council’s
(“FRC”) guidance, the audit will be put out to tender
within ten years of the initial appointment of PwC.
Additionally, the audit partner must be rotated every
fiveyears and is next eligible for rotation in 2026.
The audit plan was presented to the Committee at its
November 2023 meeting, ahead of the commencement
of the Company’s year-end audit. The audit plan sets out
the audit process, materiality, scope and significant risks.
Auditors’ Independence
The Audit and Risk Committee considered the independence
of the auditors and the objectivity of the audit process
and is satisfied that PwC has fulfilled its obligations to
Shareholders and as independent auditors to the Company
for the year ended 31 December 2023.
The Audit and Risk Committee is satisfied that there are
no issues in respect of the independence of the auditors.
Effectiveness of External Audit
The Committee is responsible for reviewing the effectiveness
of the external audit process. The Committee received a
presentation of the audit plan from the external auditors
prior to the commencement of the audit and a presentation
of the results of the audit following completion of the
main audit testing. Additionally, the Committee received
feedback from the Company Secretary, Administrator,
AIFM and Investment Adviser regarding the effectiveness
of the external audit process. Following the above review,
the Committee has agreed that the re-appointment of
the auditors should be recommended to the Board and
the Shareholders of the Company.
Provision of Non-audit Services
The Audit and Risk Committee has reviewed the FRC’s
Revised Ethical Standard 2019 Guidance on Audit Committees
and has formulated a policy on the provision of non-audit
services by the Company’s auditors. The Audit and Risk
Committee has determined that the Company’s appointed
auditors will not be considered for the provision of certain
non-audit services, such as accounting and preparation of
the financial statements, internal audit and custody. The
auditors may, if required, provide other non-audit services
however, and this will be judged on a case-by-case basis.
PwC was not engaged to provide non-audit services to the
Company during the year ended 31 December 2023.
Conclusion with Respect to the Annual Report
The production and audit of the Company’s Annual Report
is a comprehensive process requiring input from different
contributors. In order to reach the conclusion that the
Annual Report when taken as a whole is fair, balanced and
understandable, the Board has requested that the Committee
advises on whether it considers these criteria have been
satisfied. In so doing, the Committee has considered the
following:
• the comprehensive control framework around the
production of the Annual Report;
• the extensive levels of review undertaken in the
production process, by the Investment Adviser and the
Committee; and
• the internal control environment as operated by the
Investment Adviser and other suppliers including any
checks and balances within those systems.
REPORT OF THE AUDIT AND RISK COMMITTEE
CONTINUED
56 | © 2023 AEET
Conclusion with Respect to the Annual Report
continued
As a result of the work performed, the Committee has
concluded that the Annual Report and Financial Statements
for the year ended 31 December 2023, taken as a whole,
are fair, balanced and understandable and provide the
information necessary for Shareholders to assess the
Company’s performance, business model and strategy,
and it has reported on these findings and provided such
conclusion to the Board.
David Fletcher
Chair of the Audit and Risk Committee
30 April 2024
© 2023 AEET | 57
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group’s and the Company’s
financial statements in accordance with UK-adopted
international financial reporting standards in conformity
with the requirements of the Companies Act 2006.
Under company law, Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group
and the Company and of the profit or loss of the Group
and the Company for that year. In preparing the financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable UK-adopted international
financial reporting standards in conformity with the
requirements of the Companies Act 2006 have been
followed, subject to any material departures disclosed
and explained in the financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and the Company will continue in business.
The Directors are also responsible for safeguarding the
assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
and the Directors’ Remuneration Report comply with the
Companies Act 2006.
The Directors have delegated responsibility to the Investment
Adviser for the maintenance and integrity of the corporate
and financial information included on the Company’s
website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ Confirmations
The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for Shareholders
to assess the Group’s and the Company’s position and
performance, business model and strategy.
Each of the Directors, whose names and functions are
listed in the Corporate Governance section, confirm that,
to the best of their knowledge:
• the Group’s and the Company’s financial statements,
which have been prepared in accordance with UK-adopted
international financial reporting standards in conformity
with the requirements of the Companies Act 2006,
give a true and fair view of the assets, liabilities, financial
position and loss of the Group and the Company; and
• the Strategic Report includes a fair review of the
development and performance of the business and
the position of the Group and the Company, together
with a description of the principal risks and uncertainties
that it faces.
In the case of each Director in office at the date the
Directors’ report is approved:
• so far as the Director is aware, there is no relevant
audit information of which the Group’s and Company’s
auditors are unaware; and
• they have taken all the steps that they ought to have
taken as a Director in order to make themselves aware
of any relevant audit information and to establish that
the Group’s and the Company’s auditors are aware of
that information.
For and on behalf of the Board
Miriam Greenwood OBE DL
Chair of the Board
30 April 2024
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
58 | © 2023 AEET
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AQUILA ENERGY EFFICIENCY TRUST PLC
Report on the audit of the financial statements
Opinion
In our opinion, Aquila Energy Efficiency Trust Plc’s Group financial
statements and Company financial statements (the “financial
statements”):
• give a true and fair view of the state of the Group’s and of the
Company’s affairs as at 31 December 2023 and of the Group’s
and Company’s profit and the Group’s and Company’s cash flows
for the year then ended;
• have been properly prepared in accordance with UK-adopted
international accounting standards; and
• have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within the Annual
Report, which comprise: the Consolidated Statement of Financial
Position and the Company Statement of Financial Position as at
31December 2023; the Consolidated Statement of Profit or Loss
and Comprehensive Income, the Company Statement of Profit or
Loss and Comprehensive Income, the Consolidated Statement of
Changes in Equity, the Company Statement of Changes in Equity,
the Consolidated Statement of Cash Flows and the Company Statement
of Cash Flows for the year then ended; and the notes to the financial
statements, comprising material accounting policy information and
other explanatory information.
Our opinion is consistent with our reporting to the Audit and Risk
Committee.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as
applicable to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC’s Ethical Standard were not provided.
We have provided no non-audit services to the Company or its
controlled undertakings in the period under audit.
Material uncertainty related to going concern
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosure made
in note 2 to the financial statements concerning the Group’s and the
Company’s ability to continue as a going concern. The Company
held a continuation vote in February 2023 which did not pass. At
the Annual General Meeting of the Company (the “AGM”) held on
14 June 2023, Shareholders voted in favour of the Company’s change
of investment policy (the “New Investment Policy”). Following the
AGM, and in accordance with the New Investment Policy, the Company
entered a continuation and managed run-off of its portfolio (“Managed
Run-Off”), meaning that it is not making any new investments (save
© 2023 AEET | 59
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
for the limited circumstances asset out in the New Investment Policy)
and its investing activity is solely in respect of funding legal commitments
to existing investments. The Group is operating currently under a
Managed Run-Off with the term of some of the Group’s assets being
several years. The Company is continuing to explore other strategic
options, such as an asset sale or structural solution. There remains
no certainty that any of these options will materialise and be put to
Shareholders for consideration or on the potential timing of other
strategic options. These conditions, along with the other matters
explained in note 2 to the financial statements, indicate the existence
of a material uncertainty which may cast significant doubt about the
Group’s and the Company’s ability to continue as a going concern.
The financial statements do not include the adjustments that would
result if the Group and the Company were unable to continue as a
going concern.
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and the
Company’s ability to continue to adopt the going concern basis of
accounting included:
• Obtained the Directors’ going concern assessment and corroborated
key assumptions to underlying documentation and ensured this
was consistent with our audit work;
• Assessed the appropriateness of the key assumptions used both
in the base case and downside scenarios, including assessing
whether we considered the downside sensitivities to be appropriately
severe;
• Tested the integrity of the underlying formulae and calculations
within the going concern and cash flow models; and
• Considered the appropriateness of the mitigating actions available
to the Directors in the event of the downside scenario materialising.
Specifically, we focused on whether these actions are within the
Directors’ control and are achievable.
In relation to the Directors’ reporting on how they have applied the
UK Corporate Governance Code, other than the material uncertainty
identified in note 2 to the financial statements, we have nothing
material to add or draw attention to in relation to the Directors’
statement in the financial statements about whether the Directors
considered it appropriate to adopt the going concern basis of
accounting, or in respect of the Directors’ identification in the financial
statements of any other material uncertainties to the Group’s and
the Company’s ability to continue to do so over a period of at least
twelve months from the date of approval of the financial statements.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
this report.
Our audit approach
Overview
Audit scope
• The Company invests in energy efficient investments through its
investments in its subsidiaries, Attika Holdings Limited and one
compartment of SPV Project 2013 S.r.l.;
• The Company is an Investment Trust Company and has appointed
Aquila Capital Investmentgesellschaft mbH (the “Investment
Adviser”) to manage its assets, and;
• The financial statements are prepared for the Group by Apex
Listed Companies Services (UK) Limited (the “Administrator”) to
whom the Directors delegated the provision of certain administrative
functions. The Group audit team performed all the work and
did not use component auditors.
Key audit matters
• Material uncertainty related to going concern (Group and
Company)
• Valuation of investments held at fair value through profit or loss
(Group)
• Carrying value of investments at amortised cost (Group)
• Investment in subsidiary held at fair value through profit or loss
(Company)
Materiality
• Overall Group materiality: £1,886,000 (2022: £1,904,000) based
on 2% of net assets.
• Overall Company materiality: £1,791,000 (2022: £1,809,000)
based on 2% of net assets capped at 95% of Group materiality.
• Performance materiality: £1,414,000 (2022: £1,428,000) (Group)
and £1,344,000 (2022: £1,357,000) (Company).
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AQUILA ENERGY EFFICIENCY TRUST PLC
CONTINUED
60 | © 2023 AEET
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the matters
described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks identified by our audit.
Investment in subsidiary held at fair value through profit or loss is a new key audit matter this year. Investment entity status, which was a key
audit matter last year, is no longer included because there have been no changes to the Company’s business and therefore limited consideration
in the current year of whether the Company meets the characteristics of an investment entity. Otherwise, the key audit matters below are
consistent with last year.
Key audit matter How our audit addressed the key audit matter
Valuation of investments held at fair value through profit or loss
(Group)
The Group holds energy efficient investments through its subsidiaries
Attika Holdings Limited and SPV Project 2013 S.r.l. These underlying
investments held in Attika Holdings Limited and SPV Project 2013
S.r.l. are either held at fair value through profit or loss or at amortised
cost. The investments at fair value of the Group are £10,492k. The
fair value of the investments have principally been valued on a
discounted cash flow basis, which necessitates significant estimates
in respect of the forecasted cash flows and discount rates applied.
Determining the valuation methodology and determining the inputs
and assumptions within the valuations are subjective and complex.
This, combined with the size of the investments at fair value through
profit or loss balance in the consolidated statement of financial position,
meant that this was a key audit matter for our current year audit.
We planned our audit to critically assess management’s assumptions
and the investment valuation models in which they are applied. We
have assessed whether the valuation methodology adopted for the
investments held at fair value through profit and loss was appropriate
and in line with accounting standards and industry guidelines. For a
sample of investments at fair value, we performed the following
procedures:
• We tested the mathematical accuracy of the valuation models.
• We engaged our internal valuation experts to provide audit support
in reviewing and concluding on the fair valuation of the investments
held at fair value. Our internal valuations experts developed a
range to benchmark against management’s discount rates taking
into account country risk premia, price risk exposure and construction
risk which vary depending on the asset.
• Where investments were purchased during the year we have
tested the acquisition amounts to supporting documentation.
• We agreed the key valuation drivers to relevant supporting
documentation. Specifically, we have agreed a sample of inputs
driving the revenue in the underlying models to supporting
documentation such as signed contracts.
No material issues were identified in our audit testing.
© 2023 AEET | 61
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Key audit matter How our audit addressed the key audit matter
Carrying value of investments at amortised cost (Group)
As stated above, the Group holds energy efficient investments through
its subsidiaries Attika Holdings Limited and SPV Project 2013 S.r.l.
These underlying investments held in Attika Holdings Limited and
SPV Project 2013 S.r.l. are either held at fair value through profit or
loss or at amortised cost. The investments at amortised cost of the
Group are £54,990k. The amount is net of the allowance for expected
credit losses in accordance with IFRS 9. The impairment assessment
requires estimates and judgements to be applied by the Directors,
especially around expected credit loss allowance under IFRS 9, such
that changes to key inputs to the estimates and/or judgements made
may result in a material change to the carrying value. These factors
combined with the size of the investments at amortised cost balance
in the consolidated statement of financial position, meant that this
was a key audit matter for our current year audit.
We understood and evaluated the methodology and assumptions
applied, by reference to IFRS 9 and industry practice, and tested the
techniques used, in determining the amortised cost and recognition
of any expected credit loss. For a sample of investments at amortised
cost, we performed the following procedures:
• We obtained confirmations of the investments or performed
alternative procedures such as agreeing to supporting documentation,
where applicable.
• We assessed key assumptions used, such as those relating to
when a significant increase in credit risk has occurred.
• We assessed the key parameters within the expected credit loss
model such as the probabilities of default and loss given default.
• We tested mathematical accuracy of the amortised cost models.
No material issues were identified in our audit testing.
Investment in subsidiary held at fair value through profit or loss
(Company)
The Company’s investment in subsidiaries is held at £45,654k split
between an investment in Attika Holdings Limited of £9,971k held at
cost less impairment and an investment in one compartment of SPV
Project 2013 S.r.l (the “Italian SPV”) held at fair value through profit
or loss. The fair value of the Italian SPV as at 31 December 2023 has
been determined through an aggregation of the fair value of the
Italian SPV’s individual investments adjusted for the cash and liabilities
of the Italian SPV at 31 December 2023. The fair values of the Italian
SPV’s individual investments take account of projections of future
cash flows and discount rates which seek to take account of the risk
profile of the counterparty, and other areas of judgment. The valuation
of the investment in the Italian SPV was identified as a key audit matter
given the components of the underlying valuation such as forecast
cash flows and discount rates are inherently subjective.
We obtained management’s calculations of the fair value of the
investment in the Italian SPV. We performed the following procedures:
• Tested the mathematical accuracy of the calculation and agreed
the inputs to the supporting documentation; and
• In respect of the underlying investments in the Italian SPV, we
agreed the forecast cash flows to supporting documentation such
as signed contracts, tested the mathematical accuracy of the
valuation models and assessed the discount rates used.
No material issues were identified in our audit testing.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group and the
Company, the accounting processes and controls, and the industry
in which they operate.
The Group consists of the Company and its two subsidiaries in the UK
and Italy, Attika Holdings Limited and one compartment of SPV Project
2013 S.r.l. respectively. All three were determined to be financially
significant components for the purposes of the Group audit. The
Group operates common processes and controls in accounting for its
investments held at fair value through and profit and loss and investments
at amortised cost and investment income. The related balances were
therefore audited by the Group team in the UK and the Group team
was able to get sufficient coverage over the components balances
such that there was no need for the involvement of component
auditors. As part of designing our audit of the Company, we determined
materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the Directors
made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering
future events that are inherently uncertain.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand
the extent of the potential impact of climate risk on the Group’s and
Company’s financial statements, and we remained alert when
performing our audit procedures for any indicators of the impact of
climate risk. As part of our procedures over the valuation of investments
held at fair value through profit or loss, we obtained the third party
technical advice used by management to forecast energy production.
We have reviewed the appropriateness of disclosures included in the
financial statements and have read the Annual Report to consider
whether other climate change disclosures are materially consistent
with the financial statements and our knowledge obtained in the
audit. Based on our procedures performed, no significant findings
have been noted.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AQUILA ENERGY EFFICIENCY TRUST PLC
CONTINUED
62 | © 2023 AEET
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate
on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - Group Financial statements - Company
Overall materiality
£1,886,000 (2022: £1,904,000). £1,791,000 (2022: £1,809,000).
How we determined it
2% of net assets
2% of net assets capped at 95% of Group materiality
Rationale for benchmark applied
Net assets are deemed to be the appropriate
benchmark because the Group’s performance is
measured on its net asset value.
Net assets are deemed to be the appropriate
benchmark because the Company’s performance
is measured on its net asset value.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £1,128,000 and £1,794,000. Certain components were audited to a local statutory
audit materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature
and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% (2022: 75%) of overall materiality, amounting to £1,414,000 (2022: £1,428,000) for the Group financial statements and
£1,344,000 (2022: £1,357,000) for the Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation
risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £94,000 (Group
audit) (2022: £95,000) and £90,000 (Company audit) (2022: £90,000) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information
and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures
to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
© 2023 AEET | 63
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic Report and Directors’
Report, for the year ended 31 December 2023 is consistent with the
financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Group and
Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report
and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the Companies
Act 2006.
Corporate governance statement
The Listing Rules require us to review the Directors’ statements in
relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Company’s compliance
with the provisions of the UK Corporate Governance Code specified
for our review. Our additional responsibilities with respect to the
corporate governance statement as other information are described
in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded
that each of the following elements of the corporate governance
statement, included within the Strategic Report and Directors’ Report
is materially consistent with the financial statements and our knowledge
obtained during the audit, and, except for the matters reported in
the section headed ‘Material uncertainty related to going concern’,
we have nothing material to add or draw attention to in relation to:
• The Directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal
risks, what procedures are in place to identify emerging risks and
an explanation of how these are being managed or mitigated;
• The Directors’ statement in the financial statements about whether
they considered it appropriate to adopt the going concern basis
of accounting in preparing them, and their identification of any
material uncertainties to the Group’s and Company’s ability to
continue to do so over a period of at least twelve months from
the date of approval of the financial statements;
• The Directors’ explanation as to their assessment of the Group’s
and Company’s prospects, the period this assessment covers and
why the period is appropriate; and
• The Directors’ statement as to whether they have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of its
assessment, including any related disclosures drawing attention
to any necessary qualifications or assumptions.
Our review of the Directors’ statement regarding the longer-term
viability of the Group and Company was substantially less in scope
than an audit and only consisted of making inquiries and considering
the Directors’ process supporting their statement; checking that the
statement is in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether the statement
is consistent with the financial statements and our knowledge and
understanding of the Group and Company and their environment
obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
• The Directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess
the Group’s and Company’s position, performance, business
model and strategy;
• The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems;
and
• The section of the Annual Report describing the work of the
Audit and Risk Committee.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AQUILA ENERGY EFFICIENCY TRUST PLC
CONTINUED
64 | © 2023 AEET
We have nothing to report in respect of our responsibility to report
when the Directors’ statement relating to the Company’s compliance
with the Code does not properly disclose a departure from a relevant
provision of the Code specified under the Listing Rules for review by
the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities
in respect of the financial statements, the Directors are responsible
for the preparation of the financial statements in accordance with
the applicable framework and for being satisfied that they give a
true and fair view. The Directors are also responsible for such internal
control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the Directors are responsible
for assessing the Group’s and the Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Company or to
cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
Irregularities, including fraud, are instances of non-compliance with
laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified
that the principal risks of non-compliance with laws and regulations
related to the ongoing qualification as an Investment Trust under
Section 1158 of the Corporation Tax Act 2010, and we considered the
extent to which non-compliance might have a material effect on the
financial statements. We also considered those laws and regulations
that have a direct impact on the financial statements such as the
Companies Act 2006. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements
(including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries to
increase profit or to increase total shareholders’ funds, and management
bias in accounting estimates, such as the valuation of investments held
at fair value through profit or loss or carrying value of investments
held at amortised cost. Audit procedures performed by the engagement
team included:
• Enquires with the Board of Directors, Investment Adviser and the
Administrator, over consideration of known or suspected instances
of non-compliance with laws and regulations and fraud;
• Challenging assumptions and judgements made by the Board of
Directors and the Investment Adviser in their significant accounting
estimates, in particular, in relation to the valuation of investments
held at fair value through profit or loss and carrying value of
investments held at amortised cost (see related key audit matters
above);
• Identifying and testing journal entries made throughout the year
as well as those made as part of the year end reporting process;
• Reviewing relevant meeting minutes, including those of the Board
of Directors and Audit and Risk Committee;
• Assessment of the Company’s compliance with the requirements
of Section 1158 of the Corporation Tax Act 2010;
• Reviewing the financial statements disclosures to underlying
supporting documentation; and
• Designing audit procedures to incorporate unpredictability around
the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of non-compliance
with laws and regulations that are not closely related to events and
transactions reflected in the financial statements. Also, the risk of
not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
© 2023 AEET | 65
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number
of items for testing, rather than testing complete populations. We
will often seek to target particular items for testing based on their
size or risk characteristics. In other cases, we will use audit sampling
to enable us to draw a conclusion about the population from which
the sample is selected.
A further description of our responsibilities for the audit of the
financial statements is located on the FRC’s website at: www.frc.
org.uk/auditorsresponsibilities. This description forms part of our
auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only
for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
• we have not obtained all the information and explanations we
require for our audit; or
• adequate accounting records have not been kept by the Company,
or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law
are not made; or
• the Company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with
the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit and Risk Committee,
we were appointed by the members on 16 November 2021 to audit
the financial statements for the year ended 31 December 2021 and
subsequent financial periods. The period of total uninterrupted
engagement is 3 years, covering the years ended 31 December 2021
to 31 December 2023.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance
and Transparency Rule 4.1.14R, these financial statements form part
of the ESEF-prepared annual financial report filed on the National
Storage Mechanism of the Financial Conduct Authority in accordance
with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’
report provides no assurance over whether the annual financial report
has been prepared using the single electronic format specified in the
ESEF RTS.
Richard McGuire (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
30 April 2024
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AQUILA ENERGY EFFICIENCY TRUST PLC
CONTINUED
66 | © 2023 AEET
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
| For the year ended | For the year ended | ||||||
| 31 December 2023 | 31 December 2022 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Unrealised (loss)/gain on investments | 4 | ( | ( | ||||
Unrealised gain/(loss) on derivatives | ( | ( | |||||
Realised gain on derivatives | |||||||
Net foreign exchange (loss)/gain | ( | ( | |||||
Investment income | 5 | ||||||
Investment advisory fees | 6 | ( | ( | ( | ( | ||
Impairment loss | 4 | ( | ( | ( | ( | ||
Other expenses | 7 | ( | ( | ( | ( | ||
Profit/(loss) on ordinary activities before taxation | ( | ( | |||||
Taxation | 8 | ||||||
Profit/(loss) on ordinary activities after taxation | ( | ( | |||||
Return per Ordinary Share | 9 | ( | ( |
The total column of the Consolidated Statement of Profit or Loss and Comprehensive Income is the profit and loss account of the Group.
All revenue and capital items in the above consolidated statement derive from continuing operations. No operations were discontinued during
the year.
Profit/(loss) on ordinary activities after taxation is also the “Total comprehensive income/(expense) for the year”.
The notes on pages 75 to 98 are an integral part of these financial statements.
© 2023 AEET | 67
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
COMPANY STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
For the year ended
31 December 2023
For the year ended
31 December 2022
Revenue
£'000
Capital
£'000
Total
£'000
Revenue
£'000
Capital
£'000
Total
£'000Notes
Unrealised gain on investments 4 – 961 961 – 2,14 4 2,14 4
Net foreign exchange loss – (37) (37) – (99) (99)
Investment income 5 4,080 – 4,080 697 – 697
Investment advisory fees 6 (808) – (808) (615) – (615)
Other expenses 7 (1,912) – (1,912) (1,375) – (1,375)
Impairment loss (2,041) – (2,041) – – –
(Loss)/profit on ordinary activities before
taxation
(681) 924 243 (1,293) 2,045 752
Taxation 8 – – – – – –
(Loss)/profit on ordinary activities after
taxation
(681) 924 243 (1,293) 2,045 752
Return per Ordinary Share 9 (0.68p) 0.92p 0.24p (1.29p) 2.05p 0.75p
The total column of the Company Statement of Profit or Loss and Comprehensive Income is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during
the year.
Profit/(loss) on ordinary activities after taxation is also the “Total comprehensive income/(expense) for the year”.
The notes on pages 75 to 98 are an integral part of these financial statements.
68 | © 2023 AEET
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
| 2023 | 2022 | ||
Notes | £‘000 | £‘000 | |
| Fixed assets | |||
Investments at fair value through profit or loss | 4 | ||
Investments at amortised cost | 4 | ||
| Current assets | |||
Trade and other receivables | 10 | ||
Derivative financial instrument | 4 | ||
Cash and cash equivalents | |||
Creditors: amounts falling due within one year | 11 | ( | ( |
Derivative financial instrument | ( | ||
Net current assets | |||
Net assets | |||
| Capital and reserves: equity | |||
Share capital | 12 | ||
Special reserve | 13 | ||
Capital reserve | ( | ||
Revenue reserve | ( | ( | |
Shareholders‘ funds | |||
Net assets per Ordinary Share | 14 | ||
No. of Ordinary Shares in issue |
Aquila Energy Efficiency Trust Plc is incorporated in England and Wales with Company number 13324616.
The notes on pages 75 to 98 are an integral part of these financial statements.
© 2023 AEET | 69
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
2023
£‘000
2022
£‘000Notes
Fixed assets
Investment in subsidiaries 4 45,654 31,220
Current assets
Cash and cash equivalents 22,548 32,714
Intercompany receivable 10 – 32,966
Shareholder loan receivable 17 27,293 –
Trade and other receivables 10 255 33
50,096 65,713
Creditors: amounts falling due within one year 11 (874) (1,050)
Net current assets 49,222 64,663
Net assets 94,876 95,883
Capital and reserves: equity
Share capital 12 1,000 1,000
Special reserve 13 93,500 94,750
Capital reserve 2,923 1,999
Revenue reserve (2,547) (1,866)
Shareholders' funds 94,876 95,883
Approved by the Board of Directors and authorised for issue on 30 April 2024.
Signed on behalf of the Board of Directors
Miriam Greenwood OBE DL
Aquila Energy Efficiency Trust Plc is incorporated in England and Wales with Company number 13324616.
The notes on pages 75 to 98 are an integral part of these financial statements.
70 | © 2023 AEET
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
| Share | Special | Capital | Revenue | |||
| capital | reserve | reserve | reserve | Total | ||
| For the year ended 31 December 2023 | Notes | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 |
Opening equity as at 1 January 2023 | ( | |||||
Dividends paid | 15 | ( | ( | |||
(Loss)/profit for the year | ( | |||||
Closing equity as at 31 December 2023 | ( | ( |
| Share | Special | Capital | Revenue | |||
| capital | reserve | reserve | reserve | Total | ||
| For the year ended 31 December 2022 | Notes | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 |
Opening equity as at 1 January 2022 | ( | ( | ||||
Impact of the acquisition of subsidiaries on 1 January 2022 | ( | ( | ||||
Dividends paid | 15 | ( | ( | |||
Profit/(loss) for the year | ( | |||||
Closing equity as at 31 December 2022 | ( |
The notes on pages 75 to 98 are an integral part of these financial statements.
© 2023 AEET | 71
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
For the year ended 31 December 2023
Share
capital
£‘000
Special
reserve
£‘000
Capital
reserve
£‘000
Revenue
reserve
£‘000
Total
£‘000Notes
Opening equity as at 1 January 2023 1,000 94,750 1,999 (1,866) 95,883
Dividends paid 15 – (1,250) – – (1,250)
Profit/(loss) for the year – – 924 (681) 243
Closing equity as at 31 December 2023 1,000 93,500 2,923 (2,547) 94,876
For the year ended 31 December 2022
Share
capital
£‘000
Special
reserve
£‘000
Capital
reserve
£‘000
Revenue
reserve
£‘000
Total
£‘000Notes
Opening equity as at 1 January 2022 1,000 97,000 (46) (573) 97, 381
Dividends paid 15 – (2,250) – – (2,250)
Profit/(loss) for the year – – 2,045 (1,293) 752
Closing equity as at 31 December 2022 1,000 94,750 1,999 (1,866) 95,883
The notes on pages 75 to 98 are an integral part of these financial statements.
72 | © 2023 AEET
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
| For the year | For the year | ||
| ended | ended | ||
| 31December | 31December | ||
| 2023 | 2022 | ||
Notes | £‘000 | £’000 | |
| Operating activities | |||
Profit on ordinary activities before taxation | |||
| Adjustments for: | |||
Unrealised loss/(gain) on investments | 4 | ( | |
Unrealised loss/(gain) on derivative instruments | 4 | ( | |
Realised gains on derivative instruments | ( | ||
Impairment loss | |||
Net foreign exchange loss | |||
(Increase)/decrease in trade and other receivables | ( | ||
Increase in creditors: amounts falling due within one year | |||
Interest receivable from amortised cost investments | ( | ( | |
Net cash flow from/(used in) operating activities | ( | ||
| Investing activities | |||
Purchase of investments | 4 | ( | ( |
Repayment of investments | 4 | ||
Net cash received on acquisition of Attika Holdings Ltd. | |||
Net cash received on acquisition of SPV Project 2013 S.r.l. | |||
Net cash flow used in investing activities | ( | ( | |
| Financing activities | |||
Dividends paid | 15 | ( | ( |
Net cash flow used in financing activities | ( | ( | |
Decrease in cash and cash equivalents | ( | ( | |
Cash and cash equivalents at start of year | |||
Effect of foreign currency exchange translation | ( | ||
Cash and cash equivalents at end of year |
The notes on pages 75 to 98 are an integral part of these financial statements.
© 2023 AEET | 73
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
For the year
ended
31December
2023
£‘000
For the year
ended
31December
2022
£’000Notes
Operating activities
Profit on ordinary activities before taxation 243 752
Adjustments for:
Unrealised gain on investments 4 (961) (2,14 4)
Net foreign exchange loss (17) –
Shareholder loan interest income (1,912) –
Impairment loss 2,041 –
Increase in intercompany receivables (1,901) (27,79 6)
(Increase)/Decrease in trade and other receivables (91) 71
(Decrease)/Increase in creditors (175) 544
Net cash flow used in operating activities* (2,773) (28,573)
Investing activities
Purchase of investments 4 (4,808) (16,592)
Repayment of investments 1,306 –
Net cash flow used in investing activities (3,502) (16,592)
Financing activities
Loan to subsidiary 10 (4,437) –
Shareholder loan interest income received 1,782 –
Dividends paid 15 (1,250) (2,250)
Net cash flow used in financing activities (3,905) (2,250)
Decrease in cash and cash equivalents (10,180) (47,415)
Cash and cash equivalents at start of year 32,714 80,129
Effect of foreign currency exchange translation 14 –
Cash and cash equivalents at end of year 22,548 32,714
*Cash flows from operating activities were presented after the below non-cash
transactions:
Conversion of intercompany receivables to investment in subsidiary 11,791 –
Conversion of intercompany receivable to shareholder loan 23,076 –
34,867 –
The notes on pages 75 to 98 are an integral part of these financial statements.
74 | © 2023 AEET
© 2023 AEET | 75
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
76 | © 2023 AEET
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
2. BASIS OF PREPARATION CONTINUED
© 2023 AEET | 77
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
78 | © 2023 AEET
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
2. BASIS OF PREPARATION CONTINUED
3. MATERIAL ACCOUNTING POLICIES
© 2023 AEET | 79
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
80 | © 2023 AEET
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
3. MATERIAL ACCOUNTING POLICIES CONTINUED
© 2023 AEET | 81
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Optimistic | Base case | Pessimistic | |
| IFRS 9 probability weighting | 25% | 50% | 25% |
82 | © 2023 AEET
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
31 December 2023 | 31 December 2022 | |||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
| Group | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 |
Investments at fair value through profit and loss | – | – | 10,492 | 10,492 | – | – | 11,742 | 11,742 |
| Derivative financial instrument | – | 122 | – | 122 | – | (856) | – | (856) |
– | 122 | 10,492 | 10,614 | – | (856) | 11,742 | 10,886 |
31 December 2023 | 31 December 2022 | |||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
| Company | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 |
Investment in SPV, at fair value through profit or loss | – | – | 35,683 | 35,683 | – | – | 31,220 | 31,220 |
– | – | 35,683 | 35,683 | – | – | 31,220 | 31,220 |
| 31 December | 31 December | |
| 2023 | 2022 | |
| £‘000 | £‘000 | |
Opening balance | 11,742 | – |
Additions during the year | 1,675 | 10,926 |
Disposals during the year | (1,551) | (43) |
Unrealised (loss)/gain on investments | (1,374) | 859 |
Closing balance | 10,492 | 11,742 |
© 2023 AEET | 83
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
| 31 December | 31 December | ||
| 2023 | 2022 | ||
| Company | Company | ||
| £‘000 | £‘000 | ||
Opening balance | 31,220 | 12,307 | |
Additions during the year | 4,808 | 16,769 | |
Repayments during the year | (1,306) | – | |
Unrealised gain on investments | 961 | 2,14 | 4 |
Closing balance | 35,683 | 31,220 |
31 December 2023 | 31 December 2022 | |||
| Fair market | Fair market | |||
| Carrying value | value | Carrying value | value | |
| £‘000 | £‘000 | £‘000 | £‘000 | |
| Assets | ||||
| Investments at amortised cost | 54,990 | 57, 221 | 38,550 | 38,755 |
Total | 54,990 | 57,221 | 38,550 | 38,755 |
84 | © 2023 AEET
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
4. INVESTMENTS CONTINUED
31 December 2023 | 31 December 2022 | |||
| +0.5% | -0.5% | -0.5% | +0.5% | |
| Change | Change | Change | Change | |
| Discount rate | £‘000 | £‘000 | £‘000 | £‘000 |
| Valuation | (242) | 250 | (488) | 512 |
31 December 2023 | 31 December 2022 | |||
| -10.0% | +10.0% | -10.0% | +10.0% | |
| Change | Change | Change | Change | |
| Power price | £‘000 | £‘000 | £‘000 | £‘000 |
| Valuation | (64) | 66 | (542) | 547 |
31 December 2023 | 31 December 2022 | |||
| -10.0% | +10.0% | -10.0% | +10.0% | |
| Change | Change | Change | Change | |
| Energy yield | £‘000 | £‘000 | £‘000 | £‘000 |
| Valuation | (555) | 533 | (1,570) | 1,866 |
© 2023 AEET | 85
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
31 December 2023 | 31 December 2022 | ||||||
| Gross | Net | Gross | Net | ||||
| carrying | Allowance | carrying | carrying | Allowance | carrying | ||
| amount | for ECL | amount | amount | for ECL | amount | ||
| Group | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | |
| Fixed value investments at amortised cost | |||||||
| Stage 1 | 54,399 | (259) | 54,14 | 0 | 37,735 | (77) | 37,658 |
| Stage 2 | 156 | (24) | 132 | 951 | (59) | 892 | |
| Stage 3 | 2,306 | (1,588) | 718 | – | – | – | |
| Total assets | 56,861 | (1,871) | 54,990 | 38,686 | (136) | 38,550 |
| 2023 | 2022 | |
| Group | £‘000 | £‘000 |
At 1 January | 136 | – |
Charge for the year – Stage 1 | 182 | 77 |
Charge for the year – Stage 2 | (35) | 59 |
Charge for the year – Stage 3 | 1,588 | – |
Allowance for ECL at 31 December | 1,871 | 136 |
86 | © 2023 AEET
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
4. INVESTMENTS CONTINUED
| 2023 | 2022 | |
| Company | £‘000 | £‘000 |
Investment in SPV, at fair value through profit or loss | 35,683 | 31,220 |
Investment in AHL, held at cost less impairment | 9,971 | –* |
Investment in subsidiaries | 45,654 | 31,220 |
© 2023 AEET | 87
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
| 2023 | 2022 | |
| Gross carrying amount | £‘000 | £‘000 |
Balance 1 January | – | – |
Additions during the year | 11,791 | –* |
Balance 31 December | 11,791 | –* |
| Accumulated impairment | ||
Balance 1 January | – | – |
Impairment loss recognised | (1,820) | – |
Balance 31 December | (1,820) | – |
Carrying amount at 31 December | 9,971 | –* |
| For the year | For the year | |
| ended | ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| Group | £‘000 | £‘000 |
Investment interest income | 5,027 | 1,646 |
Bank interest income | 921 | 551 |
Total investment income | 5,948 | 2,197 |
| For the year | For the year | |
| ended | ended | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| Company | £‘000 | £‘000 |
Investment interest income | 3,426 | 235 |
Bank interest income | 654 | 462 |
Total investment income | 4,080 | 697 |
6. INVESTMENT ADVISORY FEES
| For the year ended | For the year ended | |||||
| 31 December 2023 | 31 December 2022 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Group | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 |
| Investment advisory fees | 808 | – | 808 | 615 | – | 615 |
| For the year ended | For the year ended | |||||
| 31 December 2023 | 31 December 2022 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Company | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 |
| Investment advisory fees | 808 | – | 808 | 615 | – | 615 |
Under the Investment Advisory Agreement, the following fee is payable to the Investment Adviser:
(i) 0.95 per cent. per annum of committed capital of the Company up to and including £500 million; and
(ii) 0.75 per cent. per annum of committed capital of the Company above £500 million.
88 | © 2023 AEET
| For the year ended | For the year ended | ||||||
| 31 December 2023 | 31 December 2022 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Group | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | |
| Secretary and administrator fees | 281 | – | 281 | 319 | – | 319 | |
| Tax compliance | 62 | – | 62 | 37 | – | 37 | |
| Directors' fees | 281 | – | 281 | 143 | – | 143 | |
| Broker’s fees | 182 | – | 182 | 61 | – | 61 | |
| Auditors’ fees* | |||||||
- | Fees payable to the Company‘s auditors for | ||||||
the audit of the Company‘s annual accounts | 590 | – | 590 | 211 | – | 211 | |
- | Fees payable to the Company‘s auditors | ||||||
| and its associates for other services: | |||||||
Audit of the accounts of subsidiaries | 26 | – | 26 | 16 | – | 16 | |
| AIFM fees | 91 | – | 91 | 98 | – | 98 | |
| Registrar's fees | 23 | – | 23 | 16 | – | 16 | |
| Marketing fees | 104 | – | 104 | 107 | – | 107 | |
| FCA and listing fees | 26 | – | 26 | 17 | – | 17 | |
| Investment expenses | 332 | – | 332 | 222 | – | 222 | |
| Legal fees | 235 | – | 235 | 365 | – | 365 | |
| Other expenses | 259 | – | 259 | 174 | – | 174 | |
| Total other expenses | 2,492 | – | 2,492 | 1,786 | – | 1,786 |
| For the year ended | For the year ended | ||||||
| 31 December 2023 | 31 December 2022 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Company | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | |
| Secretary and administrator fees | 199 | – | 199 | 233 | – | 233 | |
| Tax compliance | 41 | – | 41 | 37 | – | 37 | |
| Directors' fees | 203 | – | 203 | 108 | – | 108 | |
| Broker’s fees | 182 | – | 182 | 61 | – | 61 | |
| Auditors‘ fees* | |||||||
- | Fees payable to the Company‘s auditors for | ||||||
the audit of the Company‘s annual accounts | 590 | – | 590 | 211 | – | 211 | |
- | Fees payable to the Company‘s auditors | ||||||
| and its associates for other services: | |||||||
audit of the accounts of subsidiaries | 26 | – | 26 | 16 | – | 16 | |
| AIFM fees | 91 | – | 91 | 98 | – | 98 | |
| Registrar's fees | 23 | – | 23 | 16 | – | 16 | |
| Marketing fees | 104 | – | 104 | 107 | – | 107 | |
| FCA and listing fees | 26 | – | 26 | 17 | – | 17 | |
| Legal fees | 235 | – | 235 | 351 | – | 351 | |
| Other expenses | 192 | – | 192 | 120 | – | 120 | |
| Total other expenses | 1,912 | – | 1,912 | 1,375 | – | 1,375 |
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
© 2023 AEET | 89
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
8. TAXATION
(a) Analysis of charge in the year
| For the year ended | For the year ended | |||||
| 31 December 2023 | 31 December 2022 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Group | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 |
| Corporation tax | – | – | – | – | – | – |
| Taxation | – | – | – | – | – | – |
| For the year ended | For the year ended | |||||
| 31 December 2023 | 31 December 2022 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Company | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 |
| Corporation tax | – | – | – | – | – | – |
| Taxation | – | – | – | – | – | – |
(b) Factors affecting total tax charge for the year
The effective UK corporation tax rate applicable to the Group for the year is 23.5% (2022: 19%). The tax charge differs from the charge
resulting from applying the standard rate of UK corporation tax for an investment trust company.
The differences are explained below:
For the year ended 31 December 2023 | For the year ended 31 December 2022 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Group | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 |
Profit/(loss) on ordinary activities before taxation | 913 | (609) | 304 | (340) | 477 | 137 |
| Corporation tax at 23.5% (2022: 19%) | 215 | (143) | 72 | (65) | 91 | 26 |
| Effects of: | ||||||
| Utilisation of carried forward tax losses/ | ||||||
management expenses | (320) | (35) | (355) | 65 | – | 65 |
| Movement on investments not taxable | (310) | 178 | (132) | – | – | – |
| Loss not recognised | 415 | – | 415 | – | (91) | (91) |
| Total tax charge for the year | – | – | – | – | – | – |
For the year ended 31 December 2023 | For the year ended 31 December 2022 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Company | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 | £‘000 |
(Loss)/Profit on ordinary activities before taxation | (681) | 924 | 243 | (1,293) | 2,045 | 752 |
| Corporation tax at 23.5% (2022: 19%) | (160) | 217 | 57 | (246) | 389 | 143 |
| Effects of: | ||||||
| Utilisation of carried forward tax losses/ | ||||||
management expenses | (320) | – | (320) | 246 | – | 246 |
| Non-deductible impairment | 480 | – | 480 | – | – | – |
| Gain on investments not taxable | – | (217) | (217) | – | (389) | (389) |
| Total tax charge for the year | – | – | – | – | – | – |
90 | © 2023 AEET
8. TAXATION CONTINUED
Investment companies which have been approved by HM Revenue & Customs under section 1158 of the Corporation Tax Act 2010 are exempt
from tax on capital gains. Due to the Company’s status as an investment trust, and the intention to continue meeting the conditions required
to obtain approval in the foreseeable future, the Company has not provided for deferred tax on any capital gains or losses arising on the
revaluation of investments.
The Company has not recognised a deferred tax asset of £89,000 (2022: £429,000) on trading losses of £369,000 (2022: £429,000) in the
UK. The asset has not been recognised as it is considered unlikely that the Company will generate sufficient future profits against which to
utilise the assets. There is no time limit for expiry of the losses. On 3 March 2021, the UK Government announced its intention to increase the
rate of UK corporation tax rate from 19% to 25% with effect from 1 April 2023. The increase to 25% was substantively enacted on 24 May
2021 and, accordingly, the unrecognised deferred tax asset has been measured using the 25% tax rate.
9. RETURN PER ORDINARY SHARE
Group
Return per share is based on the consolidated profit for the year of £304,000 (2022: £137,000) attributable to the weighted average number
of Ordinary Shares in issue of 100,000,000 in the year to 31 December 2023 (2022: Ordinary Shares in issue 100,000,000). Consolidated
revenue profit and capital loss are £913,000 (2022: Consolidated revenue loss of £340,000) and £609,000 (2022: Consolidated capital gains
of £477,000) respectively.
Company
Return per share is based on the profit for the year of £243,000 attributable to the weighted average number of Ordinary Shares in issue of
100,000,000 in the year to 31 December 2023 (2022: Company gain of £752,000; weighted average number of Ordinary Shares in issue
100,000,000). Company revenue loss and capital gain are £681,000 (2022: Company revenue loss of £1,293,000) and £924,000 (2022: Company
capital gain of £2,045,000) respectively.
As at 31 December 2023 | As at 31 December 2022 | |||
| Company | Group | Company | Group | |
| £‘000 | £‘000 | £‘000 | £‘000 | |
| Intercompany receivable | – | – | 32,966 | – |
| Shareholder loan receivable | 27,293 | – | – | – |
| Unsettled trades | – | 272 | – | – |
| Trade and other receivables | 255 | 380 | 33 | 70 |
| Total | 27,548 | 652 | 32,999 | 70 |
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
© 2023 AEET | 91
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
As at 31 December 2023 | As at 31 December 2022 | |||
| Company | Group | Company | Group | |
| £‘000 | £‘000 | £‘000 | £‘000 | |
| Accrued expenses | 874 | 1,016 | 867 | 892 |
| Unsettled payment of notes purchased | – | – | 177 | – |
| Unsettled trades | – | 41 | – | – |
| Other creditors | – | – | 6 | 12 |
| Total | 874 | 1,057 | 1,050 | 904 |
As at 31 December 2023 | As at 31 December 2022 | |||
No. of shares | £‘000 | No. of shares | £‘000 | |
| Allotted, issued and fully paid: | ||||
| Ordinary Shares of 1p each (“Ordinary Shares“) | 100,000,000 | 1,000 | 100,000,000 | 1,000 |
| Total | 100,000,000 | 1,000 | 100,000,000 | 1,000 |
| Shares in issue at | Shares in issue | ||
| the beginning | Shares | at the end of | |
| For the year ended 31 December 2023 | of the year | subscribed | the year |
Management Shares | – | – | – |
Ordinary Shares | 100,000,000 | – | 100,000,000 |
| Shares in issue at | Shares in issue | ||
| the beginning of | Shares | at the end of | |
| For the year ended 31 December 2022 | the year | subscribed | the year |
Management Shares | – | – | – |
Ordinary Shares | 100,000,000 | – | 100,000,000 |
92 | © 2023 AEET
14. NET ASSETS PER ORDINARY SHARE
The Group’s net assets per Ordinary Share as at 31 December 2023 is based on £94,281,000 (2022: £95,227,000) of net assets of the Group
attributable to the 100,000,000 Ordinary Shares in issue as at 31 December 2023 (2022: 100,000,000).
The Company’s net assets per Ordinary Share as at 31 December 2023 is based on £94,876,000 (2022: £95,883,000) of net assets of the
Company attributable to the 100,000,000 Ordinary Shares in issue as at 31 December 2023 (2022: 100,000,000).
15. DIVIDEND
The Company has paid the following interim dividends in respect of the year under review:
| For the year ended | For the year ended | |||
| 31 December 2023 | 31 December 2022 | |||
| Pence per | Total | Pence per | Total | |
| Total dividends paid in the year | Ordinary Share | £‘000 | Ordinary Share | £‘000 |
| 30 June 2022 interim – Paid 31 October 2022 | N/A | N/A | 1.00p | 1,000 |
| 30 September 2022 interim – Paid 9 December 2022 | N/A | N/A | 1.25p | 1,250 |
| 31 December 2022 interim – Paid 20 March 2023 | 1.25p | 1,250 | N/A | N/A |
Total | 1.25p | 1,250 | 2.25p | 2,250 |
The dividend relating to the year ended 31 December 2023, which is the basis on which the requirements of section 1159 of the Corporation
Tax Act 2010 are considered, is detailed below:
| For the year ended | For the year ended | |||
| 31 December 2023 | 31 December 2022 | |||
| Pence per | Total | Pence per | Total | |
| Total dividends declared in the year | Ordinary Share | £‘000 | Ordinary Share | £‘000 |
| 30 June 2022 interim – Paid 31 October 2022 | – | – | 1.00p | 1,000 |
| 30 September 2022 interim – Paid 9 December 2022 | – | – | 1.25p | 1,250 |
| 31 December 2022 interim – Paid 20 March 2023 | – | – | 1.25p | 1,250 |
Total | – | – | 3.50p | 3,500 |
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
© 2023 AEET | 93
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
31 December 2023 | 31 December 2022 | |||||
| GBP | EUR | Total | GBP | EUR | Total | |
| Assets | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
| Cash and cash equivalents | 23,547 | 5,535 | 29,082 | 37,444 | 9,181 | 46,625 |
| Trade and other receivables | 159 | 493 | 652 | 33 | 37 | 70 |
| Derivative financial | 122 | – | 122 | – | – | – |
| instruments | ||||||
| Investments | 3,566 | 61,916 | 65,482 | 4,306 | 45,986 | 50,292 |
Total assets | 27, 394 | 67,944 | 95,338 | 41,783 | 55,204 | 96,987 |
| Liabilities | ||||||
| Creditors | (901) | (156) | (1,057) | (900) | (4) | (904) |
| Derivative financial | – | – | – | (856) | – | (856) |
| instruments | ||||||
Total liabilities | (901) | (156) | (1,057) | (1,756) | (4) | (1,760) |
31 December 2023 | 31 December 2022 | |||||
| GBP | EUR | Total | GBP | EUR | Total | |
| Assets | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
| Cash and cash equivalents | 19,884 | 2,664 | 22,548 | 32,169 | 545 | 32,714 |
Intercompany balance with Attika Holdings | – | – | – | 16,371 | 16,595 | 32,966 |
| Shareholder loan receivable | 27,293 | – | 27,293 | |||
| Trade and other receivables | 255 | – | 255 | 33 | – | 33 |
| Investments | 9,971 | 35,683 | 45,654 | – | 31,220 | 31,220 |
Total assets | 57,403 | 38,347 | 95,750 | 48,573 | 48,360 | 96,933 |
| Liabilities | ||||||
| Creditors | (874) | – | (874) | (1,050) | – | (1,050) |
Total liabilities | (874) | – | (874) | (1,050) | – | (1,050) |
94 | © 2023 AEET
16. FINANCIAL RISK MANAGEMENT CONTINUED
31 December 2023 | 31 December 2022 | |||||
| Interest | Non-interest | Interest | Non-interest | |||
| bearing | bearing | Total | bearing | bearing | Total | |
| Assets | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
| Cash and cash equivalents | 27,817 | 1,265 | 29,082 | 44,854 | 1,771 | 46,625 |
| Trade and other receivables | – | 652 | 652 | – | 70 | 70 |
| Derivative financial | – | 122 | 122 | – | – | – |
| instruments | ||||||
| Investments | 54,990 | 10,492 | 65,482 | 38,550 | 11,742 | 50,292 |
Total assets | 82,807 | 12,531 | 95,338 | 83,404 | 13,583 | 96,987 |
| Liabilities | ||||||
| Creditors | – | (1,057) | (1,057) | – | (904) | (904) |
| Derivative financial | – | – | – | – | (856) | (856) |
| instruments | ||||||
Total liabilities | – | (1,057) | (1,057) | – | (1,760) | (1,760) |
31 December 2023 | 31 December 2022 | |||||
| Interest | Non-interest | Interest | Non-interest | |||
| bearing | bearing | Total | bearing | bearing | Total | |
| Assets | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
| Cash and cash equivalents | 21,606 | 942 | 22,548 | 31,174 | 1,540 | 32,714 |
| Trade and other receivables | – | 255 | 255 | – | 33 | 33 |
| Intercompany receivable | – | – | – | – | 32,966 | 32,966 |
| Shareholder loan receivable | 27,293 | – | 27,293 | – | – | – |
| Investments | 35,683 | 9,971 | 45,654 | 31,220 | – | 31,220 |
Total assets | 84,582 | 11,168 | 95,750 | 62,394 | 34,539 | 96,933 |
| Liabilities | ||||||
| Creditors | – | (874) | (874) | – | (1,050) | (1,050) |
Total liabilities | – | (874) | (874) | – | (1,050) | (1,050) |
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
© 2023 AEET | 95
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
As at 31 December 2023 | As at 31 December 2022 | ||||
| Company | Group | Company | Group | ||
| Rating | £’000 | £’000 | £’000 | £’000 | |
| Goldman Sachs – Liquid reserve fund | AAA (Fitch Rating) | 6,632 | 6,632 | 7,752 | 7,752 |
| EFG Deposit account | A (Fitch Rating) | 15,858 | 19,248 | 23,904 | 23,957 |
| Royal Bank of Scotland International | A–1/A (S&P Rating) | 58 | 2,998 | 1,058 | 6,314 |
| Bank of New York Mellon | AA (Fitch Rating) | – | 204 | – | 8,602 |
22,548 | 29,082 | 32,714 | 46,625 |
| As at | As at | |
| 31 December | 31 December | |
| Group | 2023 | 2022 |
A | 5,871 | 4,138 |
B | 31,890 | 23,895 |
C | 16,509 | 10,517 |
D | 720 | – |
54,990 | 38,550 |
96 | © 2023 AEET
16. FINANCIAL RISK MANAGEMENT CONTINUED
| Corresponding | |
| Credit risk band | S&P rating range |
A | AAA to A- |
B | BBB+ to BBB- |
C BB to CC- D Default |
31 December 2023 | 31 December 2022 | |||||||
| Less than | Less than | |||||||
| 1 year | 1-2 years | 2-5 years | Total | 1 year | 1-2 years | 2-5 years | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Liabilities | ||||||||
| Creditors | (1,057) | – | – | (1,057) | (904) | – | – | (904) |
| Derivative financial | – | – | – | – | (856) | – | – | (856) |
| instruments | (1,057) | – | – | (1,057) | (1,760) | – | – | (1,760) |
31 December 2023 | 31 December 2022 | |||||||
| Less than | Less than | |||||||
| 1 year | 1-2 years | 2-5 years | Total | 1 year | 1-2 years | 2-5 years | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Liabilities | ||||||||
| Creditors | (874) | – | – | (874) | (1,050) | – | – | (1,050) |
(874) | – | – | (874) | (1,050) | – | – | (1,050) |
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
© 2023 AEET | 97
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
| Fees for the | Fees for the | ||
| year ended | year ended | ||
| Date of | 31 December | 31 December | |
| appointment to | 2023 | 2022 | |
| the Board | (£) | (£) | |
| Miriam Greenwood | 19 April 2021 | 92,852 | 57,585 |
| Nicholas Bliss | 9 April 2021 | 59,794 | 42,226 |
| Lisa Arnold | 9 April 2021 | n/a | 3,231 |
| Laura Sandys | 9 April 2021 | n/a | 3,231 |
| David Fletcher | 29 April 2022 | 71,861 | 30,557 |
| Janine Freeman | 2 November 2022 | 56,512 | 6,642 |
Total | 281,019 | 143,472 |
As at 31 December 2023 | As at 31 December 2022 | |||||
| Connected | Connected | |||||
| Shares | person | Total | Shares | person | Total | |
| Miriam Greenwood | 24,000 | – | 24,000 | 24,000 | – | 24,000 |
| David Fletcher | 42,425 | 14,181 | 56,606 | 41,785 | 13,951 | 55,736 |
| Nicholas Bliss | 20,000 | – | 20,000 | 20,000 | – | 20,000 |
| Janine Freeman | – | – | – | – | – | – |
Subsidiary entity name and registered address | Effective ownership | Investment | Country of incorporation |
| Attika Holdings Limited | 100% | HoldCo subsidiary entity, | United Kingdom |
| Leaf B, 20th Floor, Tower 42, Old Broad Street, | owns underlying | ||
| London, England, EC2N 1HQ | investments | ||
| SPV Project 2013 S.r.l. | 100% of the notes of one | Special purpose entity, | Italy |
| Via Vittorio Betteloni, 2 20131, Milan, Italy | compartment | owns underlying | |
| investments |
98 | © 2023 AEET
17. RELATED PARTY TRANSACTIONS CONTINUED
19. SUBSEQUENT EVENTS
On 19 April 2024, the Company published a circular in respect of proposals that up to 18,561,732 Ordinary Shares may be purchased under
the Tender Offer for a maximum aggregate cash consideration of £17.5 million at a fixed price of 94.28 pence per Ordinary Share. The Company
is convening a General Meeting for 11.30 a.m. on 13 May 2024 to consider and, if thought fit, pass the Tender Offer Resolution to authorise
and to approve the terms under which the Tender Offer will be effected.
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
© 2023 AEET | 99
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
OTHER INFORMATION (UNAUDITED)
In reporting financial information, the Company presents alternative performance measures (“APMs”) which are not defined or specified under the
requirements of IFRS. The Company believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance of the Company. There have been no changes in these APMs from the prior
year. The APMs presented in this report are shown below:
(Discount)/premium
The amount, expressed as a percentage, by which the share price is more than the Net Asset Value per Ordinary Share.
Page
As at
31 December
2023
As at
31 December
2022
NAV per Ordinary Share (pence) a
3 94.28 95.23
Share price (pence)
b
3 57.25 71.00
Discount (b÷a) -1 (39.3%) (25.4%)
Ongoing charges
A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company. The
average net assets has been computed as the average of the published NAV for 31 December 2022, 30 June 2023 and 31 December 2023.
Page
As at
31 December
2023
As at
31 December
2022
Average NAV a
n/a 94,349 96,835
Annualised expenses
b
n/a 3,300 2,537
1
Ongoing charges (b÷a) 3.5% 2.6%
1
Figure includes investment advisory fees and other expenses as disclosed in the Consolidated Statement of Profit or Loss and Comprehensive
Income.
ALTERNATIVE PERFORMANCE MEASURES OF THE GROUP
100 | © 2023 AEET
Total return
A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends
paid out by the Company into the Ordinary Shares of the Company on the ex- dividend date.
31 December 2023 Page Share price NAV
Opening at 1 January 2023 (pence) a
n/a 71.00 95.23
Dividend adjustment b
1.25 1.25
Closing at 31 December 2023 (pence)
c
3
57.25
94.28
Total return ((c+b)÷a)-1 (17.6%) 0.3%
31 December 2022 Page Share price NAV
Opening at 1 January 2022 (pence) a
n/a 95.75 97.38
Dividend adjustment b
2.25 2.25
Closing at 31 December 2022 (pence)
c
3
71.00
95.23
Total return ((c+b)÷a)-1 (25.8%) (2.2%)
n/a = not applicable
ALTERNATIVE PERFORMANCE MEASURES OF THE GROUP
CONTINUED
© 2023 AEET | 101
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
AIC
Association of Investment Companies.
Alternative Investment Fund or “AIF”
An investment vehicle under AIFMD. Under AIFMD (see below) Aquila
Energy Efficiency Trust Plc is classified as an AIF.
Alternative Investment Fund Managers Directive or “AIFMD”
A European Union directive which came into force on 22 July 2013 and
has been implemented in the UK.
Annual General Meeting or “AGM”
A meeting held once a year which Shareholders can attend and where
they can vote on resolutions to be put forward at the meeting and ask
directors questions about the company in which they are invested.
the Company
Aquila Energy Efficiency Trust Plc.
Discount
The amount, expressed as a percentage, by which the share price is less
than the Net Asset Value per share.
Dividend
Income receivable from an investment in shares.
Ex-dividend date
The date from which you are not entitled to receive a dividend which
has been declared and is due to be paid to Shareholders.
ESCO
Energy Service Company.
EU
European Union.
Financial Conduct Authority or “FCA”
The independent body that regulates the financial services industry in
the UK.
General Meeting or ‘‘GM’’
A meeting which Shareholders can attend and where they can vote on
resolutions to be put forward at the meeting and ask directors questions
about the company in which they are invested.
Gross Asset Value
The sum of the value of the assets a company owns.
the Group
Aquila Energy Efficiency Trust Plc and its subsidiaries, Attika Holdings
Limited and SPV Project 2013 S.r.l.
GWh
Gigawatt hour.
The HoldCo
Attika Holdings Limited (“AHL” or “Attika”).
Investment company
A company formed to invest in a diversified portfolio of assets.
Investment Trust
An investment company which is based in the UK and which meets
certain tax conditions which enables it to be exempt from UK corporation
tax on its capital gains. The Company is an investment trust.
IPO
Initial Public Offering.
Leverage
An alternative word for “Gearing”.
Under AIFMD, leverage is any method by which the exposure of an AIF
is increased through borrowing of cash or securities or leverage embedded
in derivative positions.
Under AIFMD, leverage is broadly similar to gearing, but is expressed
as a ratio between the assets (excluding borrowings) and the net assets
(after taking account of borrowing). Under the gross method, exposure
represents the sum of a company’s positions after deduction of cash
balances, without taking account of any hedging or netting arrangements.
Under the commitment method, exposure is calculated without the
deduction of cash balances and after certain hedging and netting
positions are offset against each other.
Liquidity
The extent to which investments can be sold at short notice.
Net assets or Net Asset Value (‘‘NAV“)
An investment company’s assets less its liabilities.
NAV per Ordinary Share
Net assets divided by the number of Ordinary Shares in issue (excluding
any shares held in treasury).
GLOSSARY
102 | © 2023 AEET
Ongoing charges
A measure of the regular, recurring annual costs of running an investment
company, expressed as a percentage of average net assets.
Ordinary Shares
The Company’s ordinary shares in issue.
Portfolio
A collection of different investments held in order to deliver returns to
Shareholders and to spread risk.
Premium
The amount, expressed as a percentage, by which the share price is
more than the Net Asset Value per share.
Share buyback
A purchase of a company’s own shares. Shares can either be bought
back for cancellation or held in treasury.
Share price
The price of a share as determined by a relevant stock market.
Total return
A measure of performance that takes into account both income and
capital returns. This may take into account capital gains, dividends,
interests and other realised variables over a given period of time.
GLOSSARY
CONTINUED
© 2021 AERIF | 103
Contents
Your Company at a Glance ...........................3
Highlights.........................................3
STRATEGIC REPORT
Chair’s Statement ..................................4
Investment Adviser’s Report .........................6
Environmental, Social and Governance ................19
Investment Policy .................................22
Key Performance Indicators .........................24
Risk Management .................................25
Section 172 Report ................................30
Other Information .................................33
GOVERNANCE
Directors’ Report .................................35
Corporate Governance Statement . . . . . . . . . . . . . . . . . . . . 41
Directors’ Remuneration Report .....................50
Report of the Audit and Risk Committee ...............54
Statement of Directors’ Responsibilities ...............58
FINANCIAL STATEMENTS
Independent Auditors‘ Report .......................59
Consolidated Statement of Profit or Loss and
Comprehensive Income ............................67
Company Statement of Profit or Loss and
Comprehensive Income ............................68
Consolidated Statement of Financial Position ...........69
Company Statement of Financial Position ..............70
Consolidated Statement of Changes in Equity ..........71
Company Statement of Changes in Equity ..............72
Consolidated Statement of Cash Flows ................73
Company Statement of Cash Flows ...................74
Notes to the Financial Statements ....................75
OTHER INFORMATION
Alternative Performance Measures ...................99
Glossary .......................................101
Company Information .............................103
For more information please visit our website
www.aquila-energy-efficiency-trust.com
INVESTING WITH IMPACT
ANNUAL REPORT 2023
Directors (all non-executive)
Miriam Greenwood OBE DL (Chair)
Nicholas Bliss
David Fletcher
Janine Freeman
Registered office
(Registered in England and Wales with
Company number 13324616)
6th Floor
125 London Wall
London
England
EC2Y 5AS
AIFM
FundRock Management Company (Guernsey) Limited
Sarnia House
Le Truchot
St Peter Port
Guernsey
GY1 1GR
Investment Adviser
Aquila Capital Investmentgesellschaft mbH
Valentinskamp 70
D-20335
Hamburg
Germany
Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Administrator and Company Secretary
Apex Listed Companies Services (UK) Limited
6th Floor, 125 London Wall
London
England
EC2Y 5AS
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6AH
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
COMPANY INFORMATION
AQUILA ENERGY EFFICIENCY TRUST PLC
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
© 2021 AERIF | A
INVESTING WITH IMPACT
AQUILA ENERGY EFFICIENCY TRUST PLC
ANNUAL REPORT 2023
For more information please contact:
Aquila Group
Valentinskamp 70
20355 Hamburg
Germany
Tel.: +49 (0)40 87 50 50-100
Email: info@aquila-capital.com
Web: www.aquila-capital.com
Follow us on
Hamburg · Frankfurt · London · Luxembourg · Madrid · Oslo · Zurich · Invercargill · Singapore · Tokyo
Important Notice: This document serves informational purposes only. It constitutes neither investment advice, an investment service nor the
invitation to make offers or any declaration of intent; the contents of this document also do not constitute a recommendation for any other
actions. The validity of the provided information is limited to the date of preparation of this document and may change at any time for various
reasons, especially market development. The sources of information are considered reliable and accurate, however we do not guarantee the
validity and the actuality of the provided information and disclaim all liability for any damages that may arise from the use of the information.
Historical information cannot be understood as a guarantee for future earnings. Predictions concerning future developments only represent
forecasts. Statements to future economic growth depend on historical data and objective methods of calculation and must be interpreted as
forecasts. No assurances or warranties are given, that any indicative performance or return will be achieved in the future. The terms Aquila
and Aquila Capital comprise companies for alternative and real asset investments as well as sales, fund-management and service companies
of Aquila Group (“Aquila Group” meaning Aquila Capital Holding GmbH and its affiliates in the sense of sec. 15 et seq. of the German Stock
Corporation Act (AktG)). The respective responsible legal entities of Aquila Group that offer products or services to (potential) investors/
customers are named in the corresponding agreements, sales documents or other product information.
A publication of Aquila Capital Investmentgesellschaft mbH. As at 30.04.2024
Read more about our
commitment to sustainability
www.aquila-capital.de/esg/
AEET | ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2023