Aquila European Renewables Plc Registered · LSE:AERI
Aquila European Renewables Plc Registered — Aquila European Renewables — H1 2023 Earnings Presentation
54 slides from Aquila European Renewables Plc Registered's earnings presentation, Sep 27, 2023
Slide 1: Aquila European Renewables Plc 1H23 Results
27 September 2023 AQUILA EUROPEAN RENEWABLES PLC 1H23 Results © 2023 Aquila Capital The Rock, Norway
Slide 2: Table of Contents
TABLE OF CONTENTS 1. Introduction 2. Portfolio 3. Financial and Operating Performance 4. Valuation and Power Prices 5. Capital Allocation and Conclusion 6. Appendix © 2023 Aquila Capital 2
Slide 3: Overview of Aquila European Renewables Plc ("AER")
OVERVIEW OF AQUILA EUROPEAN RENEWABLES PLC (“AER”) 464 MW Operating Portfolio European Focused, Presence in 6 Countries Key Metrics 4.4% Market capitalisation1 EUR 318.5 million Net Asset Value (“NAV”) EUR 403.3 million 43.3% Discount to NAV2 (18.7%) 52.2% Dividend yield3 6.6% Annualised total NAV r
Slide 4: Why Invest?
WHY INVEST? Market Opportunity AER Positioning Returns − Participation in Europe’s green energy transition − European focused (excl. UK), diversified by − Portfolio levered discount rate of 7.7%2 with geography and technology modest gearing − Participation in Europe’s green energy transition − Highl
Slide 5: 1H23 Highlights
1H23 HIGHLIGHTS KPIs (EUR cents, unless stated otherwise) 1H23 1H22 Dividend per share1 2.8 2.6 NAV per share 104.1 105.5 Total NAV return per share (%)2 (3.5%) 5.3% − EUR 12.8 million of total underlying earnings in 1H23 − Dividend cover of 1.2x in 1H23 (1.7x before debt amortisation). 1.5x expecte
Slide 6: Track Record Since IPO
TRACK RECORD SINCE IPO 23.7% total NAV return per share since IPO (5.4% annualised)1 Total NAV Return (cents per share) Dividends (cents per share)2 5.3 5.5 NAV per share Cumulative dividends paid 5.0 125.1 121.2 4.0 +EUR 20 million 103.5 111.8 shares 104.2 repurchased 1.5 2.8 2019 2020 2021 2022 1H
Slide 7: Environmental, Social and Governance Highlights
ENVIRONMENTAL, SOCIAL AND GOVERNANCE HIGHLIGHTS Households supplied with green Tonnes of CO2 emissions energy avoided annually 1H23 1H22 1H23 1H22 AER1 133.9k 83.4k 134.8k 87.9k Aquila Capital 2,036k2 1,660k3 2,232k2 1,850k3 − Appointment of Myrtle Dawes to the Board, 30 years of experience in the e
Slide 8: Table of Contents
TABLE OF CONTENTS 1. Introduction 2. Portfolio 3. Financial and Operating Performance 4. Valuation and Power Prices 5. Capital Allocation and Conclusion 6. Appendix © 2023 Aquila Capital 8
Slide 9: Portfolio Snapshot
PORTFOLIO SNAPSHOT Olhava Key Statistics (30 June 2023)1 The Rock 464 MW 12 Total capacity Investments Wind energy Solar PV Tesla 6 ~32 Countries and Power Remaining asset life Hydropower Markets (years)2 Holmen II Svindbaek I+II 51% 33% Contracted revenue3 Leverage4 Portfolio Allocation by Technolo
Slide 10: Construction Projects Driving Portfolio Growth and Value Creation
CONSTRUCTION PROJECTS DRIVING PORTFOLIO GROWTH AND VALUE CREATION Total Generating Capacity – AER Share (MW) 100% Operational portfolio 464 414 50 205 MW 155 Construction projects completed since IPO 229 198 414 EUR 17.1 million 133 Value creation from construction 259 projects since IPO1 30% 2019 2
Slide 11: Attractive Contracted Revenue Base
ATTRACTIVE CONTRACTED REVENUE BASE Present Value of Contracted vs. Non-Contracted Revenue Revenue Mix (5 Years)1 100% 90% Aquila will proactively seek to replace expired PPA / tariff contracts over time in order to maintain a high degree of contracted revenues 25.5% 80% 49.5% 70% 60% 50% 40% Market
Slide 12: Diversified Contracted Revenue Structure
DIVERSIFIED CONTRACTED REVENUE STRUCTURE − Contracts diversified by type and counterparty to minimise risks, whilst Baseload PPA Pay-as-Produced PPA also offering flexibility (8%) (35%) − Danish and Finnish regulated tariff schemes (9% of revenue1) provide an attractive price floor of ~EUR 34 – 54 /
Slide 13: Active Management Delivering Value
ACTIVE MANAGEMENT DELIVERING VALUE Initiatives Commentary Impact − Asset life extensions of up to 10 years completed for ~57% of the portfolio following completion of due diligence 1 +3.2 cents per share − Final construction project completed (Guillena, 50 MW) Contributing to income since April 2023
Slide 14: Table of Contents
TABLE OF CONTENTS 1. Introduction 2. Portfolio 3. Financial and Operating Performance 4. Valuation and Power Prices 5. Capital Allocation and Conclusion 6. Appendix © 2023 Aquila Capital 14
Slide 15: Balanced Technology Mix Has Reduced Volatility
BALANCED TECHNOLOGY MIX HAS REDUCED VOLATILITY Expected Monthly Distribution of Production (%) 1H23 Actual Monthly Production (GWh) 100.0 14.0% 90.0 12.0% 80.0 10.0% 70.0 60.0 8.0% 50.0 6.0% 40.0 4.0% 30.0 20.0 2.0% 10.0 0.0% 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Ju
Slide 16: Production
PRODUCTION Technology Electricity Production (AER Share, GWh) Load Factors (%) Technical Availability (%)1 1H23 1H22 Variance (%) 1H23 1H22 1H23 1H22 Wind 260.5 216.0 20.6% 27.0% 32.3% 94.0% 96.8% Solar PV 195.1 70.2 177.8% 21.4% 13.7% 99.7% 99.6% Hydropower 33.2 17.2 93.4% 39.5% 21.4% 98.8% 99.1% T
Slide 17: Power Prices and Revenue
POWER PRICES AND REVENUE Technology Country Average Realised Price (EUR / MWh)1 Total Revenue2 (AER Share, EUR million) 1H23 1H22 Variance (%) 1H23 1H22 Variance (%) Denmark, Finland, Wind 56.6 86.9 (34.9%) 16.9 18.8 (10.1%) Norway, Greece Solar PV Portugal, Spain 55.7 66.4 (16.1%) 11.1 4.7 138.4% H
Slide 18: Robust Dividend Cover and Strong Outlook
ROBUST DIVIDEND COVER AND STRONG OUTLOOK February 2023 vs. Revised Dividend Cover Guidance (x) Commentary Figures presented after debt amortisation − 1H23 dividend cover of 1.2x (1.7x before debt amortisation) − Lower than expected power prices and production levels − Partial contribution from Guill
Slide 19: Table of Contents
TABLE OF CONTENTS 1. Introduction 2. Portfolio 3. Financial and Operating Performance 4. Valuation and Power Prices 5. Capital Allocation and Conclusion 6. Appendix © 2023 Aquila Capital 19
Slide 20: 1H23 Net Asset Valuation Bridge
1H23 NET ASSET VALUATION BRIDGE Net Asset Value Bridge (EUR million) − 1H23 NAV -5.9% or -6.5 cents per share after 451.7 dividends (total NAV return of -3.5% including 6.5 dividends) 5.5 − Decrease in short-term electricity price forecasts across the portfolio (-12.1 cents)3 (29.6) (10.7) 403.3 − A
Slide 21: 1H23 Portfolio Valuation
1H23 PORTFOLIO VALUATION Portfolio Valuation Bridge (EUR million) Portfolio Valuation (EUR million) 1H23 2022 Variance 45.6 Tesla 33.5 35.5 (5.7%) (2.0) (2.3) 2.0 Sagres 20.7 23.0 (10.0%) 2.9 2.9 (13.0) 467.5 Holmen II 26.6 39.5 (32.8%) (9.5) (0.9) (4.1) (2.9) (2.1) (0.6) Olhava 29.2 27.2 7.3% 451.5
Slide 22: Asset Life Extension Programme Delivering Value
ASSET LIFE EXTENSION PROGRAMME DELIVERING VALUE Status Overview − Significant progress made on asset life extension programme Q1 2023 Q2 2023 In progress − +3.2 cents per share valuation uplift achieved in 1H23 (Completed) (Completed) − Further +2.2 cents upside potential, subject to due diligence −
Slide 23: Unprecedented Power Price Environment
UNPRECEDENTED POWER PRICE ENVIRONMENT Electricity Spot Prices (EUR / MWh)1 800 Ongoing bullish trend in EUAs and fuel Spots increase to unprecedent level Spots fall following: Nordics Spain Greece prices, coupled with peaking demand driven by the war-related bullish 700 a) milder-than-expected weath
Slide 24: PPA Prices Have Replicated These Movements
PPA PRICES HAVE REPLICATED THESE MOVEMENTS Spanish PPA Prices (EUR / MWh)1 High prices do not necessarily translate into high PPA prices 75 70 Guillena 7-year PPA price 1• Regulatory uncertainty weighs on offtakers’ risk appraisal 65 60 2• Volatility also impacts the cost of hedging 55 50 3• Liquidi
Slide 25: Power Price Forecasts (Captured, Real 2023)
POWER PRICE FORECASTS (CAPTURED, REAL 2023) Electricity Price Forecasts (Weighted Average, EUR / MWh)1 Average Price 2023 – 2027 2028 – 2032 2033 - 2050 (EUR / MWh) 2 150.0 Nordics 71.1 58.9 46.1 100.0 Iberia 65.6 45.0 42.4 50.0 0.0 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 Portfolio Weighte
Slide 26: Modelling Approach to Power Prices
MODELLING APPROACH TO POWER PRICES Overview Inputs into Curve Provider Forecasts • Power price forecasts are specific to each country, technology and pricing zone, where applicable • Technology mix: Electricity demand & Commodity prices interconnectors INPUTS • Wind and solar PV → average of real po
Slide 27: Discount Rate and Inflation Developments
DISCOUNT RATE AND INFLATION DEVELOPMENTS Portfolio Discount Rate Evolution (Before Fund Level Leverage) 1H23 Adjusted Discount Rate and Implied Risk Premium1 10.0% 7.7% 9.0% 8.0% 7.0% 6.0% 4.4% 5.0% (3.3%) 4.0% 3.0% UK 10-year 2.0% gilt yield: 1.0% 4.4%2 0.0% 3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 28: Valuation Benchmarking
VALUATION BENCHMARKING Discount Rate (%)1 AER Portfolio Trading Below Cost (EUR million) 9.4 % 403.3 7.7 % 361.7 (41.6) 346.7 Portfolio Adjusted Discount Rate Implied Return at Current Share Price Q2 2023 NAV Less: Unrealised Gains, Implied Portfolio at Cost Current Market Dividends Capitalisation −
Slide 29: Power Prices, Inflation and NAV Sensitivities
POWER PRICES, INFLATION AND NAV SENSITIVITIES Impact on NAV (cents per share)1 NAV Sensitivities (cents per share) 2 2023 – 2027 2023 – 2032 Production (P90/P10) -14 14 Year Over Asset Life (5 years) (10 years) Power Prices (-/+ 10%) -11 11 Power Prices +10.0% +3 +5 +11 Discount Rate (+/- 50bps) -5
Slide 30: Table of Contents
TABLE OF CONTENTS 1. Introduction 2. Portfolio 3. Financial and Operating Performance 4. Valuation and Power Prices 5. Capital Allocation and Conclusion 6. Appendix © 2023 Aquila Capital 30
Slide 31: Modest Gearing Levels Provide Flexibility
MODEST GEARING LEVELS PROVIDE FLEXIBILITY Debt Metrics − 2.6% weighted average interest rate on debt (3.6% including RCF)3 1H23 2022 Variance (30 June 2023, EUR million)1 − Modest gearing of 32.7% of Gross Asset Value (21% project debt and 12% NAV 403.3 451.7 (10.7%) RCF) − Potential firepower of ov
Slide 32: Capital Allocation
CAPITAL ALLOCATION 1 2 Dividends Share Buybacks 1H23 Capital Allocation − Objective to progressively − Completed EUR 20.0 million grow the dividend over the share buyback programme in 489 GWh medium term June 464 MW Portfolio Clean energy produced in 1H23 − 2023 Dividend Target: 5.51 − Programme ext
Slide 33: Conclusion
CONCLUSION Performance Portfolio Solid 1H23 performance despite power Fully operating and diversified portfolio price movements. Dividend fully covered which supports a progressive dividend 1.5x dividend cover expected over the next five years Initiatives Capital Allocation The Board and its adviser
Slide 34: Table of Contents
TABLE OF CONTENTS 1. Introduction 2. Portfolio 3. Financial and Operating Performance 4. Valuation and Power Prices 5. Capital Allocation and Conclusion 6. Appendix © 2023 Aquila Capital 34
Slide 35: Portfolio Summary
PORTFOLIO SUMMARY Asset Life Equipment Energy Ownership Project Technology Country Capacity1 Status COD2 Offtaker Leverage4 Acquisition Date from COD Manufacturer Offtaker3 in Asset Tesla Wind energy Norway 150.0 MW Operational 2013, 2018 25y Nordex PPA Statkraft 25.9%6 20.4% July 2019 Sagres Hydrop
Slide 36: Portfolio Allocation
PORTFOLIO ALLOCATION 1 Technology Geography Asset Status Asset Age 19.2% 24.2% 19.2% 19.2% 100% 28.0% 2019 IPO Year 28.0% 80.8% 28.7% 52.9% Portugal Wind Finland < 5 years Hydro Denmark Operating 5 –10 years Solar PV Norway > 10 years Spain 6.7% 17.8% 4.4% Greece 15.0% 43.3% 6.4% 1H23 41.6% 16.7% 75
Slide 37: Diversified Contracted Revenue Structure: PPA Risk Profiles
DIVERSIFIED CONTRACTED REVENUE STRUCTURE Volume Delivery Obligation Volume Production Merchant PPA Considerations Types of PPA & Delivery Profile Risk Profile Risk Risk1 ▪ Predefined volumes according to a predefined hourly profile Baseload ✓ ✓ ▪ Delivery profile obligations for every hour ▪ Pre-a
Slide 38: Counterparty Exposure
COUNTERPARTY EXPOSURE 1H23 Counterparty Exposure by Contracted Revenue Counterparty Exposure by Contracted Revenue 2023 – 2027 (AER Share, %) (AER Share, %) 100.0% 90.0% 7.4% 80.0% 9.1% 21.3% 70.0% 60.0% 9.2% 50.0% 40.0% 9.3% 21.3% 30.0% 20.0% 9.5% 10.0% 12.9% 0.0% 2023 2024 2025 2026 2027 © 2023 ©
Slide 39: Valuation Assumptions
VALUATION ASSUMPTIONS 10-Year Government Bond % of Portfolio Fair Metric 1H23 FY22 Yield (%)4 Yield Value3 Levered discount rate Norway 16.7% 3.6% Weighted average 7.2% 7.2% (asset level) Denmark 13.7% 2.7% Wind energy 22 years 22 years Remaining asset life Solar PV 39 years 29 years Finland 6.2% 3.
Slide 40: Valuation Assumption Benchmarking
VALUATION ASSUMPTION BENCHMARKING Asset life – Wind energy1 Asset life – Solar PV1 Long-term inflation1,2 Discount rate3 35.0 45.0 3.0% 10.0% 40.0 9.0% 30.0 2.5% 35.0 8.0% 25.0 7.0% 30.0 2.0% 6.0% 20.0 25.0 1.5% 5.0% 15.0 20.0 4.0% 15.0 1.0% 10.0 3.0% 10.0 2.0% 5.0 0.5% 5.0 1.0% 0.0 0.0 Peer 5 0.0%
Slide 41: Board of Directors
BOARD OF DIRECTORS Ian Nolan Dr. Patricia Rodrigues David MacLellan Kenneth MacRitchie Myrtle Dawes Non- Executive Chairman Chair of the Remuneration and Chair of the Audit and Risk Member of the Remuneration and Member of the Remuneration and Led the team which was recruited by Nomination Committee
Slide 42: Dividend Cover (Unaudited)
DIVIDEND COVER (UNAUDITED) Variance Cash Dividend Cover (EUR million) 1H23 1H22 Variance (%) Dividend Cover (EUR million)1 1H23 1H22 (%) Company Asset Income 31.5 26.1 20.7% Net cash flow from operating 11.2 20.2 (44.4%) activities Asset operating costs (7.9) (6.1) 28.5% Investment advisory fee fund
Slide 43: Summary Income Statement (Unaudited)
SUMMARY INCOME STATEMENT (UNAUDITED) 1H23 1H22 Revenue (EUR k) Capital (EUR k) Total (EUR k) Revenue (EUR k) Capital (EUR k) Total (EUR k) Unrealised (loss)/gain on investments - (24,091) (24,091) - 16,434 16,434 Net foreign exchange losses - (12) (12) - (5) (5) Interest income 8,656 - 8,656 7,140 -
Slide 44: Summary Cash Flow (Unaudited)
SUMMARY CASH FLOW (UNAUDITED) EUR k 1H23 1H22 Operating activities (Loss)/profit on ordinary activities before finance costs taxation (17,592) 22,468 Adjustment for unrealised losses / (gains) on investments 24,091 (16,434) Working capital adjustments 4,725 14,137 Net cash flow from operating activi
Slide 45: Summary Balance Sheet (Unaudited)
SUMMARY BALANCE SHEET (UNAUDITED) EUR k 1H23 1H22 Assets 404,903 449,497 Cash and cash equivalents 4,128 58,274 Trade and other receivables 38 10,945 Investments at fair value through profit or loss 400,737 380,278 Liabilities (1,647) (18,867) Other creditors (1,647) (18,867) Net assets 403,256 430,
Slide 46: Reconciliation – Income Statement
RECONCILIATION – INCOME STATEMENT Aquila European Renewables (AER Plc) Income Statement (EUR k) 1H23 1H22 AER Plc 3 (Losses)/gains on investments (24,091) 16,434 Net foreign exchange losses (12) (5) Shareholder Loans 1 Interest income 8,656 7,140 1 Dividends 2 and bank interest 2 Dividend income - 1
Slide 47: Reconciliation – Balance Sheet
RECONCILIATION – BALANCE SHEET Aquila European Renewables (AER Plc) AER Plc Balance Sheet (EUR k) 1H23 2022 Assets Shareholder 1 Equity 2 Loans Cash 4,128 19,893 100% Trade and other receivables 38 5,630 Tesseract Holdings 3 Limited 3 Portfolio value 400,737 428,641 Liabilities Shareholder Creditors
Slide 48: Debt Summary (30 June 2023)
DEBT SUMMARY (30 JUNE 2023) Drawn Debt (EUR Bullet / Project AER Share Currency Maturity Hedged % Type million)1 Amortisation Tesla 25.9% 8.5 EUR Partly amortising Mar 2029 100.0% Bank Debt Sagres 18.0% 6.1 EUR Fully amortising Jun 2033 70.0% Bank Debt Dec 2030 / Olhava 100.0% 16.8 EUR Fully amortis
Slide 49: Structure
STRUCTURE Independent Board of Directors Ownership Shareholders 5 x Non-executive Board of Directors Relationship Service Providers Broker and Placing Agent: Numis Securities Investment Adviser: Company AIFM and Secretary: Aquila European FundRock Management Renewables Plc Company (Guernsey) Limited
Slide 50: Key Terms
KEY TERMS Aquila European Renewables Plc Fund structure UK-domiciled closed-end investment company Listing Premium Segment of the London Stock Exchange Ticker / ISIN in EUR / SEDOL AERI / GB00BK6RLF66 / BK6RLF6 Ticker / ISIN in GBP / SEDOL AERS / GB00BK6RLF66 / BJMXQK1 Currency Fund raising, reporti
Slide 51: Performance Summary Since IPO
PERFORMANCE SUMMARY SINCE IPO 2019 2020 2021 2022 1H23 Market capitalisation (EUR million) 167 338 415 377 318.53 NAV (EUR million) 159 317 417 452 403 # investments 5 9 10 12 12 # countries 4 6 6 6 6 MW capacity (AER share) 133 198 229 414 464 Contracted revenue (%) 72.5% 73.9% 68.5% 51.9% 50.5%1 T
Slide 52: Important Notice
IMPORTANT NOTICE FOR INSTITUTIONAL/PROFESSIONAL INVESTORS ONLY. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA, OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE
Slide 53: Important Notice (Cont'd)
IMPORTANT NOTICE (CONT’D) The information contained in this document is given at the date of its publication (unless otherwise marked) and may be incomplete and subject to change. In particular certain figures contained in this presentation, including financial information, are unaudited and may be
Slide 54: Contacts
CONTACTS AQUILA EUROPEAN RENEWABLES PLC Michael Anderson 6th Floor michael.anderson@aquila-capital.com 125 London Wall London EC2Y 5AS Christopher Gook +44 20 3327 9720 christopher.gook-extern@aquila-capital.com © 2023 Aquila Capital 54
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