aquila european renewablesincome fund plc (‟aerif”) · 2020-03-05 · jun 2019 jul 2019aug 2019...

1

Aquila European Renewables Income Fund PLC (‟AERIF”)

UK-domiciled closed-end investment company investing in a balanced portfolio of renewable assets

Q1 2020

FOR PROFESSIONAL INVESTORS ONLY | CONFIDENTIAL | © 2020 AQUILA CAPITAL

Agenda

FOR PROFESSIONAL INVESTORS ONLY | CONFIDENTIAL | © 2020 AQUILA CAPITAL 2

Aquila European Renewables Income Fund (AERIF)2

Aquila Capital3

Appendix4

Executive summary1

Executive Summary

3FOR PROFESSIONAL INVESTORS ONLY | CONFIDENTIAL | © 2020 AQUILA CAPITAL

Diversified Renewables Portfolio1

Competitive Returns and Prices

Strong Governance

Enhanced Pipeline

ExperiencedInvestment Advisor

ComprehensiveAsset Management

- Technology (solar pv, onshore wind and hydropower)- Geography (Continental Europe and Ireland)- Remuneration (contracted and non-contracted)

- 6.0 - 7.5% IRR, 5% dividend distribution p.a.2- Investment advisory fee: 0.75% on NAV p.a. (up to EUR 300m)- No performance fee

- External Board- External AIFM- Fully regulated Investment Advisor

- 50+ EMEA investment and asset management professionals- Specialized teams for asset classes and regions- Offices in the target markets

- Over EUR 6.8bn transaction volume in renewable energies- Wind energy: 2,703 MW, solar pv: 1,662 MWp, hydropower: 614 MW- In-house ESG department and annual ESG report

- Over EUR 10.7bn AuM and AuA3

- In-house- Asset class specific teams with engineering and commercial backgrounds

1 Target diversification 2 These are targets only and not forecasts. There can be no assurance that these targets can or will be met and they should not be seen as an indication of the Company’s expected or actual results or returns. Accordingly investors should not place any reliance on these targets in deciding whether to invest in Ordinary Shares or assume that the Company will make any distributions at all. 3 Assets under management (AuM) based on net asset value (NAV); enterprise value for real asset funds respectively; Assets under administration (AuA) of the AIFM Alceda include funds managed by Aquila Capital. As at 31.12.2019.

Environmental, Social and Governance (ESG)Executive Summary


Ian Nolan Non-Executive Chair

David MacLellanNon-Executive Director

Kenneth MacRitchieNon-Executive Director

Patricia RodriguesNon-Executive Director

EnvironmentCommitment to invest in and expand clean energy sources. The current portfolio is projected to save 2,751,289 tons of CO2 emissions throughout its lifetime, which contributes to the objectives set out in the Paris Agreement.

SocialEngagement with and work side-by-side with local stakeholders and communities in countries where we operate, to ensure that their interests are integrated into our decision-making.

Aim to exceed all applicable labour standards in the countries where we operate.

Governance: Independent Board

AERIF contributes to UN Development Goals:

AIFM: International Fund Management Limited

Board of Directors Investment Decision

ConfirmationInvestment Advice

Investment Proposal

Investment Advisor: Aquila Capital Investmentgesellschaft mbH

Decision-making process

Agenda


Executive summary1

Aquila Capital3

Appendix4


1 The net IRR is calculated at fund level and not for any particular investor, after fund fees, fund expenses and before individual taxes. As a result, the net performance figures set forth herein are reflective of average fund fees and expenses. The performance achieved after personal taxes is likely to differ between individuals. 2 Historical information cannot be understood as a guarantee for future earnings.


Key statistics- Listing at London Stock Exchange

- Ticker: AERI

- Investment Advisor and asset manager: Aquila Capital Investmentgesellschaft mbH

- Target net IRR: 6.0% – 7.5%1

- Target distribution of 4.0% in 2020 and 5.0% from 2021 onwards

Key statistics and financial highlights

Key performance figures as at 31.12.20192

- Market capitalisation: EUR 166.7m

- Unaudited NAV: EUR 158.9m

- Unaudited NAV per share: EUR 1.0275 (+ 2.75% since IPO)

Dividends (in EUR cts/share)

- Distribution for Q3 2019: 0.75 (payment date: 29.11.2019)

- Distribution for Q4 2019: 0.75 (payment date: 20.03.2020)

Current portfolio and commitmentBalanced by geography and asset type

7

1 PPA = Power Purchase Agreement.2 Installed capacity at 100% ownership.3 Price hedging will be implemented when market exposure increases significantly. Currently, a major part of the portfolio is remunerated with a feed-in tariff (FiT).4 Feed-in premium is structured as a Contract for Difference (CfD) at the spot market price.5 Feed-in tariff is structured as a Contract for Difference (CfD).6 Transaction not closed. Closing is envisaged for 31 March 2020. All information on Korkeakangas is subject to and might change prior to the closing of the transaction (transfer of shares).7 Leverage at acquisition date8 21 Individual assets; average concession life of 12 years9 COD = Commissioning date


Project Tech-nology

Country Capacity Status COD9 Asset Life from COD9

Equipment Manu-facturer

Energy Offtaker

Ownership in asset

Leverage7 Acquisition date

Tesla Wind energy

Norway 150 MW2 Operational 2013, 2018

25y Nordex PPA1 with utility / Spot3

25.9% 37.1% July2019

Sagres Hydro-power

Portugal 103 MW2 Operational 1951-2006

n.a.8 Various FiT5 / Spot3

18.0% 46.4% July2019

Holmen II Wind energy

Denmark 18 MW Operational 2018 25y Vestas FiP4 / Spot3

100.0% 44.3% July2019

Olhava Wind energy

Finland 35 MW Operational 2013-2015

27.5y Vestas FiT5 / Spot3

100.0% 55.6% September 2019

Svindbaek Wind energy

Denmark 22 MW Operational 2018 25y Siemens FiP4 / Spot3

100.0% 28.3% December 2019

Korkeakangas6 Wind energy

Finland 43 MW6 Construction 20226 30y6 Nordex6 PPA1 tbd / Spot3, 6

100.0%6 42.8%6 March 2020 (envisaged)

Current portfolio and commitment

8

1 Basis is the unaudited Gross Asset Value as of 31.12.2019 2 The revenue streams are discounted by the weighted average of all discount rates used for the asset valuations as of 31 December 2019FOR PROFESSIONAL INVESTORS ONLY | CONFIDENTIAL | © 2020 AQUILA CAPITAL

Deployment profile Contracted vs non-contracted revenue

Present value of revenues2 (5 years)

Fixed price PPA Governmental subsidy Market

27.5%

7.5%

65.0%

Present value of revenues2 (10 years)

Fixed price PPA

Governmental subsidy Market

13.7%

37.4%

48.8%

-

25%

50%

75%

100%

-

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

Jun 2019 Jul 2019 Aug 2019 Sep 2019 Oct 2019 Nov 2019 Dec 2019

Invested capital Committed capital % invested/ committed

EUR

k

AERIF deployment profile since IPO

16,3%

23,1%

12,9%

31,5%

16,2%

Geographical allocation1

Norway

Finland

Portugal

Denmark

Cash and other assets

Current portfolioTesla - Onshore wind farm in Norway

9

Source: Aquila Capital Investmentgesellschaft mbH, as of July 2019. 1 BNEF, as of November 2019. 2 GAV is the sum of fair value valuations of AERIF’s investments, cash and other relevant assets and liabilities of AERIF.


Capacity150 MWStatus OperationalCOD2013, 2018Offtake / Support10-year PPA / GoO /El-Certificatesa

Project ownershipApprox. 25.9%Percent share of GAV2

Approx. 16.3%

- Comprises of 44 N100 and N90 wind turbines (2.5 MW each) and 11 N117 3.6 MW (40 MW) from Nordex

- Power purchase agreement ("PPA") covers 70% of the expected P50 production for the next nine years

- Norway will leave the certificate supporting scheme in 2020 but represents the largest market for corporate PPA’s in Europe1

- Wind energy has taken over the lead in attracting investment, accounting for 64% in 2017-20181

- Norway has already expanded its green focus to other sectors, which helped to make it the leading country for electric vehicles in the world on a per-capita basis1

020.00040.00060.00080.000

100.000120.000140.000160.000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Biomass & Waste Coal Gas Oil Geothermal Hydro Marine PV + Thermal Wind Nuclear

Power generation by technology (GWh)1

– Portfolio of 21 operational small-scale hydropower plants with a long operating history

– Approx. 75% of production covered by a long-term feed-in tariff (FiT), which gradually expires for the individual power plants

– Hydropower had the biggest share in generating electricity in 2018 (27%)1

– Due to the high share of hydropower, there is, similar to Norway, a natural hedging effect in times of drought weather-conditions1

– Portugal's electricity prices are higher than the European average due to limited interconnections to the other countries1

Current portfolioSagres - Small-scale hydropower plants in Portugal

10

Source: Aquila Capital Investmentgesellschaft mbH, as of July 2019. 1 BNEF, as of November 2019. 2 Installed capacity (100%). 3 Price hedging will be implemented when market exposure increases significantly. Currently, a major part of the portfolio is remunerated with a feed-in tariff (FiT). 4 GAV is the sum of fair value valuations of AERIF’s investments, cash and other relevant assets and liabilities of AERIF.


0

20.000

40.000

60.000

80.000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Capacity103 MW2

Status OperationalCOD1951 – 2006Offtake / SupportFiT / Spot3

Project ownershipApprox. 18%Percent share of GAV4

Approx. 12.9%


– Installed Vestas turbines: Yields a capacity factor of 43%

– Danish premium tariff for a fixed volume of production (until 2025)

– Denmark shares a power market with Norway, Sweden, and Finland with sovereign energy policy

– Denmark has been committed to building out wind capacity to achieve 50% renewable generation by 2020 – resultant the business environment for renewables is quite positive

– To ensure the security of supply Denmark decided to put more focus on flexibility and interconnection capacity

Current portfolioHolmen II - Onshore wind farm in Denmark


Capacity18 MWStatus OperationalCOD2018Offtake / SupportFiP / CfD2

Project ownership100%Percent share of GAV3

Approx. 17.5%

Source: Aquila Capital Investmentgesellschaft mbH, as of July 2019. 1 BNEF, as of November 2019. 2 Feed-in premium is structured as a Contract for Difference (CfD) at the spot marketprice. 3 GAV is the sum of fair value valuations of AERIF’s investments, cash and other relevant assets and liabilities of AERIF.

0

10.000

20.000

30.000

40.000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



Current portfolioOlhava - Onshore wind farm in Finland


Capacity35 MWStatus OperationalCOD2013, 2015Offtake / SupportFiT CfD2 / GoOProject ownership100%Percent share of GAV3

Approx. 23.1%

– Consists of 8 x Vestas V112-3.0MW turbines and 3 x Vestas V126-3.3MW turbines

– Qualifies for the Finnish feed-in tariff (“FiT”); eligible for guarantees of origin (GoO) certificates

– Ambitious plans to reach carbon neutrality by 2035, while premium onshore wind locations are running out1

– Nuclear generation is currently the main source with a market share of 25% followed by hydropower with 15%1

– The government submitted a bill in 2018 to ban the use of coal for energy with a deadline of 20291

Source: Aquila Capital Investmentgesellschaft mbH, as of September 2019. 1 BNEF, as of November 2019. 2 Feed-in tariff is structured as a Contract for Difference (CfD). 3 GAV is the sum of fair value valuations of AERIF’s investments, cash and other relevant assets and liabilities of AERIF.

0

20.000

40.000

60.000

80.000

100.000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



Current portfolioSvindbaek - Onshore wind farm in Denmark


Capacity22.4 MWStatus OperationalCOD2018Offtake / SupportFiP / CfD2

Project ownership100%Percent share of GAV3

Approx. 14.1%

– Turbines: Siemens Gamesa SWT- 3.2- 101

– Located on the west coast of Denmark

– Benefits from a Danish Premium tariff (feed-in premium structured as a Contract for Difference) for a fixed volume of production, which is expected to last for another 8 years

– The Project helps to save 18,337 tons of CO² emissions which totals ca. 458,433 tons over the projected lifetime of the Project which equals the annual average energy consumption of 5,098 households based on an European average

Source: Aquila Capital Investmentgesellschaft mbH, as of September 2019. 1 BNEF, as of November 2019. 2 Feed-in premium tariff is structured as a Contract for Difference (CfD) at the spot market price. 3 GAV is the sum of fair value valuations of AERIF’s investments, cash and other relevant assets and liabilities of AERIF.


0

10.000

20.000

30.000

40.000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


CommitmentKorkeakangas - Onshore wind farm in Finland


Envisaged Capacity43.2 MWStatusConstructionEnvisaged COD2022Envisaged offtake / supportPPA / GoOEnvisaged project ownership100%

– Consists of 9 x turbines from a top-tier turbine manufacturer with an expected operating life of 30 years.

– Power purchase agreement ("PPA") that covers 65% of the expected P50 production for ten years is envisaged

– Eligible for guarantees of origin (GoO) certificates

– Ambitious plans to reach carbon neutrality by 2035, while premium onshore wind locations are running out1

– Nuclear generation is currently the main source with a market share of 25% followed by hydropower with 15%1

– The government submitted a bill in 2018 to ban the use of coal for energy with a deadline of 20291

Source: Aquila Capital Investmentgesellschaft mbH, as of September 2019. 1 BNEF, as of November 2019. 2GAV is the sum of fair value valuations of AERIF’s investments, cash and other relevant assets and liabilities of AERIF.

0

20.000

40.000

60.000

80.000

100.000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



Envisaged 2020 capital plan


Forecast Q1 2020 – Q4 2020

…EUR 154m EUR 180m

31.12.2019Invested/committed projects- 6 investments

§ 5 operating§ 1 in construction

EUR 230m EUR 280m

31.03.2020Forecast projects:- 8 investments






EUR 330m



1 Investments may comprise one or more assets

Enhanced pipeline overview1

16

1 The information on this slide is indicative and does not constitute a statement about the certainty, nature or status of any project being acquired for the Company’s portfolio and there is no guarantee they would be acquired. Investors should note that no assets from the Enhanced Pipeline have been contracted to be acquired by the Company, there are no binding commitments or agreements to acquire any of these assets and the Company does not have a right of first refusal over any of the assets in the Enhanced Pipeline. The Investment Adviser is under no obligation to make the assets in the Enhanced Pipeline available to the Company and will apply its Allocation Policy in respect of the allocation of assets among Aquila Managed Funds (as defined in the Prospectus). Therefore there can be no assurance that any of these investments will remain available for purchase by the Company or at what price (if a price can be agreed at all) the investments can be acquired by the Company. The assets in the Enhanced Pipeline are indicative of the type and size of asset that may be acquired by the Company. To the extent assets in the Enhanced Pipeline are available for investment by the Company, the Investment Adviser will advise the AIFM, who may recommend to the Board that the Company acquire one or more such assets. Any decision to acquire any assets within the Enhanced Pipeline is a matter reserved for the Board and no decision has yet been made in respect thereof. Investments not comprised in the Enhanced Portfolio may also become available. 2 PPA (= Power Purchase Agreement) envisaged. FOR PROFESSIONAL INVESTORS ONLY | CONFIDENTIAL | © 2020 AQUILA CAPITAL

# Assettechnology

Country Capacity Commissioning year Initial remuneration Project status

1 Onshore wind NOR 400 MW 2021 PPA2 Managed by Aquila Capital

2 Onshore wind FIN 59 MW 2021 PPA2 Managed by Aquila Capital

3 Solar pv ESP 50 MWp 2021 PPA2 Managed by Aquila Capital

4 Onshore wind ESP 48 MW 2021 PPA2 Managed by Aquila Capital

5 Solar pv ESP 40 MWp 2020 PPA2 Managed by Aquila Capital

6 Hydropower PRT 127 MW Operating; various Feed-in tariff + PPA2 Negotiations

7 Onshore wind ITA 120 MW Operating; various Feed-in tariff + Green Certificates

Negotiations

8 Solar pv POR 20 MWp Operating; various PPA2 Negotiations

9 Onshore wind DEN 10 MW Operating, 2018 Feed-in tariff Negotiations

Terms of the Fund

17

1 Based on a NAV = EUR 1.0 per share. 2 The net IRR is calculated at fund level and not for any particular investor, after fund fees, fund expenses and before individual taxes. As a result, the net performance figures set forth herein are reflective of average fund fees and expenses. The performance achieved after personal taxes is likely to differ between individuals. 3 These are targets only and not forecasts. There can be no assurance that these targets can or will be met and they should not be seen as an indication of the Company’s expected or actual results or returns. Accordingly investors should not place any reliance on these targets in deciding whether to invest in Ordinary Shares or assume that the Company will make any distributions at all.FOR PROFESSIONAL INVESTORS ONLY | CONFIDENTIAL | © 2020 AQUILA CAPITAL

Aquila European Renewables Income Fund PLC

Fund structure UK-domiciled closed-end investment companyListing Premium Segment of the London Stock ExchangeCurrency Fund raising, reporting and investor distributions will be Euro-denominatedInitial NAV per share EUR 1.0

Target dividend profile1- Period to 31 December 2019: 1.5% for H2 (3% annualised)- Year to 31 December 2020: minimum of 4%- Year to 31 December 2021: 5% with the aim of growing progressively thereafter

Target net IRR2 6.0 – 7.5 %3

Governance Independent board of at least 3 directors with leading investment fund and renewable energy experienceInvestment adviser Aquila Capital Investmentgesellschaft mbHAIFM International Fund Management Limited Advisory agreement Initial term: 4 years with 1 year termination notice period

Investment advisory fees + applicable taxes

< EUR 300m: 0.75% of NAV (+ VAT)≥ EUR 300m ≤ EUR 500m: 0.65% of NAV (+ VAT)> EUR 500m: 0.55% of NAV (+ VAT)

Shareholder alignment- Continuation vote after 4 years and every 4 years thereafter- Discount triggered buyback subject to free cashflow- Advisory fee settled in shares in first 2 years

Geographic focus Continental Europe and Ireland (not UK)

Key elements of investment policy/limits(% of portfolio by value at time of acquisition)

<25% in a single asset<20% in energy infrastructure technologies outside onshore wind, solar pv and hydropower<30% assets under development/construction

Risk management- Power production sold to creditworthy counterparties- An appropriate hedging policy in relation to interest rates will be adopted- No currency hedging

BrokerNumis Securities Limited Sales: Tod Davis [email protected] +44 20 7260 1381 / Corporate: David Benda [email protected] +44 20 7260 1275

Agenda


Executive summary1


Appendix4

Aquila Capital3

Madrid

Zurich

Luxembourg

AmsterdamHamburg (HQ)

FrankfurtPrague

London

Oslo

Corporate credentials Renewable energy


19 years of experience in alternative investments and close proximity to our assets and our investors– Over EUR 10.7bn AuM and AuA2

– Over EUR 6.8bn transaction volume in actively managed renewable energies

– Independently owned and operated– Fully regulated with BaFin and CSSF3

– More than 350 employees across Europe and Asia– Winner of Swedish Renewable Energy Award at 2018 Vind conference – Multi technology focus on wind energy, solar pv and hydropower– Covering the whole value chain

Transacted capacity1

Wind energy 2,703 MW>640 WTGs

Solar pv1,662 MWp>50 pv parks

Hydropower614 MW143 plants

ESG

Overall reduction of CO2 emissions4

106.9m tons

Green energy produced4

320.9 TWh

Households supplied4

88.4m

1 As at 31.12.2019. 2 Assets under management (AuM) based on net asset value (NAV); enterprise value for real asset funds respectively; Assets under administration (AuA) of the AIFM Alceda include funds managed by Aquila Capital. As at 31.12.2019. 3 Aquila Capital Investmentgesellschaft mbH is fully regulated and is supervised by the BaFin. Alceda Fund Management S.A. is fully regulated and supervised by the CSSF. 4 Over the lifetime of current portfolio. As at 31.12.2019. 5 For illustrative purposes only. Exact locations of offices and assets might deviate. Points indicate one or more assets and are not indicative of size. As at 31.12.2019.

Current renewables portfolio of Aquila Capital in Europe5

Offices

Lisbon

Onshore windHydropower

Solar pv

19

l Barcelona

Investment Management

20

1 Individual track records partly outside Aquila Group.


Investment team with a highly successful pan-European multi-technology track record

– Sourcing and introduction of the project

– Economic and commercial (pre)assessment of the project, taking into account the investment criteria of the company

– Sourcing appropriate project financing

– Procurement of relevant project contracts, if applicable

– Negotiation of transaction contracts in accordance with commercial and legal framework requirements

– Negotiation of project and financing agreements, if applicable

– Supporting the negotiation of transaction contracts in accordance with commercial and legal framework requirements

– Continued reporting on project status

– Developing a suitable transaction, corporate and tax structure

– Application of suitable de-risking measures in order to mitigate or reduce possible risks

– Successfully transacted technologies: § Solar pv, onshore and

offshore wind, hydropower as well as investments in other types of energy infrastructure

Transacted technologies Locations PPA counterparties

Track record of Aquila Capital’s professionals1

Origination Negotiation Execution

Services

– International PPA counterparties including some of the largest:§ Multinational

technology companies § European utilities§ European energy

trading companies§ International

aluminum producers

– Successfully transacted in following locations: § Northern Europe (Sweden,

Norway, Finland, Denmark)§ Western Europe (Germany,

France, the UK, Ireland, Belgium, the Netherlands)

§ Southern Europe (Spain, Portugal, Italy)

Susanne WermterHead Investment Management E&I EMEA

Andrew WojtekSenior Investment Manager

Dr. Tor SyverudHead Investment Management Hydropower

Jeroen WolfsSenior Investment Manager

Christine BrockwellHead Partnerships &Portfolio Management

Joakim JohnsenHead of MMD

Asset Management


- Performance analysis/monitoring- Predictive maintenance dispatch- Optimised cleaning schedule

- Billing, collections, payments- Accounting and financial reporting- Tax preparation/filing/administration

Operations & Maintenance/Technical Management Operations & Maintenance/ Commercial Management

- Issue detection/ diagnostics- Service dispatch/ supervision - Security monitoring interface

- Performance/service reporting- Spare parts management- Warranty claim management

- Plant/asset performance supervision - Troubleshooting/solutions management - Warranty administration

- Asset performance reporting - Oversight/management of O&M - Optimisation

Christian RenkeHead Asset ManagementWind energy

Christian AhrensHead Asset ManagementSolar pv

Christian HeidfeldHead Asset ManagementHydropower

28 team members, including 8 engineers

Asset Management

Revenue optimisation

Cost reduction

Value enhancement services

Professional asset reporting

Merchant Market Desk (MMD)Extensive PPA track record


– Overall responsible for all energy sales across Europe

– Co-ordination with transaction teams

– 16 years of experience in renewable energies

– Product and business development of MMD

– Hedging optimisation– DACH PPA sourcing– Liaison with analysts– 6 years of experience

and academics in financial industry

– Product and business development of MMD

– Operations and IT – Market access and

regulatory requirements

– Trading systems– 16 years of experience

in financial industry

– Sourcing of PPAs in Norway, Sweden, Finland and Denmark

– 15 years of experience in financial industry and thereof 10 years in Northern European power markets

– Financial modelling– Market analysis – Knowledge management– Evaluation and

implementation of PPAs– 2 years of experience in

Investment Management and MMD

– Sourcing of PPAs in Spain and Portugal

– 12 years of experience in energy sector with the focus on power markets

Aquila Capital has a strategic and in-house expert approach towards the PPA market

– A dedicated PPA team, responsible for sourcing and structuring PPAs and creating other alternative hedging solutions

– A professional European team with local origination capabilities in target markets

– Strategic PPA sourcing (“PPAs first, assets second”)

Joakim JohnsenHead of MMD

Lyubomir PetrovAssociate MMD

Norman HartmannChief Technology & Processing Officer

Dr. Dirk BrunnbergInvestment Manager Energy Markets and Product Management

Marcos DominguezDirector Power Markets Iberia

Lars HaavikDirector Power Markets Nordics

Investment Management (transactions)

Asset identification

Preliminary analysis of opportunity

Internal due diligence

Due diligence with external advisors

Structuring and contract advice

Filing of investment advice Continuous support Support

Investment Management, Asset Mgt. & Fund Mgmt.

Preliminary analysis of opportunity Internal due diligence Structuring and contract

advice Recommendation Continuous asset and fund management

Target setting and supervision advice

Structuring & Tax Preliminary checks Specification of investment structure, in control of tax DD and according to IFM Recommendation Periodic review of

investment structure Recommendation

Risk Management

Preliminary analysis of risks Risk analysis Recommendation Continuous risk

management Recommendation

Legal NDA/ LOI/ MOU In control of legal DD Contract advice Recommendation Continuous support Recommendation

Valuation Preliminary analysis of opportunity Support of valuation of asset Recommendation Periodic valuation Recommendation

Compliance NPP Support of KYC & conflict-of-interest review Recommendation Continuous surveillance Recommendation

Investment process


Investment Committee (IC) = (Board of the AIFM - ACI)

Approval of internal due diligence

Weekly deal teammeetings

IC status update and approval of external due

diligence based on decision from IFM

Weekly deal teammeetings

IC status update

IC adviceof sale

IC adviceof sales process

IC advicerecommendation

Screening & Pre-due diligence

Internal due diligence

External DD & structuring

Investment review & advice

Investment monitoring Divestment

Aquila Capital departmental functions

PeriodicIC

meetings

Source: Aquila Capital Investmentgesellschaft mbH.

AIFM: International Fund Management Limited

Board of Directors Investment Decision

ConfirmationInvestment Advice

Investment Proposal

Investment Advisor: Aquila Capital Investmentgesellschaft mbH

Agenda


Executive summary1


Aquila Capital3

Appendix4

A sophisticated approach to PPAs enables generators to optimise their risk-return profiles through stable cash flows and access to potential upside

Deciding on the right type of PPA becomes critical

1 Merchant exposure depends on the percentage of production covered by the PPA.


Types of PPA Volume delivery obligation & delivery profile Volume risk

Production profile risk

Merchant risk1

Fixed volume

Baseload

- Predefined volumes according to a predefined hourly profile

- Delivery profile obligations for every hour - Pre-agreed price

✓ ✓ ×

Fixed annual/ quarterly volume

- Annual/quarterly pre-defined volumes- Delivery profile obligation within the

predefined timeframe but no matter when - Pre-agreed price

✓ × ×

As-produced

- Pre-agreed % of production at a pre-agreed price

- No volume delivery obligation or delivery profile obligation

× × ×

Route-to-market

- Pre-agreed % of production at market spot price

- No volume delivery obligation or delivery profile obligation

- No fixed price

× × ✓

As-produced- No volume delivery

obligation- No delivery profile

obligation

Fixed annual/quarterly volume- Volume delivery

obligation- Limited delivery

profile obligation

Baseload- Volume delivery

obligation- Hourly profile

obligation

PPA

risk

prof

ile

PPA price per MWh

- PPAs with stricter delivery obligations tend to be balanced with a more attractive remuneration for the generator

- The appetite for merchant exposure is often the deciding factor when considering an optimal structure for PPAs

- Views on market risk and outlook are therefore the key drivers of the approach adopted to power purchase, given the trade-off between security and potential upside

- The common PPA structures (e.g. tenor, fixed price vs floating price) in each market are largely dependent on: § Liquidity of the forward market§ Type of renewable subsidy available

- Fixed price PPAs provide a strong base of stability and are often considered a risk management instrument for all parties involved

Market price correlations- Over the past ten years, there has been a negative correlation

between Scandinavian and Iberian power market prices- Uncorrelated price movements are due to limited market

interconnections which will be projected into the future through the geographic separation of the two regions

- If the historic low level of correlation persists, investing in both regions presents an attractive diversification of merchant risk for investors

Market pricing and correlation

Source: Bloomberg.1 Prices are weekly averages.


MIBEL Nord Pool

MIBEL 1 -0.022

Nord Pool -0.022 1

Ten-year weekly price correlation matrix

020406080

100120140160

03.01

.2010

03.01

.2011

03.01

.2012

03.01

.2013

03.01

.2014

03.01

.2015

03.01

.2016

03.01

.2017

03.01

.2018

03.01

.2019

03.01

.2020

Comparison of power markets (MWh) prices (EUR)1

MIBEL Nord Pool

Europe's electricity network development up to 2025

27

Data base/source: Entso-E, 2019. Calculations/graphics: Aquila Capital Management GmbH.


<1,000 MW

1,000 – 2,000 MW

>2,000 MW

Under construction

Planned or in permitting

Transfer capacity increase

Development status

2020

2021, 2024

2021

, 202

4

2019

2021

, 202

2

2020

2022

2024

2023

2021

2021

20222019, 2020

2022

2019

2020

2025

2025

2022, 2022

2019, 2020

2023

2020

2025

2022 2019, 2019

2020

2020

2022, 2025

2023

2020

202320

20

2020

, 202

2

2021, 2022, 2025

2023

2024

2021

2021

2023

2019

2019

With a balanced technology mix, investors can benefit from the complementary characteristics of renewable energies. This provides a stable cash flow allowing for the reliable maintenance of dividend targets.

Indicative technology profiles

28

1 Onshore. 2 Thin-layer modules. Source: Aquila Capital Analysis.


Hydropower Wind energy1 Solar energySeasonal dependence (highest production)

SpringAutumn

Spring AutumnWinter

Spring2

SummerAutumn2

Dependence onthe time of day

Predictability

Generation volatility

Operational complexity

Controllability

Low seasonal changes throughout the year (illustrative)

Hydropower

Wind energy

Solar energy

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Value drivers


Drivers Elements Key examples of value added by Aquila Capital

Revenue

Volume – Electricity production – Secure existence of measurement campaigns

Availability (%) – Technical performance – Negotiation of availability guarantee with O&M provider

Price – Market price vs FiT – Negotiation of PPAs, identifying FiTs, hedging of green certificates

Costs

OPEX

– O&M – Grid costs – Land leases – Personnel – Insurance– Audit– Accounting

– Key customer of large wind turbine manufacturer and, therefore, able to secure competitive pricing

– Challenges O&M with existing asset management teams

Financing – Financing – Structuring

– Extensive experience with development finance institutions such as KfW and EKF as well as commercial loans, mezzanine financing and green bonds

Tax – Property tax– Corporate income tax – Structuring of tax-efficient investments

CAPEX– Civil engineering– Machinery – Electrical equipment

– Extensive track record enables the securing of attractive pricing with developers and manufacturers

– A permanent monitoring of the technology by the technical management

– Aquila Capital‘s Asset Management unit checks the monthly, quarterly and annual reports of the technical management, as well as evaluates the solution proposed by the technical manager by its internal technicians

– Random checks at Asset Management level through access to online monitoring (online monitoring systems: Breeze, Rotorsoft, Skytron, Solarlog)

– The technical operator must report events that lead to an impairment of the technical performance (including estimation of loss of yield) and comment on how the damage has been repaired

– Internal control of the necessary ongoing maintenance and servicing

– Independent on-site inspections by Aquila Capital employees or external experts

Active asset management (1/3)


Project monitoring: Technical Project monitoring: Commercial

– Current control of the annual budget agreed with the commercial management, which is derived from the purchase plan

– Monthly target/actual comparisons for liquidity planning

– Internal account monitoring

– Implementation of account availability limits for commercial operations management or four-eyes principle with asset management

– Budget planning of the previous year's asset management is reviewed byAquila Capital's Valuation and Risk Management teams during the year to ensure further annual control

– Annual accounts for operating companies

– Deviation analysis of the project on an IRR basis in comparison to the purchase case

- The basis is the regular evaluation of the plant status & key figures

- Benchmarking of plants with comparable projects in Aquila Capital‘s portfoliofor abnormalities:

§ Develop possible solutions

§ Examine contractual bases

§ Initiate measures for remedy/optimization

§ Accompanying implementation, evaluating results

- Foresighted minimization of downtimes & production losses

- Regular on-site inspection of the systems

- Development and implementation of technical solutions to improve system performance



Project optimisation: Technical Project optimisation: Commercial (in addition to contract management)

– Financial management

§ Long-term planning, optimisation & monitoring of revenues & costs§ Evaluation of market analyses

� Compare cost/performance levels for service providers

� Fix electricity prices or interest rates optimally, if necessary

– Active insurance management

– Execution of refinancing where advantageous

– Information input for investor reportings

– Evaluation and compliance with legal requirements

– Coordination with tax consultants and auditors

– Entry of contract contents– Implementation of contractual obligations and deadlines– Implementation of content contract standards

§ E.g. bonus/malus at O&M providers to create incentives for high-quality work

§ Define response times (examples on the right side)– Optimisation of existing contracts (e.g. new tendering in the direct marketing

of German assets to improve conditions) – Negotiation of new contracts– Cooperation with internal departments for contract optimization and quality

assurance§ E.g. Legal, Tax, Compliance, Risk & Investment Management



Contract management

– Examples of external contractual partners of asset companies:§ Bank, commercial & technical manager, O&M provider, plant manufacturer,

insurance company, direct marketer, tax consultant etc.– Examples of contractually agreed response times for O&M providers:

§ Solar pv UK 1: max. 48h if >3% of the system is affected, otherwise 152h§ Solar pv Germany 1: max. 4h§ Wind energy Germany 2: weekdays 08.00-18.00 h: without delay, outside:

max. 24h§ Wind energy Germany 3: max. 4h§ Wind energy Sweden 1: Vestas: without delay; operator: none, but

remuneration partly based on performance

Glossary of terms


Capacity factors The ratio of an actual electrical energy output over a given period of time to the maximum possible electrical energy output over that period

DSCR Debt service coverage ratio, the ratio of cash available for debt servicing to interest, principal and lease payments

El-certs Green electricity certificates

Greenfield project Real asset projects which are not yet fully operational and are either under construction or in development

GoO A Guarantee of Origin (GoO) is used as proof that power has been generated from renewable sources, 1 GoO equals 1 MWh

Irradiation Irradiation is the process by which an object is exposed to radiation

LCOE Levelized cost of energy

P50 production The annual production volume that a renewable energy plant generates with a likelihood of 50%



PPA A power purchase agreement is a bilateral contract for the sale and purchase of electricity produced

GWA Generation Weighted Average – the forecasted power prices taking into consideration the developing energy generation mix (Capture Rates)

Contact details


Germany Czech Republic Japan Luxembourg Netherlands New Zealand

Hamburg (Headquarters)Valentinskamp 7020355 HamburgTel.: +49 (0)40 87 50 50-100

[email protected]

FrankfurtNeue Mainzer Straße 7560311 Frankfurt/Main

PraguePalladiumNáměstí Republiky 1110 00 Prague 1

TokyoBUREX FIVE2-11-10 ShimbashiMinatokuTokyo 105-0004

SenningerbergAirport Center Luxembourg5, Heienhaff 1736 Senningerberg

AmsterdamTower F, World Trade Center Schiphol AirportSchiphol Boulevard 2151118 BH Schiphol

Invercargill173 Spey StreetInvercargill 9810

Norway Portugal Switzerland Singapore Spain United Kingdom

OsloHaakon VII’s Gate 60161 Oslo

LisbonRua Filipe Folque No 101050-110 Lisbon

ZurichAQ Investment AGPoststrasse 38001 Zurich

Singapore No 8 Eu Tong Sen Street#19-89 The CentralSingapore 059818

MadridPaseo de la Castellana, 95Torre Europa - planta 10ª28046 Madrid

BarcelonaCarrer del Foc, 3008038 Barcelona

London103 Cannon StreetLondon EC4N 5AG

34


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 RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

This is an advertisement and not a prospectus for the purposes of EU Directive 2003/71/EC or Part VI of the Financial Services and Markets Act 2000 (FSMA).

This document has been prepared for information purposes only. It constitutes neither investment advice, an investment service nor the solicitation to make offers or any declaration of intent with a view to purchase or sell any shares or other securities in the presented product Aquila European Renewables Income PLC (the “Fund”); the contents of this document also do not constitute a recommendation for any other action or commitment and should not be construed as such. Any investment decision regarding the Fund should be made on the basis of the prospectus, a complete review of all sales documents and in consideration of the risk instructions only. The merits or suitability of any securities must be independently determined by the recipient on the basis of its own investigation and evaluation of the Fund, International Fund Management Limited (the “AIFM”) as well as Aquila Capital (as referenced below). Any such determination should involve, among other things, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of the securities. Recipients of this document are recommended to seek their own independent legal, tax, financial and other advice and should rely solely on their own judgment, review and analysis in evaluating the Fund, the AIFM and Aquila Capital and their business and affairs.

This document is being distributed to, and is directed only at persons or entities in the United Kingdom who (i) have professional experience in matters relating to investments and fall within the definition of “investment professionals” in Article 19(5) of the Financial Services and Markets Act 2000 (financial Promotion) Order 2005 (as amended, the “FPO”) or (ii) are high net worth companies, unincorporated associations and other bodies within the meaning of Article 49(2) of the FPO. This document is not for the consideration of any other person or entity that does not fall within the abovementioned categories (i) or (ii). This document especially must not be made available to retail customers (as defined in the Financial Conduct Authority’s rules). This document and the information contained herein are not for release, publication or distribution - and the shares in the Fund are not and must not be offered - directly or indirectly (i) 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 relevant laws or regulations of such jurisdictions or (ii) to, for the account or the benefit of, any national, resident or citizen of such countries. In particular, the Fund’s shares are not offered or sold, directly or indirectly within the United States or to, or for the account or benefit of, “US persons” as defined in the Regulation S of the US Securities Act of 1933, as amended. Any distribution of shares in the Fund shall be subject to, and be restricted by, the applicable laws, in particular the private placement regulations.

Historical information is not an indication of future earnings. This document may contain forward-looking statements. These statements typically contain words such as “expects” and “anticipates” and words of similar import. Such forward-looking statements, for example of future economic growth, depend on historical data and objective methods of calculation and by their nature involve risk and uncertainty and must be interpreted as forecasts only. Any reference to future returns or distributions must be understood as a target only. No assurances or warranties are given that any indicative performance or return will be achieved in the future. The Fund is an investment that is associated with considerable risks. Investors must be prepared to suffer substantial losses up to the total loss of their invested capital.


Important notice

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 subject to change. Therefore such information should be treated as provisional and no reliance may be placed for any purpose whatsoever on the information or opinions contained in this document or on its completeness, accuracy or fairness. Neither the Company, Aquila Capital Investmentgesellschaft mbH (who is acting solely in an investment advisory position to the AIFM), nor any other member of the Aquila Group (as defined below) gives any undertaking to provide the recipient with access to any additional information, to update this document or to correct any inaccuracies in it which may become apparent, and the distribution of this document and the document itself shall not be deemed to be any form of commitment.

The information contained in this presentation may constitute inside information for the purposes of the Criminal Justice Act 1993 and the EU Market Abuse Regulation (2014/596/EU) ("MAR"). You should not use this information as a basis for your behaviour in relation to any financial instruments (as defined in MAR), as to do so could amount to a criminal offence of insider dealing under the Criminal Justice Act 1993 or a civil offence of insider dealing for the purposes of MAR or other applicable laws and/or regulations in other jurisdictions.

Further, no liability whatsoever, whether in negligence, contract, under statute or otherwise, for damages arising directly or indirectly from the use of this document or the information contained herein is accepted by Aquila Capital Investmentgesellschaft mbH, any other member of the Aquila Group, the AIFM, the Fund or Numis Securities Limited (“Numis”) as the placement agent, or any of their respective directors, officers, employees, advisors, representatives or other agents.

All contact and any questions relating to this document should be directed through Numis. Numis is authorized and regulated by the Financial Conduct Authority in the United Kingdom. Numis is not acting as financial advisor to any recipient of this document, and any prospective investor interested in investing in the Fund is recommended to seek independent financial advice. Numis is acting exclusively for the Fund and no-one else in connection with any programme of placings proposed in the prospectus (“Placing Programme”) or in relation to the matters referred to in this document and will not regard any other person (whether or not a recipient of this document) as its client in this regard and will not be responsible to anyone other than the Fund for providing the protections afforded to its clients or for providing advice in relation to the Placing Programme, the contents of this document or any transaction or arrangement referred to in this document.

The Fund is incorporated and registered in England and Wales as a public company limited by shares under the Companies Act 2006 (as amended). A prospectus has been issued for the Fund, which is, together with further documents and information available free of charge via website at https://www.aquila-european-renewables-income-fund.com/.

The terms Aquila and Aquila Capital refer to companies making alternative and real asset investments as well as sales, fund-management and service companies of the Aquila Group (“Aquila Group” comprises Aquila Capital Holding GmbH and its affiliates in the sense of sec. 15 et seq. of the German Stock Corporation Act (AktG)).

This document is strictly confidential and is for the exclusive use of the persons to whom it is addressed and their advisors and shall not be copied, reproduced or distributed (in whole or in part) or disclosed by recipients. By accepting this document, the recipient agrees to be bound by the foregoing limitations.

Published by Aquila European Renewables Income Fund plc, 28.02.2020.

https://www.aquila-european-renewables-income-fund.com/

aquila european renewablesincome fund plc (‟aerif”) · 2020-03-05 · jun 2019 jul 2019aug 2019...

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