Regulatory Filings • Nov 15, 2016
Regulatory Filings
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THIS REGISTRATION DOCUMENT, THE SECURITIES NOTE AND THE SUMMARY ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank, solicitor, accountant, or other appropriate independent financial adviser authorised under the Financial Services and Markets Act 2000, as amended, if you are in the United Kingdom, or from another appropriately authorised independent financial adviser if you are in a territory outside the United Kingdom.
This Registration Document, the Securities Note and the Summary together comprise a prospectus relating to NextEnergy Solar Fund Limited in connection with the issue of New Ordinary Shares and C Shares in one or more issues throughout the period commencing 15 November 2016 and ending 14 November 2017 (the ''Share Issuance Programme''), and have been prepared in accordance with the Guernsey Prospectus Rules 2008 and the Prospectus Rules of the Financial Conduct Authority made pursuant to section 73A of FSMA, have been filed with the Financial Conduct Authority in accordance with Rule 3.2 of the Prospectus Rules.
This Registration Document is valid for a period of up to 12 months following publication and will not be updated. To the extent a further prospectus is required in connection with an issue of New Shares, such prospectus may consist of this Registration Document together with a Future Securities Note and a Future Summary applicable to such issue, which will be subject to separate approval by the FCA. Persons receiving this Registration Document should read the Prospectus together as a whole and any update in a Future Securities Note and Future Summary may constitute a material change for the purpose of the Prospectus Rules.
(A company incorporated in Guernsey under The Companies (Guernsey) Law, 2008, as amended, with registered no. 57739)
Sponsor Joint Bookrunner Shore Capital and Corporate Limited Shore Capital Stockbrokers Limited
In connection with the Share Issuance Programme and other arrangements described in the Prospectus, Cantor Fitzgerald Europe, Fidante Partners Europe Limited, Macquarie Capital (Europe) Limited, Shore Capital Stockbrokers Limited and Shore Capital and Corporate Limited, each of which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, are acting exclusively for the Company and no-one else, will not regard any other person (whether or not a recipient of the Prospectus) as their respective client and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients. This does not exclude any responsibilities or liabilities of any of the Joint Bookrunners or the Sponsor under FSMA or the regulatory regime established thereunder.
The Company is a registered closed-ended collective investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, and the Registered Collective Investment Schemes Rules 2015 issued by the Guernsey Financial Services Commission. The GFSC, in granting registration, has not reviewed this Registration Document but relied upon specific warranties provided by Ipes (Guernsey) Limited. The GFSC takes no responsibility for the financial soundness of the Company or for the correctness of any of the statements made or opinions expressed with regard to it.
This Registration Document may not be published, distributed or transmitted by any means or media, directly or indirectly in whole or in part, in or into the United States, Australia, Canada, Japan or the Republic of South Africa. This Registration Document does not constitute an offer to sell, or the solicitation of an offer to acquire or subscribe for, New Shares in any jurisdiction where such an offer or solicitation is unlawful or would impose any unfulfilled registration, qualification, publication or approval requirements or undue burden on the Company, the Sponsor, the Joint Bookrunners, the Investment Manager or the Investment Adviser. The offer and sale of New Shares have not been and will not be registered under the applicable securities laws of the United States, Australia, Canada, Japan or the Republic of South Africa. Subject to certain exceptions, the New Shares may not be offered or sold within the United States, Australia, Canada, Japan or the Republic of South Africa or to any national, resident or citizen of the United States, Australia, Canada, Japan or the Republic of South Africa.
The New Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the ''Securities Act'') or with any securities regulatory authority of any state or other jurisdiction of the United States and, subject to certain exceptions, may not be offered, sold, exercised, resold, transferred or delivered, directly or indirectly, within the United States. The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended (the ''Investment Company Act'') and investors will not be entitled to the benefits of the Investment Company Act.
The New Shares may be offered and sold: (a) in the United States only to persons reasonably believed to be qualified institutional buyers (each a ''QIB'') as defined in Rule 144A under the Securities Act (''Rule 144A'') in reliance on the private placement exemption contained in section 4(a)(2) of the Securities Act or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act; and (ii) outside the United States in offshore transactions in reliance on Regulation S under the Securities Act (''Regulation S'').
None of the US Securities and Exchange Commission, any other US federal or state securities commission or any US regulatory authority has approved or disapproved of the New Shares offered by the Prospectus nor have such authorities reviewed or passed upon the accuracy or adequacy of the Prospectus. Any representation to the contrary is a criminal offence in the United States.
Prospective investors should read the whole of the Prospectus, including the risk factors set out on pages 1 to 22 of this Registration Document and in the section headed ''Risk Factors'' in the Securities Note (and any Future Securities Note).
Copies of this Registration Document, the Securities Note and the Summary (and any Future Securities Note and Future Summary) will be available on the Company's website at www.nextenergysolarfund.com and the FCA's National Storage Mechanism at www.morningstar.co.uk/k/nsm.
15 November 2016
| RISK FACTORS | 1 | ||
|---|---|---|---|
| IMPORTANT INFORMATION | 23 | ||
| DIRECTORS, AGENTS AND ADVISERS | 27 | ||
| PART 1 | – | INVESTMENT OPPORTUNITY | 30 |
| PART 2 | – | INFORMATION ON THE COMPANY | 33 |
| PART 3 | – | THE UK SOLAR PV MARKET | 39 |
| PART 4 | – | THE CURRENT PORTFOLIO | 49 |
| PART 5 | – | THE NEC GROUP – INVESTMENT MANAGEMENT AND INVESTMENT PROCESS |
54 |
| PART 6 | – | DIRECTORS, MANAGEMENT AND ADMINISTRATION | 61 |
| PART 7 | – | FINANCIAL INFORMATION | 67 |
| PART 8 | – | ADDITIONAL INFORMATION | 72 |
| PART 9 | – | CERTAIN ERISA CONSIDERATIONS | 105 |
| PART 10 | – | DEFINITIONS AND GLOSSARY | 106 |
Investment in the New Shares carries risks, including the risks in relation to the Company and the New Shares referred to below and in the Securities Note, which could materially and adversely affect the Company's business, financial condition and results. Prospective investors should review this Registration Document carefully and in its entirety and consider consulting an independent financial adviser who specialises in advising on the acquisition of shares and other securities before investing in New Shares.
Prospective investors should note that the risks relating to the Company, its investments and the New Shares summarised in the Summary (or any Future Summary) are the risks that the Company believes to be the most essential to an assessment by a prospective investor of whether to consider an investment in the New Shares. However, as the risks which the Company faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the ''Summary'' (or any Future Summary) but also, among other things, the risks and uncertainties described below and in the section headed ''Risk Factors'' in the Securities Note (or any Future Securities Note).
The following is not an exhaustive list or explanation of all risks which investors may face when making an investment in the New Shares and should be used as guidance only. Additional risks and uncertainties not currently known to the Company, or that it currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Company's business, prospects, results of operations and financial position and, if any such risk should occur, the price of the New Shares may decline and investors could lose all or part of their investment. Prospective investors should consider carefully whether an investment in the New Shares is suitable for them in the light of the information in this Registration Document and the Securities Note (or any Future Securities Note) and their personal circumstances.
Prospective investors should be aware that distributions made to Shareholders will comprise amounts derived from the Company's receipts of, repayment of, or being distributions on, its investments in solar PV plants, including distributions derived from operating receipts of project entities.
The Company's target returns and dividends for the New Shares are based on assumptions which the Board and the Investment Manager consider reasonable. However, there is no assurance that all or any assumptions will be justified, and the returns and dividends may be correspondingly reduced. In particular, there is no assurance that the Company will achieve its stated policy on returns and dividends or distributions. The target return is not a profit forecast and should not be taken as an indication of the Company's expected future performance or results over any period. The target return is a target only and there is no guarantee that it can or will be achieved and it should not be seen as an indication of the Company's expected or actual return. Accordingly, investors should not place any reliance on the target return in deciding whether to invest in the New Shares.
The Company's target dividend and future distribution growth will be affected by the Company's underlying investment portfolio. Any change or incorrect assumption in relation to the dividends or interest or other receipts receivable by the Company (including assumptions in relation to projected power prices, levels of Government subsidy and incentives, levels of solar radiation, availability and operating performance of equipment used in the operation of the solar PV plants within the Company's portfolio, ability to make distributions to Shareholders (especially where the Group has a minority interest in a particular solar PV plant) and tax treatment of distributions to Shareholders) may reduce the level of distributions received by Shareholders. In addition, any change in the accounting policies, practices or guidelines relevant to the Group and its investments may reduce or delay the distributions received by investors.
To the extent that there are impairments to the value of the Group's investments that are recognised in the Company's income statement, this may affect the profitability of the Company (or lead to losses) and affect the ability of the Company to pay dividends.
Any impairments and changes to target returns and dividends may adversely impact on the share price. Changes in market conditions may adversely impact on share price.
The Company and/or the HoldCos and/or the SPVs through which the Group invests are and will be financed by a combination of share capital, shareholder loans and potentially third party project or asset financing debt which will be secured against the relevant SPV and its assets. As at the date of this Registration Document, the Group is financed by share capital and third party debt facilities. The Group's ability to repay these facilities is limited by reference to its current operational output. In addition, any Group member may make use of short-term debt finance to facilitate the acquisition of investments which the Group would subsequently seek to refinance through further capital raisings and/or the issuance of short-term or long-term debt instruments. In connection with the provision of debt financing, it is possible that a lender may require security by way of floating charges over the Group's assets.
The use of leverage may offer the opportunity for enhanced returns to the Group, and thus additional capital growth, but it also adds risk to the investment. For example, changes in interest rates may affect the relevant SPV's, the relevant HoldCo's or the Company's returns. Interest rates are sensitive to many factors including Government policies, domestic and international economic and political considerations, fiscal deficits, trade surpluses or deficits and regulatory requirements, amongst others, beyond the control of the Group. The performance of the Group or any member thereof may be affected if it does not limit exposure to changes in interest rates through an effective hedging strategy. There can be no assurance that such arrangements will be entered into or that they will be sufficient to cover such risk.
If an SPV fails to service any debt secured over its assets or breaches any of its covenants under the financing documents, the lender may take control of the relevant SPV and its underlying assets. Although the lender's recourse may be limited to the relevant SPV, enforcement of the lender's security could adversely affect the Net Asset Value and the Group's returns may be adversely impacted, including its ability to achieve its dividend targets.
Similarly, if the Group fails to service any debt financing incurred at the level of the Company or any of the HoldCos or breaches any of its covenants under the financing documents, the lender may be able to enforce any security provided by the Group over its investments which could involve the lender taking control (whether by possession or transfer of ownership) of one or more of the Group's investments, and this could have an adverse effect on the business, financial position and results of the Group, including its ability to achieve its dividend targets.
In addition, the Group may not be able to refinance any debt at maturity, including in particular, the Revolving Credit Facility which is repayable in 2017. In the event the Group or any member thereof is unable to repay its lenders, the lenders may be able to enforce any security provided by the Group which could involve the lenders taking control of one or more of the Group's investments, and this could have an adverse effect on the financial position and results of the Group, including its ability to achieve its dividend targets or to pay any dividends.
The New Shares may trade at a discount to NAV per Share and Shareholders may be unable to realise their investments through the secondary market at a price equal to, or greater than NAV per Share. The New Shares may trade at a discount to NAV per Share for a variety of reasons, including market conditions or to the extent investors undervalue the activities of the Investment Manager or discount the Company's valuation methodology and its judgments of value. Gilt and corporate bond yields are at historically low levels and a rise in such yields may make the Company's target returns less attractive, which could cause or increase such discount. While the Board may seek to mitigate any discount to the NAV per Ordinary Share through purchasing Ordinary Shares in the market, there can be no guarantee that they will do so or that such purchases will be successful in reducing the discount and the Board accepts no responsibility for any failure of any such strategy to effect a reduction in any discount.
The Investment Manager, the Investment Adviser, the Developer and WiseEnergy and any of their members, directors, officers, employees, agents and connected persons, and any person or company with whom they are affiliated or by whom they are employed (''Interested Parties'') may be involved in other financial, investment or other professional activities which may cause potential conflicts of interest with the Company and its investments. Interested Parties may provide services similar to those provided to the Group to other entities and will not be liable to account for any profit earned from any such services. In particular, WiseEnergy, a member of the NEC Group, provides asset management services to Group companies and receives remuneration for such services.
In addition, the Developer, also a member of the NEC Group, has entered into the Project Sourcing Agreement with the Company. The Developer will receive the reimbursement of certain costs and expenses in respect of projects introduced by it which the Company accepts (whether or not such project is ultimately accepted by the Group).
Subject to the arrangements explained above, the Company may (directly or indirectly) acquire assets from, or dispose of assets to, any Interested Party or any investment fund or account advised or managed by any such person. An Interested Party may provide professional services to members of the Group (provided that no Interested Party will act as auditor to the Company) or hold Shares and buy, hold and deal in assets or investments for their own accounts, notwithstanding that similar investments may be held by the Group (directly or indirectly).
An Interested Party may contract or enter into any financial or other transaction with any member of the Group or with any Shareholder or any entity any of whose securities are held by or for the account of the Group, or be interested in any such contract or transaction. Furthermore, any Interested Party may receive fees to which it is contractually entitled in relation to any contracts with the Group.
There is a risk that, as the Investment Manager's fees are calculated on the basis of NAV, the Investment Manager may be incentivised to increase NAV, rather than just the value of the New Shares.
Market liquidity in the shares of investment companies is frequently less than that of shares issued by larger companies traded on the London Stock Exchange. There can be no guarantee that a liquid market in the New Shares will exist. Accordingly, Shareholders may be unable to realise their New Shares at the quoted market price (or at the prevailing NAV per Share), or at all. In particular, the Company cannot predict the extent to which investor interest will lead to the development of an active and liquid trading market for the C Shares or, if such a market develops, whether it will be maintained. In addition, a substantial number of C Shares may be issued to a limited number of investors, which could adversely affect the development or maintenance of an active and liquid market for the C Shares and, following Conversion, the New Ordinary Shares.
The London Stock Exchange has the right to suspend or limit trading in a company's securities. Any suspension or limitation on trading in the New Shares may affect the ability of Shareholders to realise their investment.
In respect of an issue of C Shares, the Company would apply for a standard listing of the C Shares to be issued pursuant to the Share Issuance Programme on the Official List under Chapter 14 of the Listing Rules. As a consequence, despite the Company being subject to the obligations of a company that has a premium listing, the holders of C Shares will not directly benefit from the additional ongoing requirements and protections applicable to a premium listing under the Listing Rules (although they may do so as a consequence of the premium listing of the Ordinary Shares). In particular, the provisions of Chapters 6 to 8 and 10 to 13 of the Listing Rules (listing principles, sponsors, continuing obligations, significant transactions, related party transactions, dealing in own securities and treasury shares and contents of circulars), being additional requirements for a premium listing of equity securities, will not apply to the C Shares.
From time to time, there may be Shareholders with substantial or controlling interests in the Company. Such Shareholders' interests may not be aligned to the interests of other Shareholders and such Shareholders may seek to exert influence over the Group. In the event that such Shareholders are able to exert influence the detriment of other Shareholders, this may have an adverse effect on Shareholder returns.
Returns from the Group's investments will be affected by the price at which they are acquired. The value of these investments will be (amongst other risk factors) a function of the discounted value of their expected future cash flows, and as such will vary with, inter alia, movements in interest rates and the competition for such assets.
A valuation is only an estimate of value and is not a precise measure of realisable value. Ultimate realisation of the market value of an asset depends to a great extent on economic and other conditions beyond the control of the Company, and valuations do not necessarily represent the price at which an investment can be sold or that the assets of the Group are saleable readily or otherwise.
All valuations made by the Investment Manager and the calculations made by the Administrator, will be made, in part, on valuation information provided by the companies in which the Group has invested and, in part, on financial reports provided by the Investment Adviser and WiseEnergy. Although the Administrator and the Investment Manager will evaluate all information and data provided by the companies in which the Group has invested, they may not be in a position to confirm the completeness, genuineness or accuracy of such information or data, nor may such information be up to date by the time it has been received by the Company. Further details in relation to the valuation policy of the Company are set out under the heading ''Valuations'' in Part 6 of this Registration Document.
The Company's investment policy is limited to investments in solar PV plants, the entirety of which will be located in the UK. This means that, although the Company is subject to the investment and diversification restrictions in its investment policy, within those limits the Company has a significant concentration risk relating to the UK solar power sector. Significant concentration of investments in any one sector may result in greater volatility in the value of the Group's investments and consequently its Net Asset Value and may materially and adversely affect the performance of the Company and returns to Shareholders.
The Company seeks to invest in a series of solar power plants and will be bound by the investment and diversification restrictions in its investment policy. As a result, the Company may own a limited number of solar power plants. In the event one or more of its portfolio investments suffers, inter alia, a loss, interruption and/or lower than expected performance, this may result in greater volatility in the value of the Group's investments and consequently its Net Asset Value and may materially and adversely affect the performance of the Company and returns to Shareholders.
As no member of the Group has entered into any unconditional, legally binding agreements in relation to the purchase of any of the pipeline assets referred to under the heading ''Strong pipeline of attractive new investment opportunities available to the Company'' in Part 1 of this Registration Document, there can be no guarantee that the Group will ultimately be able to invest in these solar PV plants on satisfactory terms, or at all and it may not grow its portfolio of solar PV plants through the acquisition of these projects, or within its expected timeframe.
The Company may invest in operational assets and also in assets under construction. Completion of the acquisition of assets under construction could be delayed if there is any delay in the construction phase. This could result in a delay in the expected date on which the Company starts to earn income from the relevant assets; and/or which would affect the relevant project's entitlements under the RO. This could result in the Company's cash remaining uninvested for longer than anticipated and adversely affect returns to Shareholders.
The Company commits to acquire projects which are under construction, and completion of those acquisitions is dependent on a number of conditions being satisfied, including as to construction. If these conditions are not met, the acquisition may not proceed, the Company will suffer delays and consequently may need to source alternative projects.
The Company provides funding for the construction of certain assets it conditionally agrees to acquire. In such instances, the Company is exposed to risk of non-payment and non-performance as a result (in the event completion of the acquisition does not proceed). However, all such lending is on a secured basis and drawdown is against milestones in order to mitigate such risks.
The ability of the Company to achieve its investment objective is highly dependent on the financial and managerial expertise of the Investment Manager's and the Investment Adviser's investment professionals, and more generally the ability of the Investment Manager and the Investment Adviser to attract and retain suitable staff. Key personnel could become unavailable due, for example, to death or incapacity, as well as due to resignation. There may be regulatory changes in the area of tax and employment that affect pay and bonus structures and may have an impact on the ability of the Investment Manager and/or the Investment Adviser to recruit and retain staff. In the event of any departure for any reason, it may take time to transition to alternative personnel, which ultimately might not be successful. The impact of such a departure on the ability of the Company to achieve its investment objective cannot be determined.
The Investment Manager is responsible for making all investment and management decisions on behalf of the Company, but is only able to invest in assets which are recommended to it by the Investment Adviser. Accordingly, the ability of the Company to achieve its investment objective will be dependent upon the judgment and ability of the Investment Adviser in the provision of its services to the Investment Manager in terms of evaluating the viability and suitability of investment opportunities.
The past performance of investments managed and monitored by the Investment Manager, Investment Adviser or its associates is not a reliable indication of the future performance of the investments held by the Group.
The anticipated taxation impact of the structure of the Group and its underlying investments is based on prevailing tax law and accounting practice and standards. Any change in the tax status of any member of the Group or any of its underlying investments or in tax legislation or practice (including in relation to taxation rates and allowances) or in accounting standards could adversely affect the investment return of the Group.
Representations in this Registration Document concerning the taxation of Shareholders, the Company, the HoldCos and SPVs are based on tax law and tax authority practice as at the date of this Registration Document. These are, in principle, subject to change and prospective investors should be aware that such changes may affect the Company's ability to generate returns for Shareholders and/or the taxation of such returns to Shareholders. If you are in any doubt as to your tax position you should consult an appropriate independent professional adviser.
Any change in the tax status of any Group member, or in tax legislation or the tax regime, or in the interpretation or application of tax legislation applicable to the Company, any HoldCo, any SPV or the companies or assets comprised in the Company's investment portfolio, could affect the value of the investments held by the Group, the Company's ability to achieve its stated objective, the Company's ability to provide returns to Shareholders and/or alter the post-tax returns to Shareholders.
A number of countries have introduced beneficial tax and subsidy regimes to support the generation of renewable energy. In at least one instance this regime has been subject to retrospective change by the jurisdiction concerned. There is no guarantee such changes will not be introduced in the UK. Any such change could have a material adverse effect on the Group.
The solar PV energy sector is subject to extensive legal and regulatory controls, and the Group and each of its solar PV plants must comply with all applicable laws, regulations and regulatory standards which, among other things, require the Group to obtain and maintain certain authorisations, licences and approvals for the construction and operation of the solar PV plants. Breaches of any such legal or regulatory controls or laws may result in members of the Group being the subject of proceedings, including criminal proceedings and incurring fines or other sanctions.
The Company must also comply with the provisions of the Companies Law and, as its Shares are admitted to the Official List and subject to, and subject to the Listing Rules, and the Disclosure Guidance and Transparency Rules. The HoldCos and the SPVs shall be subject to company law in the jurisdiction of establishment. A breach of the Companies Law could result in the Company and/ or the Board and/or any member of the Group being the subject of proceedings including criminal proceedings and incurring fines or other sanctions.
Under the AIFM Directive, certain conditions must be met to permit the marketing of shares in AIFs to prospective and existing investors in the EU, including that prescribed disclosures are made to such investors. Implementation and interpretation of the AIFM Directive varies among Member States and may vary over time; it is therefore difficult to predict the effect of the AIFM Directive, as implemented, on the Company, the Investment Manager and the Investment Adviser. The AIFM Directive requires certain reports and disclosures to be made to regulators in those Member States and of members of the EEA in which ordinary shares in the Company are marketed. Such reports and disclosures may become publicly available.
The Company operates as an externally managed non-EU AIF for the purposes of the AIFM Directive and as such none of it, the Investment Manager, or the Investment Adviser is required to seek authorisation under the AIFM Directive. Following national transposition of the AIFM Directive in a given Member State, the marketing of shares in AIFs that are established outside the EU (such as the Company) to investors in that Member State will be prohibited unless certain conditions are met. Certain of these conditions are outside the Company's control, for example because they are dependent on the regulators of the relevant third country (in this case Guernsey) and the relevant Member State entering into regulatory co-operation agreements with one another. Accordingly, the Company cannot guarantee that such conditions will be satisfied. In cases where the conditions are not satisfied, the ability of the Company to market its shares or raise further equity capital in the EU/EEA may be limited or removed.
Any regulatory changes relating to the AIFM Directive (or otherwise) that limit the Company's ability to market future issues of its Shares may have a material adverse effect on Company's business, financial condition, results of operations, NAV, business prospects and/or the market price of the New Shares which, in turn, may have a material adverse effect on returns to Shareholders.
At some point after 2018 it may be the case that a passport will be phased in to allow the marketing of non-EU AIFs (such as the Company) and that private placement regimes will be phased out, although this is currently uncertain. Both the phasing in of the passport and the phasing out of national private placement regimes may increase the regulatory burden on the Company. Consequently, in the future there may be additional registration and reporting requirements in relation to, and restrictions, on the marketing of the Shares in the EU which, in turn, may lead to an increase in the costs borne by the Company and/or have a negative effect on marketing and liquidity generally in the Shares.
There may also be further regulatory change should the UK leave the European Union in accordance with the referendum on this in June 2016. Such change may also adversely affect the marketing of the Shares in the EU and/or EEA.
On 1 January 2014, the Unregulated Collective Investment Schemes and Close Substitutes Instrument 2013 (the ''NMPI Regulations'') came into force in the UK. The NMPI Regulations extended the application of the UK regime restricting the promotion of unregulated collective investment schemes by FCA authorised persons (such as independent financial advisers) to other ''non-mainstream pooled investments'' (''NMPIs''). With effect from 1 January 2014, FCA authorised independent financial advisers and other financial advisers are restricted from promoting NMPIs to retail investors who do not meet certain high net worth tests or who cannot be treated as sophisticated investors.
In order for the Company to be outside of the scope of the NMPI Regulations, the Company needs to rely on the exemption available to non-UK resident companies that are equivalent to investment trusts. This exemption provides that a non-UK resident company that would qualify for approval by HMRC as an investment trust were it resident and listed in the UK will be excluded from the scope of the NMPI Regulations. The principal relevant requirements to qualify as an investment trust are that: (i) the Company's business must consist of investing its funds in shares, land or other assets with the aim of spreading investment risk and giving members of the Company the benefit of the results of the management of its funds; (ii) the Ordinary Shares must be admitted to trading on a regulated market (such as the London Stock Exchange's Main Market); (iii) the Company must not be a close company (as defined in Chapter 2 of Part 10 of the Corporation Tax Act 2010); and (iv) the Company must not retain in respect of any accounting period an amount which is greater than 15 per cent. of its income.
The Board intends to conduct the Company's affairs such that the Company can satisfy requirements (i), (ii) and (iv) above. It is not anticipated that the Company would be regarded as a close company if it were resident in the UK, although this cannot be guaranteed. On the assumption that the Company is not a close company, it would qualify for approval as an investment trust if it were resident in the UK. The Company will be outside of the scope of the NMPI Regulations for such time as it satisfies the conditions to qualify as an investment trust. If the Company is unable to meet those conditions in the future, for any reason, consideration would be given to applying to the FCA for a waiver of the application of the NMPI Regulations in respect of the Shares.
If the Company becomes close or does not, or ceases to, conduct its affairs so as to satisfy the non-UK investment trust exemption to the NMPI Regulations and the FCA does not grant a waiver, the ability of the Company to raise further capital from retail investors may be affected which, in turn, may have a negative effect on marketing and liquidity generally in the Shares.
In this regard, it should be noted that, whilst the publication and distribution of a prospectus (including the Prospectus) is exempt from the NMPI Regulations, other communications by ''approved persons'' could be restricted (subject to any exemptions or waivers).
Part 8 of the Taxation (International and Other Provisions) Act 2010 contains provision for the UK taxation of investors in offshore funds. Whilst the Company has been advised that it should not be treated as an offshore fund, it does not make any commitment to investors that it will not be treated as one. Investors should note the statements made in this Registration Document in respect of discount management and should not expect to realise their investment at a value calculated by reference to NAV per Share.
The Group manages its UK tax liabilities by, inter alia, relying on tax deductions for interest payments. There are a number of provisions that could restrict the availability of those tax deductions. UK transfer pricing legislation limits the tax deductibility of interest should any terms of the loans with related parties be considered not to reflect the normal arm's length terms which would have been agreed between two independent enterprises. This includes both the rate of interest charged and the amount of debt. In particular, an entity is at risk of disallowance of tax deductions for interest payments it makes if it has excessive debt in relation to its arm's length borrowing capacity. Any restriction to the tax deductibility of interest could result in increased UK corporation tax liabilities of the Group and this could in turn adversely affect the returns to the investors.
Action 4 of the OECD Base Erosion and Profit Shifting project addresses tax deductions for interest. Once implemented, there are likely to be additional restrictions on such deductions. As a consequence, the UK Government is currently consulting on new restrictions on tax deductions for interest, which are expected to apply from 1 April 2017.
The Group may fall within the World Wide Debt Cap regime which could result in a restriction on the amount of finance expense allowable for tax purposes based on the Group's worldwide external gross finance expense.
Primarily, the SPVs are funded with equity and external debt which mitigates this risk.
Another way in which the Group may manage its UK tax liabilities is by surrendering losses between group companies. The UK Government has announced two major reforms to the UK loss relief rules. Losses arising from 1 April 2017 will be able to be carried forward and set against the taxable profits of different activities within a company and the taxable profits of its group members. However, the amount of annual profit that will be able to be relieved by carried-forward losses will be limited to 50 per cent. from 1 April 2017, subject to an allowance of £5 million per group. The UK Government is currently consulting on the implementation of these reforms, which may adversely affect the tax position of the Group and in turn the returns to the investors.
The Group also intends to use capital allowances to reduce its UK tax liabilities. Capital allowances are available on qualifying capital expenditure at varying rates. Claims for capital allowances in relation to solar PV installations are still a relatively new area and therefore more likely to be scrutinised by HMRC. Any successful challenge from HMRC of capital allowances claimed by the Group could lead to increased UK tax liabilities which could impact the returns available for distribution to the investors in the Company.
The Company expects to be classified as a passive foreign investment company (a ''PFIC'') for United States federal income tax purposes, which could result in adverse United States federal income tax consequences to US Holders of the New Shares. Prospective investors should review Part 4 of the Securities Note (United States federal income taxation) for further matters to consider regarding PFICs.
Under the FATCA provisions of the US Hiring Incentives to Restore Employment Act 2010, payments to the Company of US-source income, gross proceeds of sales of US property by the Company after 31 December 2018 and certain other payments received by the Company after 31 December 2018 at the earliest will be subject to 25 per cent. US withholding tax unless the Company complies with FATCA. Guernsey signed an intergovernmental agreement with the US Treasury on 13 December 2013 which seeks to enable Guernsey financial institutions to comply with FATCA by requiring them to report information to the Guernsey tax authority pursuant to domestic legislation. Whilst the Company will seek to satisfy its obligations under FATCA (including under such intergovernmental agreement between Guernsey and the US and Guernsey legislation and guidance implementing such intergovernmental agreement) to avoid the imposition of any FATCA withholding tax, the ability of the Company to satisfy such obligations will depend on receiving relevant information and/or documentation about each Shareholder and the direct and indirect beneficial owners of the Shares (if any). The Company intends to satisfy such obligations, although there can be no assurances that it will be able to do so. There is therefore a risk that the Company may be subject to one or more FATCA withholdings and that any amounts of US tax withheld may not be refundable by the Internal Revenue Service (''IRS''). Prospective investors should consult their advisers regarding the implications of FATCA and any other similar legislation and/or regulations for their investment in the Company.
Guernsey, along with over 50 other jurisdictions, has implemented the CRS with effect from 1 January 2016. Certain disclosure requirements may be imposed in respect of certain Shareholders in the Company falling within the scope of the CRS.
Shareholders will be required to provide certain information to the Company (or its agents from time to time) in order to enable the Company to comply with its FATCA and CRS obligations in accordance with the Articles. If a Shareholder fails to provide the required information within the prescribed period, the Board may treat that Shareholder as a Non-Qualified Holder and require the relevant Shareholder to sell its Shares in the Company. The relevant provisions in the Articles will also apply should other jurisdictions introduce similar provisions to FATCA, such as the CRS.
If prospective investors are in any doubt as to the consequences of their acquiring, holding or disposing of New Shares, they should consult their stockbroker, bank manager, solicitor, accountant or other independent financial adviser.
The Group faces significant competition for assets in the UK solar power sectors from a variety of potential buyers. Competition for appropriate investment opportunities may, therefore, increase, thus reducing the number of opportunities available to, and adversely affecting the terms upon which investments can be made by, the Group, and thereby limiting the growth potential of the Group.
Such competition may cause a decrease in expected financial returns. The ability of the Company to achieve its investment objective depends upon the Company identifying, selecting and executing investments which offer the potential for satisfactory returns.
The availability of suitable investment opportunities will depend, in part, upon conditions in the UK solar PV market. There can be no assurance that the Group will be able to identify and secure investments that satisfy its investment criteria.
Investments introduced by the Developer will be assessed by the Investment Adviser and the decision as to whether to acquire any investment will be made by the Investment Manager. Consequently, the Group may fail to acquire some or all of the assets which may be made available to it under the Project Sourcing Agreement.
The making of any further investments in any solar PV plant will be conditional upon, amongst other things, receipt of all necessary consents, approvals, authorisations and permits, the Company deciding to proceed with the acquisition, the Company being able to finance its commitment to a particular investment, satisfactory completion of due diligence and the entering into of binding agreements in a form satisfactory to all the parties thereto, including the Company.
Where the Group is taking development risk and investing in early stage assets under development (using up to the permitted 10 per cent. of Gross Asset Value available for this purpose), it is likely to incur third party costs in securing planning, grid connection and landowner rights (amongst other things). With investments in such early stage projects there is a greater risk that the projects may fail, compared to investments made in later stage assets.
The Group has, and may continue to, provide finance by way of a secured loan to enable EPC contractors to construct projects that the Company may (but need not necessarily) acquire once such projects are completed, assuming that they continue to meet the Investment policy of the Company. The Group may use up to the permitted 25 per cent. of Gross Asset Value available for this purpose (through the ''forward funding'' mechanism). Through this activity, the Group may be exposed to counterparty credit risk. The risk arises that the risk management measures adopted to control this risk may prove to be inadequate and if there is a default under the loan facility with any such EPC contractor, the Company may have inadequate security.
Costs and expenses may be incurred by the Group in respect of projects for which due diligence is undertaken but which are not ultimately acquired by the Group. Such costs and expenses may include costs and expenses paid by way of reimbursement to the Developer where a suitable project proposed by the Developer has been accepted (but is not ultimately acquired) by the Company.
Solar PV equipment prices can increase or decrease for a wide variety of reasons. Such changes would generally be expected to produce corresponding changes in the value of green benefits available to new renewable power generation projects, although this may not always be the case. Prices for solar PV equipment are influenced by a number of factors, which include the price and availability of raw materials, global and regional demand for PV equipment, and any import duties that may be imposed on PV equipment.
The European Commission has concluded its anti-dumping and anti-subsidy investigations concerning imports of solar panels from China. The imposition of definitive measures was confirmed by the European Council on 2 December 2013, which includes charging duties at an average of 47.7 per cent., to apply for two years as of 6 December 2013. However the European industry has the right to request Expiry Reviews for both measures. These requests have to contain evidence that the expiry of measures would be likely to result in a continuation or recurrence of dumping and injury (for the anti-dumping measures) and continuation or recurrence of subsidy and injury (for the anti-subsidy measures). An expiry review is currently being undertaken.
In parallel, a price undertaking covering approximately 75 per cent. of Chinese solar panel exports to the EU was accepted by the Council on 2 December 2013. Duties will not be imposed on those companies covered by the undertaking, which imposes a minimum import price for photovoltaic modules, and a minimum price for their key components (that is, cells and wafers). There is a risk that duties imposed may be extended beyond the two year deadline, or that further measures are taken in the future that interfere with the prices of solar PV equipment.
Changes in the cost of solar PV equipment could have a material adverse effect on the Group's ability to source projects that meet its investment criteria and consequently its business, financial position, results of operations and business prospects.
If UK Government, EU and international support for reducing GHG emissions, including obligations and incentives for the development of renewable energy, were to decline, be withdrawn or change, whether on a retrospective or prospective basis, this could have a material adverse effect on the business, financial position, results of operations and future growth prospects of the Group, in addition to Shareholder returns. Changes could occur for any reason, including the adoption of a different energy mix, the discovery or invention of a more preferred fuel and/or source of energy, or a change to the fiscal status of sovereign states. The confirmation of the nuclear development at Hinkley Point could signal a shift towards support for a programme of new nuclear plants, however the market expectation is that any new build plant would have a lead time of several years for permitting and construction. The UK Government's position on renewable energy following the referendum to leave the EU is not yet clear and it is possible that it will diverge from EU policy and that support for renewable energy may decrease.
Changes to the level of political support for renewable energy may result in changes to the levels of subsidy and incentives for renewable generation. Any changes having a retrospective effect (such as the withdrawal of the Levy Exemption Certificates which took place in 2015) may adversely impact the company's Net Asset Value. Any changes having a prospective effect may affect the availability of assets for acquisition and hence the Company's future growth prospects.
Under the RO regime, the price at which a solar PV plant sells its electricity is determined by wholesale market prices for ROCs and for electricity generation in the UK although from 2027 the Government intends to set a fixed price for ROCs. In the event that the costs of other sources of electricity generation, such as nuclear power or fossil fuels, were to decline, this could reduce the wholesale price of electricity generation. Wholesale prices of electricity generation could be reduced in the event that costs of other sources of electricity generation (such as fossil fuels including domestically produced shale gas or nuclear) were to decline, for example this could arise should a politically and environmentally acceptable source of domestic shale gas be made available in the UK energy market. This could, according to some analysts, have a material negative impact on wholesale energy prices. Wholesale electricity prices could also decline if a significant amount of new electricity generation capacity became available. A number of broader regulatory changes to the electricity market (such as changes to integration of transmission allocation and changes to energy trading and transmission charging) are being implemented across the EU which could also have an impact on electricity prices.
Within the terms of the EMR, the Government has established Capacity Markets. This framework is intended to secure forward generator capacity with a resulting reduction in short term merchant risk but with the effect of reducing the price for generated energy. The consequential impact of this reform may be to depress energy prices and energy price inflation, with a specific impact on the post ROC period revenues of projects but with a likely effect on prices.
Should the market price for electricity decline, this could materially adversely affect the price achieved for electricity generated by solar PV plants, and thus the Group's business, financial position, results of operations, and business prospects. The risk of declines in the wholesale price of electricity can be mitigated through a variety of means through trading strategies.
Generally, the level of subsidy (FiTs or the price at which ROCs can be sold) achieved by UK solar plants is determined by UK and EU renewable energy policies. The value of green subsidies can therefore be affected by changes in the political will to support solar PV projects and other factors such as the cost of solar PV equipment.
The Company seeks fixed price and long-term PPA arrangements with credit worthy energy supply companies in the UK but these can only be completed on connection of the asset to the National Grid. These PPAs may vary (adversely) up to the point of final connection. The PPA terms are typically for periods less than that for the life of the asset and the PPA terms may suffer variation when renegotiated in the future. Projects accredited by Ofgem in the RO year 2014/2015 earn 1.4 ROCs per MWh; those accredited in 2015-2016 earn 1.3 ROCs, while small scale solar stations (5MW or less) accredited between 31 March 2016 and 31 March 2017 should earn 1.2 ROCs if they meet the significant financial commitment grace period criteria. From 1 April 2017 the RO will be closed and is being replaced with a contract for differences (CfD) regime. Whether a project obtains a CfD is dependent upon its auction strategies and this could reduce the level of support available.
Therefore, depending on how quickly the Company invests its funds, the level of subsidy available may be affected which may affect the financial model and future cashflows. At present, there is uncertainty as to the CfD regime and its availability for solar PV projects.
Although fixed rates of return are usually provided under the FiTs regime, the value of ROCs under the RO will fluctuate according to their market supply and demand until 2027 when the price of ROCs is intended to be fixed by the Government. The CfD regime is more predictable and similar to the FiTs regime in terms of income certainty once a project is locked in to the CfD.
A variety of ways exist to mitigate the risk of declines in the price of green subsidies through trading strategies (including long-term PPAs). Reductions in levels or market value of green benefits available could have a material adverse effect on the Group's business, financial position, results of operations and business prospects. ROC prices could be materially and adversely affected by an imbalance of supply and demand should the actual amount of renewable energy generation exceed expectation on the annual Renewable Obligation target.
As a result of the changes arising from Electricity Market Reform (EMR) counterparties to existing PPAs may attempt to re-open negotiations or even terminate their agreements, relying on change of law provisions, as a result of changes brought about by EMR. The commercial terms available under replacement or newer PPAs may be less attractive. These charges may impact on the Company's income and Net Asset Value. This could include the possible scenario of the date for replacing ROCs with fixed price certificates being brought forward. Under the new CfD regime, the Government has introduced ''strike prices''.
In the context of changes to the levels of subsidy and incentives and Electricity Market Reform, in order to maintain investor confidence, the UK Government has generally ensured that the benefits already granted to operating renewable power generation projects are exempted from future regulatory change. This practice is referred to as grandfathering. Grandfathering is a policy decision and, as such, there is no guarantee that the practice of grandfathering will be continued. There have been court judgements that support the view that the Government should not make retrospective changes that reduce support for existing accredited projects, though such judgements may not be followed in the future or their precedent may be overturned by legislation. The EU has also published guidance that Governments should avoid unannounced or retrospective changes to renewable energy support schemes, and the UK Government has restated its commitment to not making retrospective changes.
If the UK Government was to abandon the practice of grandfathering and apply adverse retrospective changes to the levels of support for operating projects in which the Group has a financial interest this could have a material adverse effect on the Group's business, financial position, results of operation and business prospects, and the Net Asset Value.
Modelling detailed in the Government's Gas Generation Strategy (published December 2012), suggests that as much as 26GW of new gas plant could be required by 2030, in order to replace older fossil fuel and nuclear plants as they are decommissioned. The development of new gas power projects, may discourage the deployment of renewable technologies. This could be exacerbated by the uptake of significant volumes of domestically-produced shale gas or any other factor that results in falls in wholesale gas prices. The Government has indicated its support for developing shale gas production, with the establishment of the Office for Unconventional Gas and Oil within DECC in March 2013. Furthermore, Sajid Javid, the Secretary of State for Communities and Local Government, gave consent in October 2016 for an independent UK energy company to explore for shale gas in Lancashire. This decision could potentially provide a precedent for other companies that are preparing to seek permission to drill wells across the north of England.
Any significant move to gas power generation or other modern gas technologies, and away from renewable technologies, greater than that currently assumed in the market, could negatively impact the Group's prospects and performance.
Solar PV plants require an extensive permitting process to secure approvals for construction, grid connection and operation. For example, development of a project will require planning permission from the Local Planning Authority, and may require an Environmental Impact Assessment depending upon the size and impact of the proposed project.
Any change to permitting policies and procedures may reduce the number of solar PV plants in the UK market and consequently reduce the number of investment opportunities available to the Group. As a result, the Group's ability to deploy the net proceeds of Issues and business prospects may be adversely impacted.
Solar PV plants can only be constructed post award of planning permission for utility scale groundmounted plants. There is a six week period in which planning permission may be subject to judicial review and is at risk of being quashed. The Company intends to only consider those plants where such challenge period has expired without objection.
Planning permissions may also contain provisions for archaeological review of sites and submission of professional reports to the relevant local authority for discharge of planning requirements. Where such an archaeological review finds evidence of archaeological interest at potential risk due to plant construction then the planning permission may be withdrawn or amended and this could result in a reduction in value.
The effect of these risks would be to reduce the number of opportunities for the Company to acquire assets including those in the current pipeline. As a result, the Group's ability to deploy the net proceeds of Issues and business prospects may be adversely impacted.
The revenues and expenditure of solar PV plants are frequently partly or wholly subject to indexation, typically with reference to RPI and the Company's target distributions are linked to RPI. RPI is the result of factors outside the control of the Company and, in absolute terms, the Company's distributions would be adversely affected by deflation.
RPI is published by the Office for National Statistics on a monthly basis and measures the change in the cost of a basket of retail goods and services. Its calculation may be subject to change in the future. In 2012 the Office for National Statistics undertook a consultation, prompted by the gap between the estimates produced by the RPI and the Consumer Prices Index (CPI) which considered changing the formulae used at the elementary aggregate level in the RPI. Such consultation is concluded and recommended that the RPI formulae should remain unchanged. Should the basis of calculation of RPI be changed in the future, including inter alia through changes to the constituent basket of retail goods and services or through changes to the formulae used at the elementary aggregate level, such a change may reduce future published RPI figures, which could have an adverse effect on the absolute level of the Company's distributions.
Prior to the acquisition of a solar PV plant or any entity that holds a solar PV plant or rights to construct a solar PV plant, the Company and its advisers (including with the Investment Adviser) will undertake commercial, financial, technical and legal due diligence on the assets. Notwithstanding that such due diligence is undertaken, such due diligence may not uncover all of the material risks affecting the solar PV plant or entity, as the case may be, and/or such risks may not be adequately protected against in the acquisition documentation. The Group may acquire assets with unknown liabilities and without any recourse, or with limited recourse, with respect to unknown liabilities. However, if an unknown liability was later asserted against the acquired assets, the Group might be required to pay substantial sums to settle it or enter into litigation proceedings, which could adversely affect cash flow and the results of its operations. Accordingly, in the event that material risks are not uncovered and/or such risks are not adequately protected against, this may have a material adverse effect on the Group.
Technical analysis of the build quality, lifecycle costs, technical performance and asset life will be undertaken by the technical advisers appointed by the Group in connection with any proposed acquisition. It is not intended that the equipment and systems purchased will rely substantially on new technology and it is expected that they will have a track record in other solar PV plants. Even so, components such as cabling, PV panels, inverters and control systems amongst others can fail and repair or replacement costs, in addition to the costs of lost production, can be significant.
To the extent that the Group does not have cash reserves available for investment and is unable to finance these investments by raising further equity, the Group would need to finance further investments either by borrowing (whether by new borrowing or refinancing existing debt) or by the Company issuing further Shares. There can be no assurance that the Group may be able to borrow or refinance on reasonable terms or that there will be a market for further New Shares. If new borrowing is required for any further investments, the Group does not intend to commit to any such further investments unless such commitment is conditional upon further borrowings, as required. Any borrowing by the Company will have to comply with the Group's limits on borrowing in its investment policy.
The ability of the Company to deliver enhanced returns and consequently realise expected real Net Asset Value growth may be dependent on ongoing access to debt facilities. Please see the risk factor regarding leverage above for further information. There can be no assurance that the Group may be able to borrow on reasonable terms or at all.
The Group is a party to long term debt financing at the HoldCo and SPV levels. Any cashflow volatility in those SPVs will be exacerbated by such leverage, because cashflows must first be used to repay the financing and a reduction in cashflows will, therefore, reduce the amounts available to be paid as dividends, and returns to investors. In the event of cashflows from the relevant SPVs being insufficient to meet the repayment obligations to the lenders, the security taken by the lenders over the SPVs and the assets of the relevant SPVs may be enforced, resulting in a loss of assets to the Group.
The Group will be exposed to third party credit risk in several instances, including, without limitation, with respect to contractors who have constructed the Group's plants, may be engaged to operate assets held by the Group, property owners or tenants who are leasing ground space to the Company for the locating of the assets, or the off-takers of energy and green benefits supplied, banks who may provide guarantees of the obligations of other parties or who may commit to provide leverage to the Group at a future date, insurance companies who may provide coverage against various risks applicable to the Group's assets (including the risk of terrorism or natural disasters affecting the assets) and other third parties who may owe sums to the Group. In the event that such credit risk crystallises in one or more instances (for instance, an insurer which grants coverage becomes insolvent as a result of claims made due to a natural disaster by several persons insured by it and the Group is, consequently, unable to make substantial recovery under its own insurance policy with such insurer), this may materially adversely impact the investment returns.
The profitability of a solar PV plant over its full asset life is dependent, amongst others, on the owner's ability to manage and control the operating expenses of each plant. Plant operating expenses include land lease, O&M expenses, insurance coverage and asset management costs, as well as other costs.
In addition, a plant's profitability over its full asset life is also dependent on the owner's ability to manage and control investment costs during the operational phase of a plant. Investment costs at the plant level include replacing faulty technology components (such as modules, inverters, cables, interconnection gear, module support systems) not covered by supplier warranties or guarantees, rebuilding the plant following any unexpected event such a theft, burglary or act of vandalism not covered by insurance providers.
As a result, the Group's inability to control operating expenses and investments at the solar PV plants it acquires may adversely impact the Company's financial performance, results and ability to pay dividends to Shareholders.
The Company expects to carefully select and rely on third-party professionals and independent contractors and other service providers to provide the required operational and maintenance support services throughout the construction and operating phases of the UK solar PV plants in the Group's investment portfolio. In the event that such contracted third parties are not able to fulfil their obligations or otherwise fail to perform to standard, the Group may be forced to seek recourse against such parties, provide additional resources to undertake their work, or to engage other companies to undertake their work. However, any such legal action, breach of contract or delay in services by these third-party professionals and independent contractors could have a material adverse effect on the Group's business, financial condition and results of operations.
The Group's ability to invest in and operate solar PV projects could be adversely affected if the contractors with whom the Group wishes to work do not have sufficient capacity to work with the Group on its chosen projects. In addition, if the quality of a contractor's work does not meet the requisite requirements, this could have an adverse effect on the construction and operations, and financial returns of such projects, as well as the Group's reputation.
Where an operation and maintenance contractor, or any other contractor, needs to be replaced, whether due to expiry of an existing contract, insolvency, poor performance or any other reason, the Group will be required to appoint a replacement contractor. Any such replacement contractor may be of higher costs. If it takes a long time to find a suitable contractor, it could potentially lead to delays, lower technical and operating performance or downtime for the relevant asset. This could have a material adverse effect on the Group's financial position, results of operation and business prospects.
The Company expects to acquire projects on which, as a general rule, third-party EPC contractors have provided the required turn-key construction contracts. As part of these EPC contracts, the EPC contractor assumes financial and operational warranties and guarantees during the initial phase of the plant's operational life.
Where a EPC contractor has not fulfilled his contractual duties and/or the performance of the plant falls below the guaranteed levels, the Group will pursue all means to recover any losses resulting therefrom and seek compensation for any incremental investment costs sustained by the Company to correct any faults uncovered.
In the event the EPC contractor is not able to cover his contractual liabilities, the Company's financial position, results of operations and ability to pay Shareholder dividends may be adversely impacted.
If the construction is delayed for any reason which could include for example extended period of adverse weather conditions, this could delay commissioning and accreditation under the RO and, consequently, adversely impact the level of support achieved by the asset.
In the event that the Group's investments do not generate sufficient returns or if for other reasons the Group does not generate profits for the Company sufficient to enable the payment of dividends at or above the target described herein, the Company will not have excess cash available for reinvestment which may inhibit growth of the NAV or, indeed, its maintenance at prior levels. Further, the Board conducts the Company's affairs in a manner intended that (if the Company were a UK company) it would qualify for approval as an investment trust. Such approval may require the distribution of cash that would otherwise be available for reinvestment.
Even if excess cash is available there is no guarantee that suitable investments will be available for the deployment of that cash.
Although the Investment Manager will procure that appropriate legal and technical due diligence is undertaken on behalf of the Company in connection with any proposed acquisition of UK solar PV plants by the Company, this may not reveal all facts and risks that may be relevant in connection with an investment. In particular, if the operation of projects has not been duly authorised or permitted, it may result in closure, seizure, enforced dismantling or other legal action in relation to such projects. Certain issues, such as failure in the construction of a plant, for example, faulty components or insufficient structural quality, may not be evident at the time of acquisition or during any period during which a warranty claim may be brought against the contractor. Such issues may result in loss of value without full or any recourse to insurance or construction warranties.
Further, construction delays may occur during the construction of any such project due to either a delay or shortage of critical path project components, such as modules or inverters. Such delays could affect the time in which the project becomes operational or could even lead to the project being prevented from ultimately being constructed.
Warranties and performance guarantees typically only apply for a limited period, and may also be conditional on the equipment supplier being engaged to provide maintenance services to the project. Performance guarantees may also be linked to certain specified causes and can exclude other causes of failure in performance, such as unscheduled and scheduled grid outages. Should equipment fail or not perform properly after the expiry of any warranty or performance guarantee period and should insurance policies not cover any related losses or business interruption the Company will bear the cost of repair or replacement of that equipment.
In addition, operational solar PV plants remain subject to on-going risks, some of which may not be fully insured or fully protected by contractor or manufacturer warranties, including but not limited to security risks, technology failure, manufacturer defects, electricity grid forced outages or disconnection, force majeure or act of God. Whilst solar PV energy technology has been utilised for many years manufacturers continue to develop and change technology and this may result in unforeseen technology failures or defects.
Any unforeseen loss of performance and/or efficiency in solar modules, beyond the warranted degradation, on an acquired or developed asset would have a direct effect on the yields produced by a solar PV plant and, as a consequence, could have a material adverse effect on the Group's business, financial condition and results of operations. In addition, any unforeseen loss or redaction of performance of other technology components of a solar PV plant, such as the inverters, wiring, electronic components, switchgear and interconnection facilities, could have a material adverse change on the Group's business, financial condition and result of operations.
The Company contracts to acquire plants once constructed and may contract whilst they are ready for, or already in, construction. Contract completion is arranged to occur post solar PV plants commissioning. Due to the removal of ROC subsidy for larger solar PV plants as at 31 March 2015 subject to grace periods, and the envisaged removal of ROC subsidy for smaller solar PV plants as from 31 March 2017, the Company has typically ensured that the contracts to acquire have break points based on delivery dates. These break-points can be linked to liquidated damages, a price reduction or both; in the past, the Company has ensured it had the right but not obligation to acquire these solar PV plants post construction where the relevant ROC deadline has been missed. It is possible in these circumstances that the Company may still acquire the solar PV plants at a much reduced price and on advantageous terms that will be defined at that event. Consequently, the solar PV plants may be 100 per cent. exposed to Brown Power prices for the period to the next CfD auction or permanently should it fail to achieve a CfD contract. The exposure to Brown Power only revenues carries a significant risk that Brown Power prices may decline for a period or permanently. Such a reduction or loss of revenue may materially adversely impact the investment returns.
In order to sell their energy output and thus realise value, solar PV facilities must be and remain connected to the distribution or transmission grid. Therefore the group is reliant upon electricity transmission facilities owned by third parties to sell the electricity produced by its solar PV plants. Typically, the Group will not be the owner of, nor will it be able to control, the transmission or distribution facilities except those needed to interconnect its solar PV plants to the electricity network.
Accordingly, a solar PV plant must have in place the necessary connection agreements and comply with their terms in order to avoid potential disconnection or de-energisation of the relevant connection point.
In addition, in the event that the transmission or distribution facilities break down with or without fault of the distribution or transmission grid operator, the Company may be unable to sell its electricity and this could have a material adverse effect on the Group's business, financial status and results of operations. The circumstances in which compensation, if any, would be payable are limited and the amounts payable are unlikely to be sufficient to cover any losses of revenue. Thus, the Group would have to rely on business interruption insurance to compensate for its losses. Business interruption insurance is likely to have a minimum claim amount and not all losses sustained by the Group may be recovered, which could have a material adverse effect on the Company's financial position and results of operation.
A risk inherent to the connection to any electricity network is the limited recourse a generator has to the network operator if the solar PV plant is constrained off the system. In certain specified circumstances, NGET, as system operator, can require generators (or the electricity suppliers registered as being responsible for their metering systems, or distribution system operators) to curtail their output or de-energise altogether. Large projects which participate in the balancing mechanism would be compensated because the mechanism for curtailment would be to accept a bid/offer pair that has been submitted by the project. However, most smaller projects (including projects in which the Group may invest) may not currently participate in the balancing mechanism and therefore may not be compensated for such curtailment or, the circumstances in which compensation would be payable are limited and the amounts payable may not be sufficient to cover any actual losses of revenue. Participating in the balancing mechanism entails a certain degree of risk (especially for renewable projects that are not controllable) and solar PV plants usually transfer balancing functions to the offtaker.
The solar PV sector currently relies upon specific regulatory support to provide preferential treatment, including premium prices on electricity production, for solar PV producers. Such support has been legislated in the UK based also upon a growing public and political support for solar and other renewable energy sources, due in particular to increasing public and political concerns about climate change, environmental sustainability and energy security. According to the most recent data collected on behalf of DECC, the public attitudes to renewables ''tracker'' survey published in August 2014 shows support for solar at 82 per cent. of the survey sample. This was the highest figure of support for any of the renewables technologies to feature in the survey.
A change in public attitude in the UK to solar PV or other renewable energy installations may result in an increase in security and regulatory risk to operating solar PV installations, for example due to a resentment of the cost burden created by solar PV production relative to alternative conventional energy sources, to the appearance or environmental impact of solar PV plants or to the benefits to certain investor groups, perceived to be granted at the cost of the public; factors that have been featured in press articles.
There can be no guarantee that changes in public attitude will not result in a loss of actual or perceived value of investments.
Sales of energy generated to supply companies (Brown Power) are a significant component of long-term and a major component of the post-ROC period revenues of the Assets. These PPA prices are based on market conditions, supply and demand for energy at the time that the prices are agreed. The Company intends to the extent that it is able to fix the Brown Power component of the PPA for a three year rolling period under a long-term PPA but this may not always be the case especially where existing generating assets are acquired with pre-existing PPAs, where the availability of long-term PPAs are curtailed or where the market for Brown Power moves detrimentally to the interests of the Company. The Company seeks to secure a minimum Floor Price for Brown Power and where this is achieved, the Floor Price is significantly lower than the expected price.
The EMR has proposed CM which may have a depressing effect in the medium to long-term on demand for Brown Power and though DECC has published Energy Inflation forecasts the true extent and nature of the effect of EMR and the CM component of EMR cannot be predicted.
Accordingly, though the market predictions for long-term Brown Power prices would suggest significant inflation the Company cannot guarantee that this will be the case and a fall in Brown Power prices will have a detrimental impact on the value of assets and this may materially adversely impact the investment returns.
Additionally, the Company may acquire assets conveying Brown Power sale to a corporate buyer, sometimes by way of a private wire. These assets can benefit from higher than market Brown Power prices and or other benefits such as reduced rent where the Brown Power wholesale buyer is also the land lord. The Company intends that Brown Power buyers will be counterparts with good credit rating counterparties at the time of acquiring such assets, but the financial standing of the buyer cannot be guaranteed and may over a period of time deteriorate with the potential risk of default or bad debt arising. Where prudent to do so the Company may pursue legal action for recovery and or seek alternative buyers for energy generated but there may be a delay, a reduction in price or loss of revenues as part of a compromise with debtors and or their administrators or receivers. Such a reduction or loss of revenue may materially adversely impact the investment returns.
Changes in general economic and market conditions including, for example, interest rates, rates of inflation, industry conditions, competition, political events and trends, tax laws, national and international conflicts and other factors could substantially and adversely affect the Company's prospects and thereby the performance of its Shares.
The UK is expected to leave the EU, following the result of the June 2016 referendum. This may result in changes in the appetite for UK-based infrastructure assets or the availability of assets for purchase, which may affect the Group's growth prospects and returns and the Company's Net Asset Value. It is also likely that the macroeconomic impact of a ''Brexit'', for example, changes in inflation rates, interest rates, power prices, may have an impact on the Group and its prospects and results and the Company's Net Asset Value. In addition, it is unclear whether a ''Brexit'' will result in political change to support for renewable energy.
Solar PV plant operators generally take out insurance to cover certain costs of repairs, business interruption and any other project specific risks that may have been insurable identified and are insurable against. However, not all potential risks and losses in relation to the operation of solar PV plant will be covered by the insurance policies. For example, losses as a result of force majeure, natural disasters, terrorist attacks or sabotage, cyber-attacks or environmental contamination or theft may not be available at all or on commercially reasonable terms or a dispute may develop over insured risks. It is not possible to guarantee that insurance policies will cover all possible losses resulting from outages, failure of equipment, repair and replacement of failed or stolen equipment, environmental liabilities, any advanced profit losses equipment theft or legal actions brought by third parties (including claims for personal injury or loss of life to personnel). The uninsured loss, or loss above limits of existing insurance policies could have an adverse effect on the business, financial position, results of operations and business prospects of the Group.
In cases of frequent damage, insurance contracts might be amended or cancelled by the insurance company or the insurance premium levels will be increased, in which case the Group may not be able to maintain insurance coverage comparable to that currently in effect or may only be able to do so at a significantly higher cost. An increase in insurance premium cost could have an adverse effect on the Group's business, financial position, result of operations and business prospects.
For solar PV plants, modules are the most valuable components of solar installations and are particularly exposed to theft due to their portability. Other components at solar PV plants are also valuable and stolen with relative ease, such as copper cables. The Group may incur significant damage to its operations due to theft of components and modules.
Solar PV plants may also constitute a high risk target for terrorist acts, political actions or vandalism, in light of their strategic profile and nature. If the assets do become targeted by such terrorist acts or other political actions, they may, for an indefinite period of time, be unable to generate further electricity and/or their value may be adversely affected, in turn, heightening any potential loss from third-party claims against the Group for such failures.
While the Group will seek to obtain insurance to cover its modules, other components and PV plants against theft as well as terrorist acts, political actions and vandalism, such insurance, if obtained, may not prove adequate and this could have a material adverse effect on the Group's financial condition and results of operations.
The profitability of a solar PV plant is dependent, amongst others, on the meteorological conditions at the particular site. Levels of sunlight and cloud cover may fluctuate on a daily, monthly and seasonal basis, and over the long-term as a result of more general changes in climate, which may bring variations in meteorological conditions. Accordingly, the Group's revenues will be dependent upon the meteorological conditions at the solar PV plants owned by the Group.
Solar PV plants and plants rely upon adequate ultraviolet light from solar radiation to produce power. Although statistics show that variance in annual solar radiation is statistically relatively low compared to other renewable energy sources such as wind, the amount of solar radiation received annually or during any shorter or longer period of time in locations where the Group's solar PV plants may be located could possibly be affected by temporary or semi-permanent or permanent changes in weather patterns, including as a result of global warning or for any other reason. Thus the electricity generated could be reduced, which would have a material adverse effect on the Group's business, financial position, results of the operations and business prospects.
Certain adverse weather conditions, including hotter ambient temperatures and extreme weather (such as flooding, storms and/or high winds) could also reduce the efficiency of solar energy and in extremis, impact the operation of any solar PV plant, thereby reducing the Company's revenues which would have a material adverse effect on the Company's business, financial position, results of the operations and business prospects.
Events beyond the control of the Company, such as acts of God (including fire, flood, earthquake, storm, hurricane or other natural disasters), war, insurrection, civil unrest, strikes, public disobedience, computer and other technological malfunctions, telecommunication failures, terrorism, crimes, nationalisation, national or international sanctions and embargoes, could materially adversely affect investment returns.
Natural disasters, severe weather or accidents could damage solar PV plants or the ability of engineers to access the relevant site, which could have a material adverse effect on the Group's business, financial position, results of operations and business prospects. Earthquakes, lightning strikes, tornadoes, extreme winds, severe storms, wildfires and other unfavourable weather conditions or natural disasters may damage, or require the shutdown of, solar modules or related equipment or facilities which would decrease electricity production levels and results of operations.
The occurrence of such events may have a variety of adverse consequences for the Group, including risks and costs related to the damage or destruction of property, suspension of operation and injury or loss of life, as well as litigation related thereto. Such risk may not always constitute contractual force majeure. Such risks may not be insurable or may be insurable only at rates that the Group deems uneconomic.
Although ground-mounted PV installations have few moving parts and operate, generally, over long periods with relatively low levels of maintenance, PV power generation employs solar panels composed of a number of solar cells containing a PV material. These panels are, over time, subject to degradation since they are exposed to the elements and carry an electrical charge, and will age accordingly. In addition, the solar radiation which produces solar electricity carries heat with it that may cause the components of a PV solar panel to become altered and less able to capture irradiation effectively.
There is a risk of equipment failure due to wear and tear, design error or operator error with respect to each PV facility and this failure, among other things, could adversely affect the returns to the Company.
Solar PV plants contain a multitude of technical, electronic, mounting structures and other components, commonly referred to as ''balance-of-plant''. Balance-of-plant components are subject to degradation, technical deterioration and other loss of efficiency and effectiveness over a Solar PV plant's lifespan. There is a risk of unexpected equipment failure or decline in performance over the life cycle of the plant which would adversely affect the plants technical and financial performance.
It is anticipated that a significant proportion or potentially all of the UK solar PV plants to be acquired by the Group will be located on agricultural, commercial and industrial properties. Planning policy is directing developers towards previously used ''brownfield'' sites, although not exclusively. Such sites can have a greater likelihood of project participants suffering environmental liability and/or require a higher degree of due diligence in the permitting steps.
Reliance upon a third party owned property gives rise to a range of risks including deterioration in the property during the investment life, damages or other lease related costs, counterparty and third party risks in relation to the lease agreement and property, termination of the lease following breach or due to other circumstances such as a mortgagee taking possession of the property. Whilst the Company will seek to minimise these risks through appropriate insurances, lease negotiation and site selection there can be no guarantee that any such circumstances will not arise and result in losses to the investment.
Environmental laws and regulations may have an impact on the Group's activities. It is not possible to predict accurately the effects of future changes in such laws or regulations on the Group's financial performance and results of operations. There can be no assurance that environmental costs and liabilities will not be incurred in the future. In addition, environmental regulators may seek to impose injunctions or other sanctions on the Group's operations that may have a material adverse effect on the Group's results of operations or financial condition.
To the extent there are environmental liabilities arising in the future in relation to any sites owned or used by a solar PV plant operating company (such as the Group) including, but not limited to, clean-up and remediation liabilities, such operating company may, subject to its contractual arrangements, be required to contribute financially towards any such liabilities, and the level of such contribution may not be restricted by the value of the sites or by of the value of the total investment in the relevant solar PV plant.
All utility-scale solar energy facilities require relatively large areas for solar radiation collection when used to generate electricity at utility-scale (generally meaning facilities with a generation capacity of 5MW or greater). Solar facilities may interfere with existing land uses and could impact the use of nearby specially designated areas such as wilderness areas, areas of critical environmental concern, or special recreation management areas. Accordingly, a solar PV plant must have in place the necessary connection agreements and comply with their terms in order to avoid potential disconnection or de-energisation of the relevant connection point.
PV panels may contain hazardous materials, and although they are sealed under normal operating conditions, there is the potential for environmental contamination if they were damaged or improperly disposed of following decommissioning. This could lead to a material reduction in the returns from the affected solar PV plants and, as a result, the operational results of the Company. Proper planning and good maintenance practices can be used to minimise impacts from hazardous materials, however, there is no guarantee that this will always be the case.
The Company cannot guarantee that its solar PV plants will not be considered a source of nuisance, pollution or other environmental harm or that claims will not be made against the Group in connection with its solar PV plants and their effects on the natural environment. This could also lead to increased cost of compliance and/or abatement of the generation activities for affected solar PV plants which could also lead to a material reduction in the returns from the affected assets and as a result the results of operation of the Company.
The investment performance of the Company will be dependent on the services of any person appointed to provide asset management activities to it. The Company expects to the extent that it is able to procure that the SPVs outsource, on an arm's-length basis, all asset management activities for the Group's solar PV plants to WiseEnergy. WiseEnergy is a member of the NEC Group. WiseEnergy will undertake a range of technical, operational, financial and administrative functions on behalf of SPVs. To date, all solar PV plants owned by the Group are managed by WiseEnergy.
In the event that SPVs need to replace WiseEnergy, a replacement may be less qualified, more expensive and there is a further risk that finding a suitable replacement may take a long time. If WiseEnergy is not able to fulfil its contractual obligations or is not of the requisite quality, this could have a material impact on a plant's technical and/or financial performance and therefore impact the Company's operations and financial results.
Solar PV plant acquisitions rely on forward forecasting and detailed financial models to support their valuations. There is a risk that errors may be made in the assumptions or methodology used in a financial model. In such circumstances the returns generated by any solar PV plant acquired by the Group may be different to those expected.
The Company cannot guarantee the accuracy of forecasting or the reliability of the forecasting models, or that meteorological data collected and used in financial models will be indicative of future meteorological conditions. Meteorological forecasting can be inaccurate due to meteorological measurement errors, or errors in the assumptions applied to the forecasting model. In addition, forecasters look at long-term data and there can be short term fluctuations.
The financial models will include forecasts on a number of operating expenses at each PV plant, including, amongst others, land leases, O&M costs, local Government rates, asset management expenses, insurance expenses and other (such as SG&A) expenses.
The Company cannot guarantee such forecasts will be reliable or accurate. Differences in these forecasts may have significant effects on the return of the Company.
Furthermore, the performance of an asset is predicted by the designs and warranties provided by the EPC and adopted by the O&M provider. These performance forecasts my not be sustainable in the long-term and in the case where an O&M provider is not able to maintain performance the Company may have to rely on contractual claims against these counterparties and cannot guarantee that such claims will be successful or sufficient to cover the loss of revenues incurred.
The returns from operating efficiency improvements and energy sales could be less attractive than originally anticipated. The returns from operating efficiencies are dependent upon, inter alia, the level of technical inefficiency and avoidable losses in acquired sites, the Group's ability to identify and rectify such inefficiencies in a cost-effective manner and its ability to achieve the cost savings on operational expenses. The Group may find, following acquisition of its assets, that such operating efficiency improvements are not achievable or that the returns are less than the Investment Manager's and the Directors' current expectations.
Solar PV plants acquired by the Group may fail to meet the Company's expectations and forecasts. The prices at which the Group will acquire its assets will be determined by the Investment Manager's expectations and operational assumptions of the economics of such assets so that the returns available to the Group are acceptable. Should the operation and economics of the assets fall short of the Group's expectations, there could be a material adverse effect on the returns to the Company.
The UK Government does not guarantee the solvency of electricity suppliers and if an electricity supplier were to collapse or if its financial strength deteriorates then, in any FiT projects, its obligations should be taken over by an alternative FiT provider, which could materially affect the financial results of the Company.
The physical location, maintenance and operation of a solar power plant may pose health and safety risks to those involved. Solar power plant operation may result in bodily injury or industrial accidents, particularly if an individual were to fall from a great height, to be crushed, injured or be electrocuted. If an accident were to occur in relation to one or more of the Group's solar power plants, the Group could be liable for damages or compensation to the extent such loss is not covered under existing insurance policies. Liability for health and safety could have a material adverse effect on the business, financial position, results of operations and business prospects of the Group.
The Prospectus should be read in its entirety before making any investment in the New Shares. In assessing an investment in the Company, investors should rely only on the information in the Prospectus. No person has been authorised to give any information or make any representations in relation to the Company other than those contained in the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorised by the Company, the Directors, the Investment Manager, the Investment Adviser, the Sponsor, any of the Joint Bookrunners or any other person.
Without prejudice to the Company's obligations under the Prospectus Rules or FSMA, neither the delivery of this Registration Document, nor any subscription or purchase of New Shares made pursuant to the Prospectus shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since, or that the information contained in this Registration Document, the Securities Note or the Summary (or, where relevant, any Future Securities Note or Future Summary) is correct at any time subsequent to, the date of the relevant document.
Apart from the responsibilities and liabilities, if any, which may be imposed on the Sponsor or any of the Joint Bookrunners by FSMA or the regulatory regime established thereunder, none of the Sponsor or the Joint Bookrunners accept any responsibility whatsoever for the contents of the Prospectus or for any other document or statement made or purported to be made by it, or on its behalf, in connection with the Company, the Investment Manager, the Investment Adviser, the New Shares, Admission or the Share Issuance Programme. The Sponsor and each of the Joint Bookrunners accordingly disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above), which it might otherwise have in respect of the Prospectus or any such other document or statement.
In connection with the Share Issuance Programme, the Joint Bookrunners and any of their respective affiliates acting as an investor for its or their own account(s), may subscribe for New Shares and, in that capacity, may retain, purchase, sell, offer to sell or otherwise deal for its or their own account(s) in such securities of the Company, any other securities of the Company or other related investments in connection with the Share Issuance Programme or otherwise. Accordingly, references in the Prospectus to the New Shares being issued, offered, subscribed or otherwise dealt with, should be read as including any issue or offer to, or subscription or dealing by, the Joint Bookrunners and any of their affiliates acting as an investor for its or their own account(s). The Joint Bookrunners do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.
The Prospectus does not constitute an offer to sell, or the solicitation of an offer to subscribe for or to buy, shares in any jurisdiction in which such offer or solicitation is unlawful. Issue or circulation of the Prospectus may be prohibited in some countries.
The Company and the Directors, whose names appear on page 27 of this Registration Document, accept responsibility for the information contained in this Registration Document. To the best of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this Registration Document is in accordance with the facts and does not omit anything likely to affect the import of such information.
Each of the Investment Manager and the Investment Adviser accepts responsibility for information attributed to it in this Registration Document. To the best of the knowledge and belief of the Investment Manager and the Investment Adviser (who have taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information.
An investment in the Company is suitable only for investors who are capable of evaluating the risks and merits of such investment, who understand the potential risk of capital loss and that there may be limited liquidity in the underlying investments of the Company, for whom an investment in the New Shares constitutes part of a diversified investment portfolio, who fully understand and are willing to assume the risks involved in investing in the Company and who have sufficient resources to bear any loss (which may be equal to the whole amount invested) which might result from such investment. Typical investors in the Company are expected to be institutional and sophisticated investors and professionally advised private investors. Investors may wish to consult their stockbroker, bank manager, solicitor, accountant or other independent financial adviser before making an investment in the Company.
The New Shares are designed to be held over the long-term and may not be suitable as shortterm investments. There is no guarantee that any appreciation in the value of the Company's investments will occur and investors may not get back the full value of their investment in the Company.
The investment objective of the Company is a target only and should not be treated as assurances or guarantees of performance. The Prospectus contains certain historical financial and other information concerning the Company's past performance. However, past performance of the Company should not be taken as an indication of future performance. Prospective investors should be aware that the value of an investment in the Company is subject to normal market fluctuations and other risks inherent in investing in securities. The value of the New Shares and the income derived from them can go down as well as up. There is no guarantee that the market price of the New Shares will fully reflect their underlying Net Asset Value. In the event of a winding-up of the Company, Shareholders will rank behind any creditors of the Company and, therefore, any positive return for Shareholders will depend on the Company's assets being sufficient to meet the prior entitlements of any creditors.
The contents of the Prospectus are not to be construed as advice relating to legal, financial, taxation, investment or any other matters. Prospective investors should inform themselves as to:
Prospective investors must rely upon their own advisers, including their own legal advisers and accountants, as to legal, tax, investment or any other related matters concerning the Company and an investment therein.
All Shareholders are entitled to the benefit of, are bound by and are deemed to have notice of, the provisions of the Memorandum and Articles, which investors should review. A summary of the Articles is set out in paragraph 5 of Part 8 of this Registration Document and copies of the Memorandum and Articles are available on the Company's website at www.nextenergysolarfund.com.
The Prospectus includes statements that are, or may be deemed to be, ''forward-looking statements''. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms ''believes'', ''estimates'', ''anticipates'', ''expects'', ''intends'', ''may'', ''will'' or ''should'' or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts.
All forward-looking statements address matters that involve risks and uncertainties and are not guarantees of future performance. The Company's actual results of operations, performance or achievement of industry results may differ materially from those indicated in these statements, as a result of a number of factors. These factors include, but are not limited to, those described in the parts of this Registration Document and the Securities Note entitled ''Risk Factors'', which should be read in conjunction with the other cautionary statements that are included in the Prospectus.
Forward-looking statements in the Prospectus reflect the Company's views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Company's operations, results of operations and growth strategy as at the date of the Prospectus only. Subject to any obligations under FSMA, the Prospectus Rules, the Listing Rules and the Disclosure Guidance and Transparency Rules, the Company undertakes no obligations publicly to update or review any forward-looking statement in the Prospectus, whether as a result of new information, future developments or otherwise.
Forward-looking statements contained in this Registration Document based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Prospective investors should specifically consider the factors identified in the Prospectus which could cause actual results to differ before making an investment decision.
Given these risks and uncertainties, prospective investors are cautioned not to place any undue reliance on forward-looking statements in the Prospectus.
Nothing in the preceding paragraphs should be taken as limiting the working capital statement in paragraph 5 of Part 5 of the Securities Note.
Market, economic and industry data used throughout this Registration Document is sourced from various industry and other independent sources. The Company and the Directors confirm that such data has been accurately reproduced and, so far as they are aware and are able to ascertain from information published by such sources, no facts have been omitted which would render the reproduced information inaccurate or misleading. Sources for reproduced information set out underneath each relevant figure or table, as applicable, or in footnotes at the bottom of the relevant page.
The contents of the Company's website at www.nextenergysolarfund.com do not form part of the Prospectus and prospective investors should base their decision to invest on the contents of the Prospectus alone.
Unless otherwise indicated, all references in this Registration Document to ''GBP'', ''Sterling'', ''pounds sterling'', ''£'', ''pence'' or ''p'' are to the lawful currency of the UK; and all references to ''euros'' and ''e'' are to the lawful currency of the participating member states of the Eurozone (the geographic and economic region that consists of all the European Union countries that have fully incorporated the euro as their national currency).
In addition to further Placings pursuant to the Share Issuance Programme described in the Securities Note dated the same date as this Registration Document, this Registration Document may form part of any prospectus published in connection with an issue of New Shares under the Share Issuance Programme comprising a non-pre-emptive offer for a subscription or a pre-emptive open offer which require the publication of a Future Securities Note and Future Summary during the period of up to 12 months following the date of this Registration Document. Persons receiving this Registration Document should read the Prospectus together as a whole and any update in a Future Securities Note and Future Summary may constitute a material change for the purpose of the Prospectus Rules.
Unless otherwise indicated, the latest practicable date for the inclusion of information in this Registration Document is at the close of business on 11 November 2016. Information regarding the amounts drawn and available under the Company's financing facilities is given at 30 September 2016; however there have been no material changes since that date.
Certain numerical figures and per centages set out in this Registration Document, including financial data presented in millions or thousands and per centages describing market shares, have been subject to rounding adjustments for ease of presentation. Accordingly, a sum of numbers may not, in certain cases, conform to the total figure given (including where such numbers are presented in tabular format).
A list of defined terms used in this Registration Document is set out at pages 106 to 112 of this Registration Document.
Unless otherwise stated, statements made in this Registration Document are based on the law and practice currently in force in England and Wales or Guernsey (as appropriate) and are subject to changes therein.
| Directors (all non-executive) |
Kevin Lyon (Chairman) Patrick Firth Vic Holmes All of: 1 Royal Plaza Royal Avenue St Peter Port Guernsey GY1 2HL |
|---|---|
| Investment Manager | NextEnergy Capital IM Limited 1 Royal Plaza Royal Avenue St Peter Port Guernsey GY1 2HL |
| Investment Adviser | NextEnergy Capital Limited 10 Chandos Street London W1G 9DG |
| Developer | NextPower Development Limited 10 Chandos Street London W1G 9DG |
| Operating Asset Manager | WiseEnergy (Great Britain) Limited 10 Chandos Street London W1G 9DG |
| Administrator, Designated Administrator, Company Secretary and Registered Office |
Ipes (Guernsey) Limited 1 Royal Plaza Royal Avenue St Peter Port Guernsey GY1 2HL |
| Financial Adviser and Joint Lead Bookrunner |
Cantor Fitzgerald Europe One Churchill Place Canary Wharf London E14 5RB |
| Sponsor | Shore Capital and Corporate Limited Bond Street House 14 Clifford Street London W1S 4JU |
| Joint Lead Bookrunner | Fidante Partners Europe Limited 1 Tudor Street London EC4Y 0AH |
|---|---|
| Joint Lead Bookrunner | Macquarie Capital (Europe) Limited Ropemaker Place 28 Ropemaker Street London EC2Y 9HD |
| Joint Bookrunner | Shore Capital Stockbrokers Limited Bond Street House 14 Clifford Street London W1S 4JU |
| Legal Advisers to the Company in connection with the Share Issuance Programme (as to English law) |
Simmons & Simmons LLP CityPoint One Ropemaker Street London EC2Y 9SS |
| Legal Advisers to the Company in connection with the Share Issuance Programme (as to Guernsey law) |
Carey Olsen P.O. Box 98 Carey House Les Banques St Peter Port Guernsey GY1 4BZ |
| Legal Advisers to the Sponsor, Financial Adviser and Joint Bookrunners in connection with the Share Issuance Programme |
Gowling WLG (UK) LLP 4 More London Riverside London SE1 2AU |
| Reporting Accountants | PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH |
| Auditor | PricewaterhouseCoopers CI LLP PO Box 321 Royal Bank Place 1 Glategny Esplanade St Peter Port Guernsey GY1 4ND |
| Capita Asset Services, Corporate Actions The Registry 34 Beckenham Road Beckenham Kent BR3 4TU |
|---|
| Capita Registrars (Guernsey) Limited Mont Crevelt House Bulwer Avenue St Sampson Guernsey GY2 4LH |
| Capita Asset Services The Registry 34 Beckenham Road Kent BR3 4TU |
| Lloyds Bank International Ltd Sarnia House Le Truchot St Peter Port Guernsey GY1 4EF |
The Directors believe that within the renewable energy sector, solar energy infrastructure assets represent the most attractive risk-adjusted investment opportunity:
Note 1) the chart illustrates how the Company has deployed its capital investing in solar PV assets (shown by the dotted blue line) with financing provided by equity and debt raised. Equity raised is represented by the light blue area whereas the area in grey represents the total debt facilities available to the Company in addition to the equity raised.
* Proven track record in optimising operating asset performance: The Current Portfolio has performed materially above the targets set in the budget used in acquiring each of the Group's solar PV assets, with an average over performance of 4.1 per cent. (partly explained by the solar irradiation being 1.6 per cent. higher than expected during the period), which the Directors believe compares favourably with other, comparable portfolios.
The NEC Group's operating asset management division, WiseEnergy, is one of the largest specialist operating asset managers in the solar sector. WiseEnergy has developed proprietary software, hardware, IT platform and risk management solutions to enable it to efficiently and proactively manage and monitor data, and analyse the long-term technical, international and financial performance of solar plants.
WiseEnergy provides asset management and monitoring services in respect of more than 1,250 utility-scale solar power plants and approximately 3,000 solar rooftop installations with a total capacity of approximately 1.7GW and an estimated £3.5 billion of asset value. Its client base includes leading European banks and equity investors (including private equity funds, publicly listed funds and institutional investors).
* Focus on maximising portfolio performance and value: In the mid- to long-term period following the acquisition of an asset, the NEC Group seeks to add value to the Company's portfolio by optimising the technical and financial performances of the asset and by extending the useful lifespan of the plant.
Furthermore, the NEC Group remains fully engaged in monitoring technological change in the energy sector and is already exploring the feasibility of the application of energy storage facilities to the Company's portfolio of solar PV plants. Consequently, the Company is wellpositioned to incorporate the continuing innovation in energy technology and benefit from the associated incremental returns and/or cost reductions in solar energy generation and storage.
1 Note: These are targets only and not profit forecasts. There can be no assurance that these targets can or will be met and it 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 the New Shares or assume that the Company will make any distributions at all.
NextEnergy Solar Fund Limited is a closed-ended investment company limited by shares, registered and incorporated in Guernsey under the Companies (Guernsey) Law, 2008, as amended, on 20 December 2013, with registration number 57739. The Company is a registered closed-ended collective investment scheme registered by the GFSC pursuant to the Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended, and the Registered Collective Investment Schemes Rules 2015 issued by the GFSC.
The Company seeks to provide investors with a sustainable and attractive dividend that increases in line with RPI over the long term, whilst also seeking to provide investors with an element of capital growth, by investing in a diversified portfolio of solar PV plants located in the UK. The Company is targeting an aggregate dividend (to be paid quarterly) of 6.31 pence per Ordinary Share in respect of its financial year ending 31 March 2017 and aims to increase its aggregate dividend per Ordinary Share in respect of each financial year in line with RPI growth.
NextEnergy Capital IM Limited acts as the Company's Investment Manager, which, in turn, has appointed NextEnergy Capital Limited as its Investment Adviser. The Company has also entered into a project sourcing agreement with NextPower Development Limited, the Developer. The Investment Manager and the Investment Adviser do not, and have undertaken not to, manage any other funds investing in UK solar plants.
The Investment Manager, Investment Adviser and Developer are members of the NEC Group, which also comprises WiseEnergy, the NEC Group's asset management division. The NEC Group was founded in 2007 and has evolved into a leading solar PV specialist, active internationally throughout the solar value chain. The NEC Group provides asset management and monitoring services to asset owners and financiers of more than 1,250 utility-scale solar power plants and approximately 3,000 solar rooftop installations with a total capacity of approximately 1.7GW and an estimated £3.5 billion of asset value.
Since its IPO in April 2014, the Company has:
The Company seeks to provide investors with a sustainable and attractive dividend that increases in line with RPI over the long term by investing in a diversified portfolio of solar PV plants that are located in the UK. In addition, the Company seeks to provide investors with an element of capital growth through the re-investment of net cash generated in excess of the target dividend in accordance with the Company's investment policy.
The Company aims to increase its aggregate dividend per Ordinary Share in respect of each financial year in line with RPI growth. For the financial year ending 31 March 2017, the Company is targeting an aggregate dividend of 6.31 pence per Ordinary Share (to be paid on a quarterly basis), reflecting a 1.0 per cent. inflationary increase above the aggregate dividend of 6.25 pence per Ordinary Share in respect of its financial year ended 31 March 2016.
2 Note: These are targets only and not profit forecasts. There can be no assurance that these targets can or will be met and it 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 the New Shares or assume that the Company will make any distributions at all
The Company is also targeting aggregate returns to investors that equate to an unlevered IRR of between 7 and 9 per cent. (after fees and expenses) based on the IPO issue price of 100 pence per Ordinary Share (and based on a range of assumptions (reflecting the Company's views at the date of this Registration Document)) in relation to, amongst other things:
The target returns are expected to be achieved primarily through deployment of the Company's funds in accordance with its investment policy and active management of the Company's assets. Net cash generated in excess of the target dividend will generally be re-invested by the Group in accordance with the Company's investment policy. The Directors believe that additional upside may be realisable as a consequence of employing leverage or advancing secured construction financing.
The Company invests exclusively in solar PV plants located in the UK.
The Company intends to continue to acquire assets that are primarily ground-based and utilityscale and which are on sites that may be agricultural, industrial or commercial. The Company may also acquire portfolios of residential or commercial building-integrated installations. The Company targets solar PV plants that are anticipated to generate stable cash flows over their asset lifespan.
The Company typically seeks to acquire sole ownership of individual solar PV plants through SPVs, but may enter into joint ventures or acquire majority interests, subject, in each case, to the Company maintaining a controlling interest. Where an interest of less than 100 per cent. in a particular solar PV plant is acquired, the Company intends to secure controlling shareholder rights through shareholders' agreements or other legal arrangements. Investments by the Company in solar PV plants may be either by way of equity or a mix of equity and shareholder loans.
The Company has built up a diversified portfolio of solar PV plants and its investment policy contains restrictions to ensure risk diversification. No single investment (or, if an additional stake in an existing investment is acquired, the combined value of both the existing and the additional stake) by the Company in any one solar PV plant will constitute (at the time of investment) more than 30 per cent. of the Gross Asset Value. In addition, the four largest solar PV plants will not constitute (at the time of investment) more than 75 per cent. of the Gross Asset Value.
The Company will continue, primarily, to acquire operating solar PV plants, but may also invest in solar PV plants that are under development (that is, at the stage of origination, project planning or construction) when acquired. Such assets will constitute (at the time of investment) not more than 10 per cent. of the Gross Asset Value in aggregate.
The Company may also agree to forward-fund by way of secured loans the construction costs of solar PV plants where it retains the right (but not the obligation) to acquire the relevant plant once operational. Such forward-funding will not fall within the 10 per cent. development restriction above but will be restricted to no more than 25 per cent. of the Gross Asset Value (at the time such arrangement is entered into) in aggregate and will only be undertaken where supported by appropriate security (which may include financial instruments as well as asset-backed guarantees).
The right to forward fund, subject to the above limitations, enables the Company to retain flexibility in the event of changes in the development pipeline over time. In addition, the Company will not employ forward funding and engage in development activity in relation to the same project or assets.
A significant proportion of the Group's income is expected to result from the sale of the entirety of the electricity generated by the solar PV plants within the terms of PPAs. These are expected to include the monetisation of ROCs, and other regulated benefits and the sale of electricity generated by the plants to energy consumers and energy suppliers (Brown Power). Within this context the Company expects to execute PPAs with creditworthy counterparties at the appropriate time.
The Company will continue to diversify its third party suppliers, service providers and other commercial counterparties, such as developers, EPC contractors, technical component manufacturers, PPA providers and landlords.
In pursuit of the Company's investment objective, the Company may employ leverage, which will not exceed (at the time the relevant arrangement is entered into) 50 per cent. of the Gross Asset Value in aggregate. Such leverage will be deployed for the acquisition of further solar PV plants in accordance with the Company's investment policy. The Company may seek to raise leverage at any of the asset, SPV, HoldCo, or Company levels. The Company has a preference for mediumto long-term amortising debt financing.
The Company invests with a view to holding its solar PV plants until the end of their useful life. However, assets may be disposed of or otherwise realised where the Investment Manager determines, in its discretion, that such realisation is in the best interests of the Company. Such circumstances may include (without limitation) disposals for the purposes of realising or preserving value, or of realising cash resources for reinvestment or otherwise. The Company will seek to optimise and extend the lifespan of its assets and may invest in their repowering and/or integration of ancillary technologies (e.g. energy storage) on its solar PV plants to fully utilise grid connections and balance the electricity grid with a view to generating greater revenues. The Company expects to re-invest any cash surplus (in excess of that required to meet the Company's dividend target and ongoing operating expenses) in further investments, thereby supporting its long-term Net Asset Value.
The Company may invest cash held for working capital purposes and pending investment or distribution in cash or near-cash equivalents, including money market funds.
The Company may (but is not obliged to) enter into hedging arrangements in relation to interest rates and/or power prices.
As required by the Listing Rules, any material change to the investment policy of the Company will be made only with the approval of the FCA and of its Shareholders by ordinary resolution.
In the event of any breach of the Company's investment policy, Shareholders will be informed of the actions to be taken by the Investment Manager by an announcement issued through a Regulatory Information Service or a notice sent to Shareholders at their registered addresses in accordance with the Articles.
The Company currently complies with the following investment restrictions and will continue to do so for so long as they remain requirements of the FCA and applicable to the Company:
The Company's issued share capital currently comprises only Ordinary Shares, having issued, in aggregate, 343,197,450 Ordinary Shares pursuant to the IPO, the 2014 Share Issuance Programme, the 2016 Tap Issuance Programme, (raising gross proceeds of £350.1 million) and pursuant to scrip dividends.
The existing Ordinary Shares are, and the New Ordinary Shares to be issued pursuant to the Share Issuance Programme (including Ordinary Shares arising on conversion of any C Shares issued pursuant to the Share Issuance Programme) will be, admitted to trading on the London Stock Exchange's Main Market and are, or will be, listed on the premium segment of the Official List. Any C Shares issued pursuant to the Share Issuance Programme will be admitted to trading on the London Stock Exchange's Main Market and will be listed on the standard segment of the Official List.
Ordinary Shareholders are entitled to receive, and participate in, any dividends declared to the extent that such dividends derive from the net assets of the Company attributable to the Ordinary Shares. C Shareholders will be are entitled to receive, and participate in, any dividends declared to the extent that such dividends derive from the net assets of the Company attributable to any C Shares.
Ordinary Shareholders will be entitled to attend and vote at all general meetings of the Company and, on a poll, to one vote for each Ordinary Share held. C Shareholders will also be entitled to attend and vote at all general meetings of the Company and, on a poll, to one vote for each C Share held.
On a winding-up of the Company, once the Company has satisfied all of its liabilities, the Ordinary Shareholders are entitled to all of the surplus assets of the Company attributable to the Ordinary Shares and the C Shareholders will be entitled to all of the surplus assets of the Company attributable to any C Shares in issue.
As at 30 September 2016 the Group had debt facilities comprising a combination of short- and medium-term debt and amortising long-term debt and had drawn down short- and medium-term debt of £64.7 million and amortising long-term debt of £99.6 million. As at that date, £45.5 million remained undrawn under the £88.5 million Revolving Credit Facility. The Company intends to refinance the Revolving Credit Facility prior to maturity. Details of the Group's debt facilities are set out in paragraph 4 of Part 7 of this Registration Document.
For the financial year ending 31 March 2017, the Company is targeting an aggregate dividend of 6.31 pence per Ordinary Share, reflecting a 1.0 per cent. inflationary increase above the aggregate dividend of 6.25 pence per Ordinary Share in respect of its financial year ended 31 March 20163 . The Company aims to increase its aggregate dividend per Ordinary Share in respect of each financial year in line with RPI growth.
Dividends on the Ordinary Shares in respect of each financial year of the Company are expected to be paid quarterly, normally in respect of the three months ending 30 June, 30 September, 31 December and 31 March, and are expected to be made by way of interim dividends declared in August, November, February and May respectively and paid in September, December, March and June respectively.
Dividends payable on any C Shares will relate to the returns on the net proceeds of the relevant C Share issue and will be paid as one or more interim dividend(s) in respect of such period(s) and declared at such time(s) as the Directors, in their absolute discretion, may determine.
The Board conducts the Company's affairs with the intention that the Company would qualify as an investment trust if it were resident in the United Kingdom and may make distributions to Shareholders accordingly. However, there are no assurances that the Company will meet its dividend objective. In particular, dividends may only be paid whenever the financial position of the Company, in the opinion of the Directors, justifies such payment and subject to the Company being able to satisfy the solvency test under the Companies Law.
The Articles permit the Directors and subject to Shareholder authorisation (by way of an ordinary resolution in accordance with the Articles) to offer a scrip dividend alternative to Shareholders when a cash dividend is declared from time to time. Pursuant to a Shareholder authority dated 19 June 2015, the Directors have been granted authority to offer Shareholders the right to elect to receive further Ordinary Shares instead of cash in respect of all or part of any dividend that may
3 Note: These are targets only and not profit forecasts. There can be no assurance that these targets can or will be met and it 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 the New Shares or assume that the Company will make any distributions at all.
be declared, in the five years falling after the date of the authority. The Company intends to renew its authority on its expiry.
In the event a scrip dividend is offered, an electing Shareholder would be issued new, fully paid-up Ordinary Shares (or sold Ordinary Shares from treasury) pursuant to the scrip dividend alternative. Any scrip dividend alternative will be available only to those Shareholders to whom Ordinary Shares might lawfully be marketed by the Company. A scrip dividend alternative has been offered in respect of the dividends paid or payable in respect of the Company's current financial year, which ends on 31 March 2017 and the Directors intend to offer a scrip dividend alternative for dividends payable in respect of future financial years of the Company.
There will be no scrip dividend alternative in respect of any dividends declared in relation to any C Shares.
At the date of this Registration Document, the Company has authority to issue up to 350,000,000 Ordinary Shares and/or C Shares pursuant to the Share Issuance Programme on a non-preemptive basis. That authority will expire on 15 November 2017.
All New Ordinary Shares will be issued at a premium to the prevailing Net Asset Value per Ordinary Share which will be at least sufficient to cover the costs and expenses of the relevant Issue. The issue price of any C Shares issued pursuant to the Share Issuance Programme will be £1.00 per C Share. Typically, C Shares convert into Ordinary Shares on a Net Asset Value for Net Asset Value basis once substantially all of the net proceeds of the C Share issue have been invested. The costs and expenses of any issue of C Shares and any other costs and expenses which the Directors believe are attributable to the C Shares will be paid out of the pool of assets attributable to the C Shares and accordingly will not dilute the Net Asset Value of the Ordinary Shares.
The Directors intend to seek Shareholder approval at the annual general meeting of the Company to be held in 2017, and at each subsequent annual general meeting, to issue on a non-pre-emptive basis further Ordinary Shares equal to 10 per cent. of the Ordinary Shares in issue at the time the approval is sought. Ordinary Shares issued pursuant to any such authority will be issued at a premium to the prevailing Net Asset Value per Ordinary Share, having taken into account the costs of the issue.
No Ordinary Shares will be issued at a price less than the Net Asset Value per existing Ordinary Share at the time of their issue except: (i) pursuant to Shareholder approval; (ii) where such Ordinary Shares are being issued on a pro rata basis to all Shareholders; or (iii) pursuant to a scrip dividend alternative.
The Company has the authority to purchase in the market up to 14.99 per cent. of the Ordinary Shares in issue at 24 August 2016. This authority will expire at the conclusion of the Company's next annual general meeting to be held in 2017. The Directors intend to seek annual renewal of the Company's authority to purchase in the market up to 14.99 per cent. of the Ordinary Shares in issue at the date the authority is granted at each annual general meeting.
Whether the Company purchases in the market any Ordinary Shares, and the timing and the price paid on any such purchase, will be at the discretion of the Directors, save as described below. The Directors will consider repurchasing Ordinary Shares in the market if they believe it to be in Shareholders' interests, in particular as a means of correcting any imbalance between supply of and demand for the Ordinary Shares.
Any purchase of Ordinary Shares by the Company will only be made by the Company through the market for cash and in accordance with the Articles, the Companies Law and the Listing Rules. The Listing Rules currently provide that the maximum price that may be paid by the Company must not exceed the higher of (i) 5.0 per cent. above the average of the mid-market values of Ordinary Shares for the five Business Days before the purchase is made and (ii) the higher of the last independent trade or the highest current independent bid for the Ordinary Shares. In any event, purchases of Ordinary Shares by the Company will only be made through the market at prices below the prevailing Net Asset Value per Ordinary Share. Ordinary Shares which are purchased may be cancelled or held in treasury.
Investors should note that the purchase of Ordinary Shares by the Company is entirely discretionary and no expectation or reliance should be placed on the Directors exercising such discretion on any one or more occasions. Investors should also note that any purchase of Ordinary Shares by the Company will be subject to the ability of the Company to fund the purchase price. The Companies Law also provides, among other things, that any purchase is subject to the Company satisfying the solvency test contained in the Companies Law at the relevant time.
The Company does not have any authority, and the Directors do not intend to seek any authority for the Company, to purchase any C Shares in the market.
The Company is permitted to hold Ordinary Shares purchased in the market in treasury, rather than having to cancel them. Such Ordinary Shares may be subsequently sold for cash or cancelled. Holding Ordinary Shares in treasury gives the Company the ability to sell Ordinary Shares from treasury quickly and in a cost efficient manner (subject to having the requisite Shareholder authority disapplying pre-emption rights in relation to such sales) and provides the Company with additional flexibility in the management of its capital base. However, unless authorised by Shareholders by special resolution in accordance with the Articles, the Company will not sell Ordinary Shares out of treasury for cash at a price less than the Net Asset Value per Ordinary Share, save in connection with the payment of a scrip dividend, unless they are first offered pro rata to existing Ordinary Shareholders.
The Company has an indefinite life. However, if the Ordinary Shares trade, on average over any financial year of the Company, at a discount in excess of 10 per cent. to the Net Asset Value per Ordinary Share, the Board shall propose a special resolution at the Company's next annual general meeting that the Company ceases to continue in its present form (a ''Discontinuation Resolution''). The discount prevailing on each Business Day will be determined by reference to the closing market price of the Ordinary Shares on that day and the most recently published Net Asset Value per Ordinary Share.
If a Discontinuation Resolution is passed (requiring the approval of at least 75 per cent. of the votes cast in respect of it), the Board shall be required to put forward proposals to Shareholders at a general meeting of the Company, to be held within four months of the Discontinuation Resolution being passed, to wind up or otherwise reconstruct the Company, bearing in mind the illiquid nature of the Company's underlying assets.
PV has developed over the years into a proven, mature technology that is becoming increasingly competitive with conventional energy sources, partly due to the dramatic fall in PV module prices experienced over the last decades. Since module price increases between 2005 to 2008; which resulted from a shortage in wafer based crystalline silicon (c-Si) capacities, global module prices have decreased rapidly from US\$4/watt in 2008 to US\$0.8/watt in 2012. As use of the technology becomes more widespread, and the technology improves, prices are expected to decrease even further, for both c-Si and thin film. According to IEA's technology roadmap for PV published in 2014, module prices could halve over the next 20 years to US\$0.3-0.4/watt.
As a result of decreasing module prices and the costs of underlying components, solar PV energy is rapidly approaching grid parity. This is defined as the point where the levelised cost of energy (''LCOE'') without subsidies is the same or lower than the residential electricity price excluding taxes. According to the Fraunhofer Institute's study on LCOE, PV power plants in Southern Germany achieved a LCOE between e0.078 and 0.142/kWh in the third quarter of 2013, reaching parity with other conventional power generation technologies. By the end of the next decade, the LCOE of PV power plants is expected to decrease to between e0.055 and 0.094/kWh, and the LCOE of utility-scale solar PV plants, will be considerably below the average LCOE for all fossil fuel power plants.
Apart from increasing cost competitiveness, solar PV has a range of characteristics that create an attractive investment proposition. Solar PV energy is a clean, noiseless, reliable and predictable source of electricity due to consistency in yearly solar radiation, and importantly, realises maximum outputs during peak demand hours. Furthermore, solar PV equipment has a very long useful asset life, estimated to be between 25 and 40 years by the US National Renewable Energy Laboratory (''NREL''), with the additional upside of potential repowering. According to NREL, degradation rates of monocrystalline silicon modules installed before and after 2000 are 0.47 per cent. and 0.36 per cent., respectively.
The predictability and stability of annual solar PV generation results from the fact that solar energy (solar irradiation) received on a given surface varies relatively little from year to year. According to
4 Source: IEA: ''Technology Roadmap – Solar Photovoltaic Energy (2014 edition)''.
the European Photovoltaic Industry Association (''EPIA''), predicting available solar irradiation is generally quite accurate and easier than predicting wind patterns. The stability in solar irradiance is illustrated in chart below, provided by the US National Oceanic and Atmospheric Administration's National Geophysical Data Center. The peak-to-trough range of the annual rolling average total solar irradiance5 over the 1978 to 2003 data period has been 1.2 W/m2, equivalent to a 0.1 per cent. deviation from the average 1,366 W/m2.
Total solar irradiance: November 1979 – October 20036
The long-term potential of solar energy is considerable and far from being fully exhausted: solar irradiation far exceeds the amount necessary to satisfy global energy demand. According to EPIA, the proportion of the sun's rays that reaches the earth's surface can satisfy global energy consumption 10,000 times over.
The market opportunity in the UK is also driven by the evidence of solar irradiation being available in the UK, for viable and economical investment in large solar PV assets. Daylight level (i.e. irradiation) in the South of England is similar to that in most of Germany, historically Europe's largest solar market.
5 Total solar irradiance is the amount of radiant energy emitted by the sun that falls each second on 1m2 on the Earth's upper atmosphere, as measured by satellites.
6 Source: NOAA's National Geophysical Data Centre: ftp://ftp.ngdc.noaa.gov/STP/SOLAR_DATA/SOLAR_IRRADIANCE (file: composite_d25_07_0310a.dat).
National markets for renewable energy are policy-driven markets resulting from initiatives designed to improve security of energy supply, diversity of generation technology and to generate economic incentives for the reduction of GHG emissions, thereby mitigating the onset of climate change.
The UK's commitment to cutting GHG and mitigating climate change, and the associated deployment of increasing amounts of renewable energy for power generation, is enshrined in primary national legislation and international law.
The UK is a party to the United Nations Framework Convention on Climate Change (the ''UNFCCC'') and has signed and ratified the Kyoto Protocol, an international treaty that extended the UNFCCC, as part of the EU commitment for the reduction of GHG emissions. The major feature of the Kyoto Protocol is that it sets binding GHG emissions reduction targets for the countries that are a party to it.
In the first ''commitment period'' from 2008-2012, these reductions were set at an average reduction of five per cent. relative to 1990 levels. The average target reduction for EU members was 8.0 per cent., with the UK's individual target set at 12.5 per cent. Under the second commitment period from 2013-2020, the EU countries (along with Iceland) agreed to meet, jointly, a 20 per cent. reduction target compared to 1990 levels. The UK's individual target is set at 16 per cent. of 2005 emissions levels.
In 2015, 195 countries adopted the Paris Agreement, which will act as a successor to the Kyoto Protocol under the UNFCCC. Under the Paris Agreement, countries will work towards a long term goal of keeping the increase in global average temperatures well below 28C above pre-industrial levels, and aim to limit the increase to 1.58C. The Paris Agreement is significantly different from the Kyoto Protocol in setting emissions targets for countries as each countries (or country bloc such as the EU) make 'nationally determined contributions' towards cutting GHG and mitigating climate change, as well as adaptation actions. The EU ratified the Paris Agreement as a bloc in October, and has submitted an ambitious intended contribution of reducing emissions by at least 40 per cent. by 2030. Importantly, the Paris Agreement binds parties to increase and progress their nationally determined contribution over time, therefore increasing ambition towards the 28C and 1.58C goals. The Paris Agreement entered into force on 4 November 2016. As of 14 October 2016, the UK has yet to ratify the Paris Agreement, however the British Prime Minister committed that the UK will also do so as a separate nation before then end of the year.
Currently, one of the main pieces of legislation supporting renewable generation at the EU level is the Renewable Energy Directive 2009. Under the Renewable Energy Directive, Member States are required to adopt national targets for renewables that are consistent with reaching the European Commission's overall EU target of a 20 per cent. share of energy from renewable sources relative to final energy consumption from all sources by 2020. The Renewable Energy Directive sets the UK a target of 15 per cent. for primary energy consumption from renewables by 2020.
EU countries have also agreed on a new 2030 Framework for climate and energy, including EU-wide targets and policy objectives for the period between 2020 and 2030. A new binding target was set of a 40 per cent. reduction in GHG emissions below the 1990 level by 2030, which was reflected in the intended nationally determined contribution under the Paris Agreement referred to above, to be met through domestic measures alone.
In addition, an EU-wide binding target is proposed that would require at least 27 per cent. of energy to come from renewables by 2030, to be implemented through national energy plans of the Member States. Furthermore, an indicative target of at least 27 per cent. improvement on energy efficiency compared with business as usual scenarios was set, which will be reviewed by 2020, having in mind an EU level of 30 per cent. The target will be binding only at an EU level and not shared between member states.
In order to deliver the new 2030 framework, including the target of 27% of energy from renewables by 2030, the European Commission carried out a consultation and results were published in March 2016. A new renewables energy directive for the 2020-2030 period is expected to be tabled in due course.
7 Source: European Commission – IET – PVGIS http://re.jrc.ec.europa.eu/pvgis/index.htm
The Government anticipates that, in order to meet this overall renewable energy target by 2020, approximately 30 per cent. of the UK's electricity will need to come from renewable sources. As such, the Government has introduced several incentive schemes to help achieve that target. Current projections are that the UK will miss the 2020 overall target. However it is expected to meet the 30 per cent. target for renewable energy generated electricity, while underperforming on its heat and transport targets.
These incentive schemes have enabled the UK to increase the share of renewables in electricity generation mix from a 6.8 per cent. in 2010 to 24.7 per cent. in 2015.
2014 Actual Renewables (%) 2020 Renewables Target
In 2008, the UK passed the Climate Change Act (the ''CCA'') in order to establish a framework to develop an economically credible emissions reduction path. The CCA commits the UK to an 80 per cent. reduction in GHG emissions by 2050 relative to 1990 levels. The CCA also established the Committee on Climate Change which advises the Government and devolved administrations on progress towards this target, and proposes carbon budgets which define the total emissions for the
8 Sources: Eurostat – 2016; European Commission – Renewable Energy Progress Report – June 2015; European Economic Area Agreement – July 2016.
UK economy over certain periods. These budgets are established to serve as a pathway to the final legally binding goal for 2050, as set out in the CCA. The Committee on Climate Change's advice to the Government on carbon budgets and targets is presented to Parliament by the Government for enacting into law. The first carbon budget for 2008 to 2012 was set at a 23 per cent. average reduction against 1990 emissions levels. The most recent fifth carbon budget sets a 57 per cent. average reduction against 1990 levels for 2028-2032.
The national commitments described above are enshrined in law and underpin the UK's efforts to mitigate climate change and to deploy renewable energy. In order to facilitate investment in renewable energy and hence meet these legal commitments, various instruments have been developed which sit within and alongside the UK power market.
Following the ''Brexit'' referendum vote on 23 June 2016, in the long term, it is unclear whether UK legislation will continue to precisely mirror EU legislation or the UK will adopt a divergent policy. The government has said that at the point of Brexit (probably in 2019), in the 'Great Repeal Act', EU law will be converted in into domestic law ''wherever practical''. We can expect law and policy changes to reflect national circumstances to follow but not as a priority and presumably following proper procedures for scrutiny and consultation. There are no indications that climate change or energy laws will be prioritised for review or amendment. The exit negotiations have not begun but there are no indications that access to the common market will be available to the UK if there is a diminution in adherence to the Environmental Aquis. Consequently, the outlook for renewable energy sources including wind and solar is relatively stable due to the CCA which is primary UK legislation that is not dependent on any overarching EU legislation. As explained above the CCA imposes a long term national commitment to a reduction of GHG emissions. On 29 June 2016, importantly post-Brexit, the UK government sought to further reassure energy market participants and investors by confirming its commitment and passing the fifth Carbon Budget into law, which calls for a 57 per cent. cut to 1990 carbon emission levels for the period 2028-2032. The budget has since been approved by Parliament.
The UK electricity system is facing a period of major structural change and challenge, which could affect the prices in the wholesale power market.
The UK faces the decommissioning of a substantial proportion of its legacy power generation fleet, either, in the case of nuclear stations, because they have come to the end of their design lives, or, in the case of many coal and oil stations, because of the prohibitive costs of complying with other environmental regulations.
National Grid projects that UK generation capacity over the period from 2015/16 to 2020/21 will fall from just over 70GW to between 61 and 65GW, with capacity thereafter projected to increase slowly.
Renewable energy is a steadily increasing proportion of that generation capacity – with over 46 per cent. of Britain's electricity coming from renewable sources in 2015; accompanied by a decrease in the proportion generated by coal-fired stations to 22 per cent., down from 30 per cent. the previous year.
The drive to address climate change, along with supply pressures, has led to a number of regulatory and market initiatives in the UK. The Government has been supportive of the growth of renewable energy, as demonstrated by the legislation passed and policies issued.
The UK Renewable Energy Roadmap confirms that there are significant advantages with solar PV energy: it is versatile and scalable, with deployment possible in a wide range of locations including domestic and commercial buildings and, where appropriate, on the ground; solar projects can be developed and installed very quickly; and the fuel, solar radiation, is free and materially abundant in the UK. In addition the extensive deployment of solar PV assets across the UK has recently resulted in solar receiving the highest public approval rating of all renewable energy technologies at 82 per cent.9
9 Source: DECC – Public Attitudes Tracker – Wave 10 – August 2014.
The UK Renewable Energy Roadmap indicates that there is a potential deployment range of 7-20GW of solar PV deployment by 202011. On 18 November 2015 the then Energy Secretary Amber Rudd announced an upgrade to DECCs' solar deployment forecast for 2020 to 12GW from 9.55GW earlier in August of the same year.
Solar PV projects in the UK typically generate revenues from:
Looking at each of these in turn:
The electricity market in the UK is divided into:
The electricity wholesale market consists of electricity generators (those who produce electricity) selling their output to electricity suppliers (entities who sell the electricity to consumers) through bilateral contracts, over-the-counter trades and through spot markets.
The price available to renewable electricity generators in the wholesale electricity market, generally referred to as the ''spot price'', is determined by the market, which in the UK comprises approximately nine major electricity generators and six major electricity suppliers to the consumer market.
The wholesale price of power drives circa 40-50 per cent. of the revenue mix of large solar PV assets and is therefore a significant NAV driver. This is particularly amplified as the sale of electricity is linked to energy price inflation, whereas the operating cost basis of these plants is mainly linked to RPI which is generally forecasted to be lower than energy price inflation12.
10 Source: DECC – Solar Photovoltaics Deployment – September 2016.
11 Source: DECC – Department of Energy & Climate Change – UK Renewable Energy Roadmap – November 2013 Update.
12 Source: DECC – Electricity Generation Costs – July 2013.
The wholesale price of power is projected to rise in the near term as the rising cost of carbon is passed through to generator offers. Coal generation is the dominant price setting technology in the near term. However, as the number of coal power stations being decommissioned increases, gas becomes increasingly dominant and is the key driver of long-term baseload power prices13.
The UK has implemented three extant regimes which specifically incentivise the deployment of solar PV technology, being ROCs, FiT and CfDs. The RO has been the main support mechanism since it began operating in 2002, although it has evolved and become more targeted through successive Renewables Obligation Orders. The FiT was introduced later and began operating in April 2010. CfDs were introduced in 2015 to be the underlying regime for larger (greater than 5MWp) solar projects although there is some uncertainty as to how this will be applied.
The RO supports renewable electricity generation by placing an obligation on licensed electricity suppliers to surrender Renewables Obligation certificates each year or else pay a buy-out price.
The powers required to establish the RO were included in the Utilities Act 2000, and the detailed mechanics and parameters are defined in the Renewables Obligation Orders. The primary Renewables Obligation Order, the Renewables Obligation Order 2015 came into force on 1 December 2015.
The RO operates in England and Wales, with parallel obligations in Scotland and Northern Ireland.
The RO is a system whereby a generator using certain Specified Renewable Technologies, is eligible to receive green energy certificates, otherwise known as ROCs, in addition to their Brown Power sales. All licensed electricity suppliers are obliged to source a fixed percentage of their supply from renewable energy sources, and to evidence this by presenting ROCs to the regulator (Ofgem) or pay a ''buy-out price''. Suppliers source these ROCs from generators who are accredited by Ofgem and if a supplier fails to purchase sufficient ROCs to fulfil this obligation then it must pay a buyout price for each of the ROCs representing the difference between its obligation and the ROCs it submits. These payments are recycled to suppliers in proportion to the ROCs they did submit. As such, the price of ROCs is inversely related to the amount of renewable energy produced, as the greater the shortfall below the target, the greater the buyout payments recycled to those who did submit ROCs. The RO regime provides for the ROC buyout price to increase with inflation each year.
It is intended that from 2027 to 2037, the current recycling system will no longer be in effect, and all accredited projects will simply receive a ''Fixed Price Certificate'', consisting of a premium payment of 110 per cent. of the buyout price for their ROCs.
Revenue received by generators for each unit of electricity sold under the RO regime comprises four main elements, which together constitute the RO ''all-in'' price. Each of these elements has an independent value and, in the case of ROCs, can be sold separately. The elements are:
Electricity suppliers with an RO must either (a) submit to Ofgem a number of ROCs up to a certain defined proportion of their supply base and/or (ii) make a buyout payment for the balance. The level of the buyout payment required increases in line with RPI each year. The value of ROCs fluctuates depending on the actual amount of renewable generation compared to the annual RO target.
13 Source: Inenco UK 15 Year Outlook – July 2013 and DECC Updated Energy & Emissions Projections – September 2013
ROC percentages and prices by year14
| Obligation for England & Wales and Scotland | |
|---|---|
| Buy-out price | (ROCs per MWh of electricity supplied) |
| £30.00 | 0.030 |
| £30.51 | 0.043 |
| £31.39 | 0.049 |
| £32.33 | 0.055 |
| £33.24 | 0.067 |
| £34.30 | 0.079 |
| £35.76 | 0.091 |
| £37.19 | 0.097 |
| £36.99 | 0.111 |
| £38.69 | 0.124 |
| £40.71 | 0.158 |
| £42.02 | 0.206 |
| £43.30 | 0.244 |
| £44.33 | 0.290 |
| £44.77 | 0.348 |
The RO system was changed in 2009 as it became apparent that the UK was unlikely to meet its renewable energy targets set by the EU without accelerating the development of certain higher cost renewable energy technologies such as solar, offshore wind, biomass, wave and tidal (among others). After a series of Government consultations, banding was introduced in April 2009.
Banding involves different technologies being awarded different numbers of ROCs for every MWh of electricity produced. However, in order to mitigate the disturbance that could arise from banding (and changing ROC awards for projects already in operation or under construction), the banding levels for most technologies were grandfathered. This is a process whereby an accredited generating plant will receive the same level of ROC support for its generation output for the full 20 year period allowed under the RO, so long as it remains eligible.
The bands are reviewed on a regular basis with historical rights to banding levels being grandfathered as a matter of policy for projects registered before 22 July 2015 or qualifying for the transitional grace period relief.
At the same time, a system known as ''headroom'' was introduced to prevent the new banded RO from being oversupplied. Under this system, the target obligation level for the forthcoming year was set in advance based on a Government estimate of the supply of ROCs for that year plus an additional 10 per cent. margin.
The RO was changed such that from April 2016 any new solar PV generating station (both ground and building mounted) above 5MWp will no longer be eligible for ROCs including any project increased in size to exceed 5MWp after April 2016. However, the RO should remain open for new registrations until 2017 for projects below 5MWp in size, where the transitional grace period criteria is met, so the Directors consider that all of the Group's existing pipeline PV assets below 5MW should be eligible for accreditation under the RO.
In an outstanding consultation released in December 2015 the Government has proposed that small scale solar accredited between April 2016 and March 2017 may be subject to a ROC banding review unless it qualifies for the significant financial commitment grace period. In addition, the Government has proposed that small scale PV accredited from 22 July 2015 will only benefit from grandfathering if it qualifies for the significant financial commitment grace period. The Directors consider that all of the Group's existing pipeline PV assets below 5MW should be eligible for accreditation under the RO.
As the levels of Renewables Obligation support for solar PV energy in the future will be lower than for other technologies, such as offshore wind and onshore wind, it can be inferred that the UK Government believes that solar PV requires less support than other technologies in order to be deployed.
14 Source: Ofgem Information Note 12 February 2014 – The Renewables Obligation Buy-out Price and Mutualisation Ceiling 2016-17
FiTs support renewable electricity generation by requiring certain licensed electricity suppliers to make generation and export payments in respect of certain kinds of renewable electricity generation up to 5MW (or up to 10MW in the case of ''community power generating projects'').
New small-scale electricity generating stations (including solar PV plants) above 50KW and up to 5MW in size have the option of choosing support from either the Renewables Obligation or the FiTs scheme. Eligible technologies include solar PV. Generation payments are a fixed payment by the relevant electricity supplier to the FiT generator for every KWh generation by the installation.
Export payments are a payment by the relevant electricity supplier to the FiT generator for every kWh exported to the national grid (although electricity can alternatively be sold into the market).
Levels of FiTs are determined by DECC and can only be adjusted pursuant to pre-determined criteria. FiTs for solar PV are granted now for 20 years. Once an installation is FiT accredited, FiT payments are adjusted in accordance with RPI.
The policy commitment to grandfathering ensures that solar PV generating stations should continue to receive the FiT for which they were first accredited for the duration of their FiT support. FiT payments for newly accredited FiT installations are reduced over time by a mechanism known as degression.
As a result of the Government Response to the Review of the Feed-in Tariffs Scheme in December 2015 generation tariffs for new installations have been reduced and deployment caps have been introduced.
Deployment caps are limits on the aggregate capacity of installations that can accredit for a FiT tariff under a particular three month tariff period. Once a deployment cap is reached, no further installations are eligible to receive the tariff rate applicable for that band in that tariff period, Applications for such installations fall be determined in the following period at a reduced tariff rate.
The White Paper (''Planning our electric future: a White Paper for secure, affordable and low-carbon electricity'') published in July 2011 initially set out the Government's intention to introduce a feed-in tariff with contracts for difference (CfDs) as a new mechanism to support investment in low-carbon electricity generation. CfDs are a core part of EMR. The first solar CfDs have been awarded and with the RO being closed to new projects from 1 April 2017, the CfD will become the key incentive for development of renewable projects not supported by the existing small scale FiT regime (which supports up to 5MW renewable generation).
The CfD works by stabilising revenues for generators at a fixed price level known as the ''strike price''. Generators will receive revenue from selling their electricity into the market as usual. However, when the market reference price is below the strike price they will also receive a top-up payment from suppliers for the additional amount. Conversely if the reference price is above the strike price, the generator must pay back the difference.
These characteristics mean that the CfD provides additional benefits when compared with the current RO and alternative mechanisms considered. It gives greater certainty and stability of revenues by removing exposure to volatile wholesale prices, and protects consumers from paying for support when electricity prices are high. Consequently it makes the development of low-carbon generation cheaper for both investors and consumers.
The 2016 UK Government Budget stated that the Government will auction Contracts for Difference of up to £730 million this Parliament for up to 4 GW of offshore wind and other less established renewables. While a second Contracts for Difference auction round was expected to occur in late 2016, this is now uncertain due to the change in Government personnel. The latest indication is that the Government will initially auction Contracts for Difference of up to £290 million for offshore wind and less established renewables with plans for more mature technologies (including large scale solar to be set out in due course15.
In addition to the all-in price under the RO and FiT regimes, assets receive certain ''embedded benefits'' as a result of being connected entirely at the distribution network level, as opposed to at the transmission network level.
15 Source: Government Response to Committee on Climate Change (October 2016) at page 10.
The UK electricity grid is broadly split between the high voltage main transmission system and the lower voltage distribution system. Electricity generated and fed into the grid at the distribution level is considered to be supplied to customers within that same distribution grid and is therefore deemed not to be using the transmission system. Suppliers who purchase power embedded PV assets therefore avoid paying some of the charges which would normally be associated with supplying customers in that area with power procured and delivered via the transmission grid.
The amounts saved by the avoidance of these charges are known as ''embedded benefits'', and embedded generators are able to capture a proportion of these benefits through the pricing of its PPAs.
Embedded benefits comprise the avoidance of the following charges: (a) transmission and distribution losses; (ii) transmission network use of system (or Triad) charges; (iii) balancing services use of system charges; (iv) generator distribution use of system charges; and (e) residual cashflow reallocation cashflow payments. A number of factors determine whether the renewable electricity generator incurs network charges or is eligible for embedded benefits, including: (a) whether the generator is transmission or distribution connected; (ii) whether the generator is classed as licence exempt; (iii) the size and location of the generator; (iv) the treatment of the generator under the Connection and Use of System Code, which makes up the contractual national framework in the UK for connecting to and using the transmission system operated by National Grid; and (e) the type of bilateral connection agreement that the generator has with the National Grid for exporting power.
An open letter from Ofgem, the Office of Gas and Electricity Markets, dated 29 July 2016 indicated that embedded benefits will be subject to formal review and sought preliminary comment by 23 September 2016. The open letter states that there is a concern that embedded benefits may be over-rewarding embedded generators so the review may result in a decrease of these benefits.
As at 11 November 2016, the Current Portfolio comprised 33 operating solar PV plants (32 acquisitions completed, with a further plant contracted to be acquired, completion expected shortly) across 17 counties in England and Wales. These 33 plants had a total investment value of £481.4 million. All of the plants are (or will be) wholly owned by the Company through its HoldCos, which are intermediate holding companies.
The solar PV plants in the Current Portfolio have a weighted average operational history of approximately 1.6 years and a generating capacity of approximately 413.7MW. The majority of these plants are accredited under the ROC subsidy regime. The Investment Adviser estimates that, as at 30 September 2016, approximately 51.8 per cent. of the revenues derived from the Current Portfolio were regulated (that is, derived from ROCs and embedded benefits, mainly linked to RPI), with the balance derived from the sale of electricity.
The majority of the plants in the Current Portfolio are large, ground-based and agriculturally situated. There is one roof-mounted plant in the Current Portfolio, with a generating capacity of approximately 1.8MW.
Valuation
Summary
| Plant | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 June | Portfolio | |||||||
| Acquisition | Regulatory | capacity | Investment | 2016) | ||||
| Power plant | Location | Date | Regime(1) | (MW) | (GBPm) | (GBPm) | ||
| 1 | Higher Hatherleigh | Somerset | 01-05-14 | 1.6 | 6.1 | 7.3 | 7.1 | 1.8 |
| 2 | Shacks Barn | Northants | 09-05-14 | 2.0 | 6.3 | 8.2 | 8.2 | 2.1 |
| 3 | Gover Farm | Cornwall | 23-06-14 | 1.4 | 9.4 | 11.1 | 11.7 | 3.0 |
| 4 | Bilsham | Sussex | 26-01-15 | 1.4 | 15.2 | 18.9 | 18.0 | 4.6 |
| 5 | Brickyard | Midlands | 14-07-14 | 1.4 | 3.8 | 4.1 | 3.8 | 1.0 |
| 6 | Ellough | Suffolk | 28-07-14 | 1.6 | 14.9 | 20.0 | 19.2 | 4.9 |
| 7 | Poulshot | Wiltshire | 02-04-15 | 1.4 | 14.5 | 15.7 | 15.8 | 4.0 |
| 8 | Condover | Shropshire | 31-05-15 | 1.4 | 10.2 | 11.7 | 10.7 | 2.7 |
| 9 | Llywndu | Ceredigion | 17-07-15 | 1.4 | 8.0 | 9.4 | 9.2 | 2.4 |
| 10 | Cock Hill Farm | Wiltshire | 17-07-15 | 1.4 | 20.0 | 23.3 | 22.8 | 5.8 |
| 11 | Boxted Airfield | Essex | 02-04-15 | 1.4 | 18.8 | 20.6 | 20.6 | 5.2 |
| 12 | Langenhoe | Essex | 13-04-15 | 1.4 | 21.2 | 22.9 | 22.1 | 5.6 |
| 13 | Park View | Devon | 15-07-15 | 1.4 | 6.5 | 7.7 | 7.5 | 1.9 |
| 14 | Croydon | Cambridgeshire | 23-04-15 | 1.4 | 16.5 | 17.8 | 17.4 | 4.4 |
| 15 | Hawkers Farm | Somerset | 30-06-15 | 1.4 | 11.9 | 14.5 | 14.2 | 3.6 |
| 16 | Glebe Farm | Bedfordshire | 31-05-15 | 1.4 | 33.7 | 40.5 | 40.0 | 10.2 |
| 17 | Bowerhouse | Somerset | 15-07-15 | 1.4 | 9.3 | 11.1 | 10.8 | 2.8 |
| 18 | Wellingborough | Northants | 15-07-15 | 1.6 | 8.5 | 10.8 | 10.1 | 2.6 |
| 19 | Birch Farm | Essex | 25-09-15 | FiT | 5.0 | 5.3 | 5.7 | 1.4 |
| 20 | Thurlestone Leicester | Leicestershire | 15-10-15 | FiT | 1.8 | 2.3 | 2.7 | 0.7 |
| 21 | North Farm | Dorset | 19-10-15 | 1.4 | 11.5 | 14.5 | 14.2 | 3.6 |
| 22 | Ellough Phase 2 | Suffolk | 22-08-15 | 1.3 | 8.0 | 8.0 | 8.0 | 2.1 |
| 23 | Hall Farm | Leicestershire | 18-04-16 | FiT | 5.0 | 5.0 | 4.9 | 1.3 |
| 24 | Decoy Farm | Lincolnshire | 23-03-16 | FiT | 5.0 | 5.2 | 5.7 | 1.5 |
| 25 | Green Farm(5) | Essex | —(5) | FiT | 5.0 | 5.8 | 5.8 | 1.5 |
| 26 | Fenland(2) (3) | Cambridgeshire | 08-01-16 | 1.4 | 20.4 | 23.941 | 8.5 | 2.2 |
| 27 | Green End(2) (3) | Cambridgeshire | 08-01-16 | 1.4 | 24.8 | 28.984 | 10.2 | 2.6 |
| 28 | Tower Hill(2) (3) | Gloucestershire | 08-01-16 | 1.4 | 8.1 | 8.791 | 3.6 | 0.9 |
| 29 | Branston | Lincolnshire | 14-04-16 | 1.4 | 18.9 | |||
| 30 | Great Wilbraham | Cambridgeshire | 14-04-16 | 1.4 | 38.1 | |||
| 31 | Berwick | Sussex | 14-04-16 | 1.4 | 8.2 | 97.9(2)(4) | 53.0 | 13.5 |
| 32 | Bottom Plain | Dorset | 14-04-16 | 1.4 | 10.1 | } | ||
| 33 | Emberton | Buckinghamshire | 14-04-16 | 1.4 | 9.0 | |||
| Total | 413.7 | 481.4 | 391.8 | 100 |
Notes:
(2) Investment excludes debt drawn down included in cost.
(3) Part of the Three Kings portfolio.
(4) Part of the Radius Portfolio.
(5) Acquisition not yet completed.
(1) An explanation of ROC Regime is available at www.ofgem.gov.uk/environmental-programmes/renewables-obligation-ro
Summaries of solar PV plants in Current Portfolio are included in the Annual Report of the Company, which are incorporated by reference into this Registration Document pursuant to paragraph 2.4 of Part 7 of this Registration Document.
As at 30 September 2016, 51.8 per cent. of the annual revenues derived from the current portfolio were regulated (that is, ROC or other subsidy regimes).
By year of expiry of regulatory regime
The NEC Group includes NextEnergy Capital IM Limited (the Investment Manager) NextEnergy Capital Limited (the Investment Adviser), NextPower Development Limited (the Developer) and WiseEnergy (Great Britain) Limited (the operating asset manager), all of which are subsidiaries of NextEnergy Capital SARL (Luxembourg).
The NEC Group, which is privately-owned, was founded in 2007 and has evolved into a leading specialist investment and asset manager in the solar sector. The NEC Group can lead the entire process on a solar project, from origination to project development, financing, construction and connection and asset management post-construction.
With an over 67 strong team focussed exclusively on the solar energy sector, the NEC Group has an operating presence in two of the most attractive solar markets globally (Italy and the UK).
Its team comprises professionals with senior experience in global investment banks in equity and debt raising, mergers and acquisitions, structured finance and strategic advisory as well as renewable energy sector specialists. Senior management and employees of the Investment Adviser have extensive renewable energy and public markets expertise, including over e100 billion in energy and infrastructure transactions. The NEC Group has deployed approximately £600 million of its own and third party capital, in acquiring approximately 50 solar power projects.
The NEC Group also manages NextPower II LP, a e150 million private equity fund focused on acquiring operating solar power projects in Italy. The Investment Manager and the Investment Adviser do not, and have undertaken not to, manage any other funds investing in UK solar plants.
WiseEnergy provides asset management services to other listed solar funds (in addition to NESF), private equity funds, and other equity investors, as well as some of the largest lending banks active in the European solar sector to whom WiseEnergy provides loan portfolio management and risk management services. WiseEnergy is one of the largest specialist operating asset managers in the solar sector, providing asset management and monitoring services in respect of more than 1,250 utility-scale solar power plants and approximately 3,000 solar rooftop installations with a total capacity of approximately 1.7GW and an estimated £3.5 billion of asset value.
The Investment Manager is a limited company registered in Guernsey (registered number: 57740) with its registered office at 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey, GY1 2HL and is licensed and regulated by the GFSC to undertake the activity of investment management pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, and acts as the AIFM of the Company.
The Investment Manager has been appointed by the Company pursuant to the Management Agreement, which is summarised in paragraph 6.9 of Part 8 of this Registration Document.
Under the Management Agreement, subject to the overall control and supervision of the Board, the Investment Manager has full discretion to make investments in solar projects which have been recommended by the Investment Adviser and meet the requirements of the Company's investment policy.
As the Company's AIFM, the Investment Manager also has responsibility for all risk management and portfolio management activities. In addition, the Investment Manager has been granted powers by the Company as regards its HoldCos and SPVs in order to facilitate the performance of its obligations.
The Investment Manager's directors are Aldo Beolchini, Jeremy Thompson and Andrew Whittaker. One director of the Investment Manager is nominated by the Investment Adviser, with such nominee being drawn from the members of the Investment Committee (Mr Beolchini is the Investment Adviser's nominee at the date of this Registration Document). The biographies of Mr Beolchini, Mr Thompson and Mr Whittaker appear below.
Mr Beolchini is also CFO and a director of the Investment Adviser, a member of the Investment Committee and a director of the Developer and WiseEnergy UK. Mr Beolchini's biographical details are set out under the heading ''Investment Adviser'' below.
Mr Thompson is a Guernsey resident with sector experience in Finance, Telecoms, Aerospace and Oil & Gas. He acts as a consultant to a number of businesses which include independent non-executive directorships for three PE funds, Riverstone Energy Limited (FTSE-250), DP Aircraft Limited and to the Investment Manager.
Between 2005 and 2009 he was a director of multiple businesses within a London based private equity group. This entailed board positions on both private, listed and SPV companies and highly successful exits. Prior to that he was CEO of four autonomous global businesses within Cable & Wireless PLC and earlier held CEO roles within the Dowty Group. Mr Thompson has studied and worked in the UK, USA and Germany.
Currently, he serves as chairman of the States of Guernsey Renewable Energy Team and is a commissioner of the Alderney Gambling Control Commission. He is also an independent member of the Guernsey Tax Tribunal panel.
Mr Thompson is a graduate of Brunel (B.Sc) and Cranfield (MBA) Universities and was an invited member to the UK's senior defence course (Royal College of Defence Studies). He holds the Institute of Directors (IoD) Certificate and Diploma in Company Direction and is an associate of the Chartered Institute of Arbitration. He is currently completing an M.Sc in Corporate Governance.
Mr Whittaker has over 15 years' experience in the fund industry with an extensive experience of onshore and offshore vehicles (open- and closed-ended, traditional and alternative funds, including AIFM Directive and FATCA implementations. Mr Whittaker is managing director of Ipes' Guernsey business after previously heading up the Ipes UK office. He founded Ipes' AIFM Directive Depositary Service, seeing it approved under the FCA's transitional provisions and working with two of the first three AIFMs to be approved on 22 July 2013. Mr Whittaker is a director of Starwood European Finance Partners Limited, the Investment Manager of Starwood European Real Estate Finance Limited (LSE:SWEF). Mr Whittaker joined Ipes in January 2011 from Capita Financial Group's Specialist Fund Services (formally Sinclair Henderson) where he was managing director. Mr Whittaker also held senior management roles at Moscow Narodny (now VTB Capital) and DML and trained as an accountant while at HSBC. Mr Whittaker graduated from Cardiff University, is a Chartered Management Accountant, a member of the Chartered Institute for Securities & Investment and a member of the Guernsey Society of Chartered and Certified Accountants. He is a member of the Association of Investment Companies' (AIC) Technical Committee and the Association of Real Estate Funds' (AREF) Regulatory Committee and chairs the Guernsey Investment Fund Association (GIFA) Executive and the British Venture Capital Association (BVCA) Channel Islands Working Group.
The Investment Adviser is a limited company registered in England (registered number: 05975223) with its registered office at 10 Chandos Street, London, W1G 9DG and is authorised and regulated by the FCA under number FRN 471192.
The Investment Adviser has been appointed by the Investment Manager pursuant to the Investment Advisory Agreement, which is summarised in paragraph 6.10 of Part 8 of this Registration Document.
The Investment Adviser acts only in an advisory capacity to the Investment Manager. All decisions in respect of investments and disposals relating to the Current Portfolio are the responsibility of the Investment Manager.
The Investment Adviser's role primarily entails the origination, evaluation, co-ordination and recommendation of investment opportunities for the Company and the related provision of investment advice to the Investment Manager in respect of acquisitions and disposals portfolio efficiencies, financing, strategy, market developments and other matters that may affect the Company's portfolio or the Company's ability to meet its investment objective. In addition, the Investment Adviser is responsible for reviewing the performance of the Company's portfolio together with WiseEnergy UK.
The Investment Adviser maintains the Investment Committee, comprising senior members of its staff. The role of the Investment Committee is to consider and, if thought fit, to recommend actions to the Investment Manager in respect of the Company's potential and actual investments. The Investment Committee is the primary interface between the Investment Manager and the Investment Adviser. At the date of this Registration Document, the Investment Committee comprises Michael Bonte-Friedheim, Aldo Beolchini, and Abid Kazim, whose biographies appear below.
Mr Bonte-Friedheim is founding partner and CEO of the NEC Group. He is a director of the Investment Adviser, a member of the Investment Committee and a director of the Developer and WiseEnergy. Mr Bonte-Friedheim has extensive experience in the energy and power industry, as well as financial expertise, developed over more than 20 years in investment banking, managing energy companies and principal investing across the energy sector (with a particular focus on solar PV energy). Mr Bonte-Friedheim has successfully undertaken a number of public and private fund-raising activities in energy and renewable energy, as well as having negotiated multiple JVs and commercial agreements with entities co-investing in assets developed and financed by the NEC Group, as well as third-party solar PV acquisition transactions. Mr Bonte-Friedheim has also held various roles at listed companies including Valiant Petroleum (where he was acting CEO and the senior independent member of the board of directors) and Mediterranean Oil & Gas (where he was the non-executive chairman and subsequently CEO). Mr Bonte-Friedheim was a managing director at Goldman Sachs in the energy and power division of the investment banking group in London and prior to this held senior roles in the London investment banking departments of Morgan Stanley and Credit Suisse First Boston. Mr Bonte-Friedheim graduated from the University of San Diego in 1989 and earned a MBA from INSEAD in 1994.
Mr Beolchini is managing partner and CFO of the NEC Group. He is a director of the Investment Adviser, a member of the Investment Committee and a director of the Investment Manager, the Developer and WiseEnergy UK. He has over 15 years' experience primarily in investment banking and renewable energy. Mr Beolchini joined the NEC Group in 2008 and is responsible for the design, structuring and execution of the NEC Group asset financing strategy and for covering relationships with lending banks, institutional investors and financial intermediaries. Mr Beolchini has been instrumental in growing WiseEnergy's assets under management, whilst designing WiseEnergy's administration and financial management services. Mr Beolchini previously obtained eight years of investment banking experience, including M&A, structured finance and capital markets as a vice president at Morgan Stanley in London, and was responsible for the identification, execution and ongoing management of structured finance principal investments, targeting a variety of assets including renewable energy generation globally. Prior to this, Mr Beolchini was an Officer at the Financial Guard Corps in Italy, assigned to its academy where he held classes on financial reporting and tax regulations. Mr Beolchini holds a masters degree in Business and Finance from LUISS University, Italy.
Mr Kazim is the UK managing director of the NEC Group. He is a consultant to the Investment Adviser and is a member of the Investment Committee. Mr Kazim has over 25 years' experience in strategy development and large programme delivery. He spent 10 years in business outsourcing and strategic sales, with more than \$3 billion in deals originated and/or delivered across Government and clean energy. Since 2009 (but prior to his involvement in the Company), Mr Kazim has advised on, originated, structured and/or delivered solar PV plants with capacity in excess of 200MWp. Mr Kazim has delivered operational services for organisations including the BBC, UK Passport Office, National Air Transport, National Savings and Investments (NS&I) and other local Government organisations. Previously, Mr Kazim advised on the 1998 deregulation of Eastern Energy and on corporate strategy for Yorkshire Electricity. Mr Kazim also co-founded Cluster Seven and PW Global e-Business Consulting. Mr Kazim earned a MBA from the Manchester Business School in 1993.
The Developer is a limited company registered in England (registered number: 06363524) with its registered office at 10 Chandos Street, London, W1G 9DG.
The Developer, the Investment Adviser and the Company have entered into the Project Sourcing Agreement, which is summarised in paragraph 6.11 of Part 8 of this Registration Document.
Abid Kazim, who is the managing director of the Developer, a consultant to the Investment Adviser and a member of the Investment Committee, is primarily responsible for the performance of the Developer's obligations under the Project Sourcing Agreement. Mr Kazim's biographical details are set out under the heading ''Investment Adviser'' above.
The Developer's activities include primarily sourcing and evaluating investment opportunities, in the pre-construction, construction and operating phases in the general market from entities owning such projects or through intermediaries and taking forward the legal, technical and financial development of those opportunities that pass the Developer's initial selection process. Once an investment opportunity is deemed by the Developer to be sufficiently developed and de-risked, the Developer markets that opportunity to interested parties on the basis of the agreements it has entered into with interested parties or, if no such agreement exists or the contractual counterparties decline such investment opportunities, to external, unconnected parties. Under the Project Sourcing Agreement, the Company has a right of ''first offer'' in respect of all large scale ground-mounted or building-integrated solar PV projects located in the United Kingdom that are sourced by the Developer and fall within the Company's investment objective and investment policy.
The Investment Adviser evaluates all the projects presented to the Company by the Developer. The Investment Adviser is not obliged to recommend, and the Company is not obliged to acquire, any project proposed by the Developer under the Project Sourcing Agreement. Furthermore, the Company, the Investment Manager and/or the Investment Adviser may establish relationships with other developers, or otherwise source investment opportunities as they deem appropriate.
Where investment opportunities sourced by the Developer are pursued by the Company, the Developer project manages the pre-construction and construction phases (if any) and the acquisitions, including:
The Developer has agreed, pursuant to the Project Sourcing Agreement, that it will not receive fees in respect of projects introduced by it, although it is entitled to reimbursement of transaction costs, expenses and disbursements paid by it or on its behalf in connection with any project introduced by it which is accepted by the Company (whether or not such project is ultimately acquired by the Group).
WiseEnergy UK is the operating asset management division of the NEC Group and includes, a limited company registered in England (registered number 8822067) with its registered office at 10 Chandos Street, London, W1G 9DG.
WiseEnergy UK is appointed on an arm's length basis by each underlying SPV to conduct selected asset management and monitoring activities on completion of each acquisition. The main role of WiseEnergy UK is to supervise the technical and administrative operations of the Group's solar plants and provide the Investment Manager with detailed portfolio monitoring information to enable it to optimise the Group's investments. WiseEnergy UK may also provide these services in respect of joint ventures in which the Company participates.
The activities of WiseEnergy UK include, amongst other things:
The provision and cost of these services is governed by a separate Asset Management Agreement which serves as a framework agreement for each SPV once solar plants have been acquired and the exact scope of the asset monitoring activities can be finalised. The Asset Management Agreement and charging schedules for each SPV were negotiated on an arm's length basis and subject to full Board review and approval. In addition to fees payable to WiseEnergy UK, WiseEnergy UK is also entitled to reimbursement of customary expenses (excluding ordinary overhead operating expenses).
The NEC Group has extensive experience in advising internal and external clients on investments in solar projects in the UK and other countries and its investment process has been tested and optimised over multiple transactions since its formation in 2007.
The investment process begins, in each case, with an evaluation by the Investment Adviser of a potential investment. Potential investments may be originated by the Developer (as described under the heading ''The Developer'' above) or from other sources, including proposals arising from the Investment Manager's or the Investment Adviser's other activities.
Projects that are deemed to be of potential interest to the Company are subject to a comprehensive analysis conducted by the Investment Adviser and including due diligence conducted by external advisers. Following the completion of initial due diligence on a potential investment, the Investment Adviser prepares an investment memorandum for submission to the Investment Committee.
Each investment memorandum summarises the analysis conducted by the Investment Adviser, including:
summary of project design and grid connection offers; and
summary of technology and creditworthiness of counterparties;
The Investment Committee considers each investment memorandum and, if thought fit, recommends the relevant project for consideration by the Investment Manager.
If a proposal is deemed not to be worthy of consideration by the Investment Manager, the Investment Committee may return the proposal to the Investment Adviser's broader team for further work, or reject the potential investment entirely. Where a potential investment has been originated by the Developer and is rejected entirely, at this stage the investment opportunity will be released to the Developer who may pass the opportunity to other clients.
On receipt of a recommendation from the Investment Committee, the Investment Manager considers each investment opportunity at board level. The director of the Investment Manager nominated by the Investment Adviser presents the Investment Committee's recommendation to the other directors of the Investment Manager. The board of the Investment Manager considers the recommendation and, if thought fit, may approve the investment for the Company. Any such approval requires a unanimous resolution of the board.
If the investment opportunity is approved, it moves to the execution stage, with execution being implemented by the Investment Manager, with assistance and advice of the Investment Adviser where appropriate, in accordance with the terms of the Management Agreement, and the Investment Advisory Agreement.
If the investment opportunity is not approved, the Investment Manager may either reject the proposed investment entirely or return it to the Investment Adviser for further consideration and advice. Where the potential investment was originated by the Developer and is rejected entirely, at this stage the investment opportunity will be released to the Developer who may pass the opportunity to other clients.
The Investment Manager will only consider for the Company investment opportunities recommended to it by the Investment Adviser.
Members of the NEC Group, including the Investment Manager, the Investment Adviser, the Developer and WiseEnergy, may be involved in other financial, investment or other professional activities, including investment management services, investment advisory services, project development and related activities or asset management and monitoring activities, on behalf of other clients, entities or other persons. Such activities may cause potential conflicts of interest with the Company, the Group and its investments. Any resulting profits earned by the NEC Group from any such activities are retained by the NEC Group.
The NEC Group has sought to minimise the potential for conflicts of interest with the Company by:
* the Developer giving the Company a right of ''first offer'' in respect of all large scale groundmounted or building-integrated solar PV projects located in the United Kingdom that are sourced by the Developer and fall within the Company's investment objective and investment policy.
Furthermore, the Investment Manager, the Investment Adviser, the Developer and WiseEnergy UK will at all times have due regard to their duties owed to members of the Group and, where a conflict arises, they will endeavour to ensure that it is resolved fairly. In addition, any relevant conflicts of interest will be disclosed by the NEC Group to the Board, as will decisions by the Investment Manager or Investment Adviser to allocate an investment opportunity appearing to fall within the Company's investment objective and policy to any other client.
The Directors have satisfied themselves that the Investment Manager, the Investment Adviser, the Developer and WiseEnergy UK have procedures in place to identify and address potential conflicts of interest between any of them (or any of their respective directors, officers, employees, consultants and agents) and the Group.
As at 11 November 2016, being the last practicable date prior to publication of this document, the Investment Adviser held 88,197 Ordinary Shares, representing 0.026 per cent. of the Company's issued share capital.
The Board comprises three directors, each of whom is non-executive and independent of the NEC Group. Details of each of the Directors are set out below.
Mr Lyon is a qualified Chartered Accountant, with over 30 years of experience in private equity and senior director positions in a number of different companies. He spent approximately 17 years with the 3i Group, responsible for their core private equity business across the UK, with a team of 10 Directors and 40 executives. Mr Lyon is currently chairman of Drilling Systems Ltd, a designer and manufacturer of simulators for the oil and gas industry, of Inoapps Ltd, a vendor of Oracle software and of ROVOP, an independent provider of subsea remotely operated vehicle services. He was former chairman of Smart Metering Systems plc, Valiant Petroleum plc, RBG, Wyndeham Press Group, Craneware plc, Incline GTS and Ambrian plc and was a non- executive director on Booker plc, David Lloyd Leisure, and Phase 8. He won the Institute of Directors Scotland, Non-Executive Director of the Year Award in March 2013. Mr Lyon graduated from Edinburgh University in 1982 and has attended management courses at INSEAD, IESE and Ashridge.
Mr Firth qualified as a Chartered Accountant with KPMG Guernsey in 1991 and is also a member of the Chartered Institute for Securities and Investment. Mr Firth is a director of a number of management companies, general partners and investment companies, including Riverstone Energy Limited, JZ Capital Partners Limited, ICG-Longbow Senior Secured UK Property Debt Investments Limited, DW Catalyst Fund Ltd. and GLI Finance Limited. He has worked in the fund industry in Guernsey since joining Rothschild Asset Management C.I. Limited in 1992 before moving to become managing director at Butterfield Fund Services (Guernsey) Limited (subsequently Butterfield Fulcrum Group (Guernsey) Limited), a company providing third party fund administration services, where he worked from April 2002 until June 2009. Mr Firth is Chairman of the Guernsey International Business Association and is a former chairman of the Guernsey Investment Fund Association (GIFA). He is a resident of Guernsey.
Mr Holmes is a qualified Chartered Certified Accountant. He has been involved in financial services for over 30 years. In 1986, Mr Holmes joined the board of Guernsey International Fund Management Limited, Guernsey's largest fund administration company. In 1990, he was appointed managing director of the newly established Irish-based Baring Asset Management subsidiary, providing international fund administration services from a Dublin base. He continued in that position until 2003, when he was appointed head of fund administration services for the Baring Asset Management group of companies, providing services out of London, Dublin, Guernsey, Isle of Man and Jersey. Subsequent to the acquisition of the Baring Asset Management Financial Services Group by Northern Trust in 2005, he was appointed country head of Northern Trust's Irish businesses and, in 2007, he returned to Guernsey to assume the position of jurisdictional head of Northern Trust's Channel Island businesses. Since 1986, Mr. Holmes has served on a wide range of fund-related boards, based mainly in Guernsey and Ireland, but also in the UK and the Cayman Islands. Mr Holmes' current directorships include Permira Holdings Limited, Generali Worldwide Insurance Company Limited, Picton Property Income Limited (London listed), Highbridge Multi-Strategy Fund Limited (London listed), DBG Management GP (Guernsey) Limited and a range of Ashmore funds. Mr Holmes was the first chairman of what is now known as the Irish Fund Industry Association which he was instrumental in establishing in 1991, and served as chairman of the executive committee of the Guernsey Investment Fund Association from April 2013 to April 2015. He is a resident of Guernsey.
The Directors are responsible for managing the business affairs of the Company in accordance with the Articles and the investment policy of the Company and have overall responsibility for the Company's activities, including its investment activities and reviewing the performance of the Company's portfolio.
As a general matter, it is the Directors (and not the Investment Manager, although it owes certain duties to the Company under the Management Agreement) who owe certain fiduciary duties to the Company (but not directly to Shareholders), which require them to, among other things, act in good faith and in what they consider to be in the best interests of the Company and, in doing so, the Directors must act in a manner that ensures the fair treatment of Shareholders.
The Directors may delegate certain functions to other parties such as the Investment Manager, the Administrator and the Registrar. In particular, the Directors have delegated responsibility for day-today management of the assets comprised in the Company's portfolio to the Investment Manager. The Directors have responsibility for exercising overall control and supervision of the Investment Manager.
The Listing Rules require that the Company must ''comply or explain'' against the UK Code. In addition, the Disclosure Guidance and Transparency Rules require the Company to (i) make a corporate governance statement in its annual report and accounts based on the code to which it is subject, or with which it voluntarily complies and (ii) describe its internal control and risk management arrangements.
The Company, which is a member of the AIC, voluntarily complies with the recommendations of the AIC Code by reference to the AIC Guide except as noted below. The AIC Code addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment companies. The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide, provides better information to Shareholders than if it had adopted the UK Code. The AIC Code has been endorsed by the Financial Reporting Council as ensuring investment company boards fully meet their obligations under the Listing Rules with regard to the UK Code.
The Directors recognise the importance of a strong corporate governance culture and the value of the AIC Code. Accordingly, they have taken appropriate measures to ensure that the Company complies, so far as appropriate given the Company's size and the nature of its business, with the AIC Code (and, therefore, with the UK Code). The areas of non-compliance by the Company with the UK Code are as follows:
The GFSC Code came into effect on 1 January 2012 and applies to Guernsey regulatory licensees and collective investment schemes. As the Company has committed to comply with the AIC Code (and, therefore, the UK Code), it is deemed to meet the requirements of the GFSC Code.
The Company's Audit Committee, chaired by Patrick Firth and comprising all the Directors, meets formally at least twice a year for the purpose of, amongst other things:
* discussing and agreeing with the auditor the nature and scope of the audit;
* keeping under review the scope, results and cost effectiveness of the audit and the independence and objectivity of the auditor;
Where non-audit services are to be provided by the auditor, full consideration of the financial and other implications on the independence of the auditor arising from any such engagement will be considered before proceeding.
The Company established a joint Remuneration/Nominations Committee in September 2016. The Remuneration / Nominations Committee is chaired by Vic Holmes and comprises all the Directors and meets formally at least once annually for the purpose of, amongst other things:
Mr Holmes is the Company's senior independent director, for the purposes of the Code.
The Directors have adopted a code of Directors' dealings. The Board is responsible for taking all proper and reasonable steps to ensure compliance with this by the Directors.
Ipes (Guernsey) Limited is the administrator to the Company pursuant to the Administration Agreement (details of which are set out in paragraph 6.12 of Part 8 of this Registration Document) and provides company secretarial services and a registered office to the Company. For the purposes of the Rules, the Administrator is the designated administrator of the Company. The Administrator is responsible for the safekeeping of any share and loan note certificates in respect of the Group's unquoted investments, the implementation of the Group's cash management policy, production of the Company's accounts, regulatory compliance, providing support to the Board's corporate governance process and its continuing obligations under the Listing Rules, the Disclosure Guidance and Transparency Rules and the Market Abuse Regulation and dealing with dividend payments and investor reporting. In addition, the Administrator is responsible for the day to day administration of the Company (including but not limited to the calculation, in conjunction with the Investment Adviser, of the Net Asset Value) and for general secretarial functions required by the Companies Law (including, but not limited to, the maintenance of the Company's accounting and statutory records).
The Administrator is independent of the Company and of the NEC Group, although it should be noted that Andrew Whittaker, who is a managing director of the Administrator, is also a director of the Investment Manager and the Administrator also provides administration and corporate secretarial services to the Investment Manager as well as the Company.
Capita Registrars (Guernsey) Limited acts as the Company's registrar and Capita Asset Services acts as the Company's UK transfer agent. Capita Asset Services, Corporate Actions acts as the Company's UK receiving agent.
PricewaterhouseCoopers CI LLP provides audit services to the Company and audit the Company's annual financial statements in accordance with International Standards on Auditing. The Directors are responsible for the preparation and approval of the annual report and financial statements and for ensuring that the financial statements comply with International Financial Reporting Standards and the provisions of the Companies Law and the Listing Rules. The Company has entered into an engagement letter with PricewaterhouseCoopers CI LLP. The terms of such engagement letter include certain limitations of liability in favour of PricewaterhouseCoopers CI LLP. PricewaterhouseCoopers LLP provides audit services to the HoldCos, and is appointed on terms which are materially the same as those between the Company and PricewaterhouseCoopers CI LLP. Neither PricewaterhouseCoopers CI LLP or PricewaterhouseCoopers LLP receive indemnification from the Company or any of the UK HoldCos pursuant to their respective terms of engagement.
The Investment Manager is entitled to receive an annual fee, accruing daily and calculated on a sliding scale, as follows:
The Investment Manager's fee is prima facie payable by the Company, but may be paid by other members of the Group (to reflect the extent to which the services provided by the Investment Manager are provided to such other members of the Group) should the Company so determine. It is expected that the majority of the Investment Manager's fee will be borne by the Company. The Investment Manager shall also be entitled to reimbursement of customary expenses incurred in providing its services (excluding ordinary overhead operating expenses).
The Investment Manager has agreed, subject to the fulfilment of certain criteria, to make certain payments out of its Investment Manager's fee to the IPO Cornerstone Shareholder.
The Investment Manager is responsible for the fees and expenses of the Investment Adviser, which will be payable at a rate agreed between them from time to time.
The Group bears project costs in connection with its investments. These project costs cover the performance of the operating asset, management and reporting activities that are essential to ensuring optimal performance of each project's assets. The project costs include the arm's length fees and expenses of WiseEnergy UK for performing for the Group the operating asset monitoring and reporting activities typically required in projects of the type acquired by the Company. The total fees for recurring and one-off services paid to WiseEnergy UK during the Company's financial year ended 31 March 2016 amounted to £1.5 million (for comparison purposes only, the fee paid to the Investment Manager for the Company's financial year ended 31 March 2016 was £2.6 million).
The Developer is entitled to recover all transaction costs, expenses and disbursements paid by or on behalf of the Developer in connection with any project introduced by it which is accepted by the Company (whether or not such project is ultimately acquired by the Group). Such transaction costs may include, amongst other things, due diligence costs, down-payments for grid offer acceptances and similar costs and expenses. The Developer has no right to receive reimbursement for costs, expenses and disbursements in respect of projects rejected by or on behalf of the Group (unless first accepted). The Developer is not entitled to receive any fees in respect of the projects introduced by it under the Project Sourcing Agreement.
The Company also incurs further ongoing annual fees and expenses, which include fees to the Administrator, Registrar and Directors.
All other ongoing operational expenses of the Company are borne by the Company including, without limitation: the incidental costs of acquiring, holding or selling investments and implementing its investment objective and policy; banking and financing fees; travel, accommodation and printing costs; the cost of directors' and officers' liability insurance, website maintenance costs; audit and legal fees; and annual listing fees. All out of pocket expenses that are reasonably and properly incurred by the Investment Manager, the Administrator, the Registrar and the Directors relating to the Group are borne by the Group. The on-going operational expenses of the Company (and the Group) are not capped, and the amount of such expenses will depend on a variety of factors.
The Company's ongoing charges (as calculated in accordance with the AIC's methodology) for its financial year ended 31 March 2016 were 1.2 per cent. One of the benefits of increasing the size of the Company by issuing New Shares is that such increase should result in a reduction in the Company's ongoing charges ratio (being the proportion of ongoing charges per Share) as its operating costs will be spread over a larger capital base.
All general meetings of the Company shall be held in Guernsey. The Company expects to hold its annual general meeting in Guernsey in August each year.
The Company's audited annual report and accounts are prepared to 31 March each year, and it is expected that copies will be sent to Shareholders in June each year, or earlier if possible (or required by law or regulation). The Company's annual report and accounts are drawn up in Sterling and in accordance with IFRS and the AIFM Directive. In particular, the Company's annual report and accounts will include the following information:
Shareholders also receive an unaudited interim report each year in respect of the six months ending on 30 September each year, which is expected to be despatched in November each year.
The Company's audited annual reports and accounts and interim reports are available on the Company's website at www.nextenergysolarfund.com.
Any changes to the maximum level of leverage of the Company, any right of re-use of collateral or any changes to any guarantee granted under any leveraging arrangement will be provided by the Investment Manager to Shareholders without undue delay and in accordance with the AIFM Directive and relevant rules.
The Administrator is responsible for calculating the NAV which is presented to the Directors for their approval and adoption. The calculations are carried out on at least a quarterly basis as at 31 March, 30 June, 30 September and 31 December each year and notified to Shareholders through a Regulatory Information Service. In addition, the NAVs as at 31 March and 30 September are reported to Shareholders in the Company's annual and interim financial statements.
The NAV calculation is mainly driven by the fair market value of the Group's investments in solar PV plants. The valuation principles used to calculate the fair value are based on a discounted cash flow methodology, and take into account Invest Europe (formerly European Private Equity and Venture Capital Association) guidelines, save that, for solar PV plants not yet operational or where the completion of the acquisition is not imminent at the time of valuation, the acquisition cost is used as an appropriate estimate of fair value.
Fair market value for each investment is calculated by the Investment Manager as 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. As at the date of this Registration Document, the Company uses a discount rate of 7.5 per cent. for unlevered operating solar assets, and a levered rate of up to 8.5 per cent. for those operating solar assets with project level debt. The Investment Manager exercises its judgement in assessing the expected future cash flows from each investment. The Investment Adviser produces, for each SPV, detailed financial models and the Investment Manager takes into account, amongst other things, in its review of such models and makes amendments where appropriate:
All NAV calculations by the Administrator are made, in part, on valuation information provided by the Investment Manager. Although the Administrator evaluates all such information and data, it may not be in a position to confirm the completeness, genuineness or accuracy of such information or data.
The Board reviews the operating and financial assumptions, including the discount rates, used in the valuation of the Company's underlying portfolio and approves them based on the recommendation of the Investment Manager. As part of the annual audit, PricewaterhouseCoopers CI LLP reviews the valuation model used by the Investment Adviser, including the discount rate.
The Board may determine that the Company shall temporarily suspend the determination of the Net Asset Value per Ordinary Share when the prices of any investments owned by the Group cannot be promptly or accurately ascertained. However, in view of the nature of the Company's investments, the Board does not envisage any circumstances in which valuations will be suspended. Any suspension in the calculation of the Net Asset Value will be notified to Shareholders through a Regulatory Information Service as soon as practicable after such suspension occurs.
The historical information of the Company for the financial periods ended 31 March 2015 and 31 March 2016 set out, or incorporated by reference, in this paragraph 2 was audited by PricewaterhouseCoopers CI LLP. In respect of the Company's audited financial statements for those financial periods, PricewaterhouseCoopers CI LLP gave unqualified opinions that such financial statements:
Set out in the following tables are summaries of the Company's financial results for the financial periods ended 31 March 2015 and 31 March 2016, which have been extracted without material adjustment from the Company's audited financial statements for those financial periods.
| Capital | As at 31 March 2015 (audited) |
As at 31 March 2016 (audited) |
|---|---|---|
| Total assets | £248,447,480 | £321,417,342 |
| Total current liabilities | £88,942 | £47,606,464 |
| Net assets | £248,358,538 | £273,810,878 |
| Net Asset Value per Ordinary Share | 103.3 pence | 98.5 pence |
| For period from 20 December 2013 to 31 March 2015 (audited) |
For year ended 31 March 2016 (audited) |
|---|---|
| £24,046,160 | |
| (£18,503,991) | |
| £3,615,579 | |
| £1,926,590 | |
| £8,534,649 | £2,034,701 |
| 9.13 pence | 0.78 pence |
| 2.625 pence | 5.750 pence |
| — £10,570,553 £2,293,835 £8,276,718 |
2.3 Historical financial information incorporated by reference into this Registration Document The list in the following table is intended to enable investors to identify easily specific items of historical financial information relating to the Company for the financial periods ended 31 March 2015 and 31 March 2016 that are incorporated by reference into this Registration Document. The page numbers in the following table refer to the relevant pages of the Company's annual reports and accounts.
| Nature of information | Annual report and accounts for period from 20 December 2013 to 31 March 2015 (audited) – page numbers |
Annual report and accounts for year ended 31 March 2016 (audited) – page numbers |
|---|---|---|
| Statement of comprehensive income | 59 | 78 |
| Statement of financial position | 60 | 79 |
| Statement of changes in equity | 61 | 80 |
| Statement of cash flows | 62 | 81 |
| Notes to the audited financial statements (including accounting policies and related party transactions) Independent auditor's report |
63 – 77 78 – 79 |
82 – 98 75 – 76 |
17 Note: Recognised in period/year.
The published annual reports and accounts of the Company for the financial periods ended 31 March 2015 and 31 March 2016 included descriptions of the Company's financial condition, changes in its financial condition, its results from operations and details of the Company's investment activity and portfolio. The list in the following table is intended to enable investors to identify easily those specific items of information regarding such matters which are incorporated by reference into this Registration Document. The page numbers in the following table refer to the relevant pages of the Company's annual reports and accounts.
| Nature of information | Annual report and accounts for period from 20 December 2013 to 31 March 2015 (audited) – page numbers |
Annual report and accounts for year ended 31 March 2016 (audited) – page numbers |
|---|---|---|
| Highlights | 1 | 1 |
| Corporate summary | 2 | 2 |
| Chairman's statement | 3 – 4 | 3 – 5 |
| Strategic report | 6 – 10 | 7 – 11 |
| Investment manager's report (including details and analysis | ||
| of the Company's investment portfolio) | 11 – 25 | 15 – 39 |
| Financial review | 27 – 36 | 41 – 52 |
| Report of the Directors (including business review) | 49 – 51 | 66 – 68 |
| Directors' remuneration report | 52 – 53 | 69 – 70 |
| Audit committee report | 54 – 57 | 71 – 74 |
Investors should note that statements regarding current circumstances and forward-looking statements made in the Company's annual report and accounts referred to in the table above speak as at the date of the annual report and accounts and, therefore, such statements do not necessarily remain up-to-date at the date of this Registration Document. Information included in this Registration Document, to the extent applicable, automatically updates and supersedes information included in the annual reports and accounts incorporated by reference into this Registration Document and referred to in the table above.
Copies of the published annual reports and accounts of the Company for the financial periods ended 31 March 2015 and 31 March 2016 (as filed with the FCA) are available for inspection at:
The information in such annual reports and accounts not incorporated by reference into paragraphs 2.2, 2.3 and 2.4 of this Part 7 is either covered elsewhere in the Prospectus or is not relevant for the purposes of prospective investors considering an investment in New Shares.
There has been no significant change in the financial condition or trading position of the Company since 31 March 2016 (being the end of the last financial period of the Company for which audited financial information has been published) up to the date of this Registration Document, save for:
(B) on 18 April 2016, completion of the acquisition of the Hall Farm solar PV Plant;
(C) on 19 May 2016, the Group increased its Revolving Credit Facility from £100 million to £120 million, with the additional £20 million having a maturity date of 17 May 2017 (subject to the Company's option to extend it to 17 November 2017);
The Group is funded by both equity and debt. As at 30 September 2016, the Group had debt facilities comprising a combination of short- and medium-term debt and amortising long-term debt and had drawn down short- and medium-term debt of £64.7 million, amortising long-term debt of £99.6 million and £45.5 million undrawn under the Company's £88.5 million Revolving Credit Facility. Details of the Group's debt facilities as at 30 September 2016 are set out in the following table. There have been no material changes since that date.
| Facility | Type | Borrower | Tranches | Facility available (GBP) |
Amount outstanding (GBP) |
Termination (including options to extend) |
Applicable rate |
|---|---|---|---|---|---|---|---|
| Macquarie & Santander |
revolving credit facility |
Fund/ HoldCo level |
Tranche B | 68,500,000 | 43,000,000 | 17-06-17 | 1m Libor + (1.95-2.50)% |
| Tranche C18 20,000,000 | — | 17-11-17 | 1m Libor + (1.95-2.50)% |
||||
| NIBC | acquisition facility |
Fund/ HoldCo level |
21,680,000 | 21,680,000 | 04-07-19 | 3m Libor + 2.20per cent + ''mandatory cost'' (if applicable) |
|
| MIDIS | fully-amortising long-term debt |
Radius Portfolio level debt |
Inflation Linked Tranche |
27,162,559 | 27,162,559 | 30-09-34 | RPI index + 1.44% |
| Fixed Tranche |
27,500,000 | 27,500,000 | 30-09-34 | 4.11% | |||
| Bayern LB | fully-amortising long-term debt |
Three Kings Portfolio level debt19 |
44,932,871 | 44,932,871 | 30-06-33 | 3.96% | |
| Total | 209,775,430 | 164,275,430 |
The Group borrowings represented approximately 32 per cent. of the Gross Asset Value as at 30 September 2016 and as the date of this Registration Document. It is intended that the short-term facilities will be repaid through one or a combination of the following: rollover of the same short-term facilities, refinancing with a long-term debt facility and/or further equity issuance. It is expected that the Revolving Credit Facility will be refinanced on or before the maturity of Tranche B in June 2017.
18 Note Tranche A was cancelled with effect from 17 September 2016
19 Note Three Kings Portfolio consists of three different agreements with different tranches and interest rates
| Direct or | ||||
|---|---|---|---|---|
| Country of | indirect | Principal | ||
| Name | incorporation | holding | activity | Ownership |
| Berwick Solar Park Ltd | UK | Indirect | SPV | 100% |
| BL Solar 2 Limited | UK | Indirect | SPV | 100% |
| Bottom Plain Solar Park | UK | Indirect | SPV | 100% |
| Bowerhouse Solar Limited | UK | Indirect | SPV | 100% |
| Branston Solar Park Ltd | UK | Indirect | SPV | 100% |
| Ellough Solar 2 Ltd | UK | Indirect | SPV | 100% |
| Emberton Solar Park Ltd | UK | Indirect | SPV | 100% |
| Empyreal Energy Ltd | UK | Indirect | SPV | 100% |
| ESF Llwyndu Ltd | UK | Indirect | SPV | 100% |
| Fenland Renewables Ltd | UK | Indirect | SPV | 100% |
| Glebe Farm SPV Limited | UK | Indirect | SPV | 100% |
| Glorious Energy Limited | UK | Indirect | SPV | 100% |
| Great Wilbraham Solar Park Ltd | UK | Indirect | SPV | 100% |
| Green End Renewables Ltd | UK | Indirect | SPV | 100%* |
| Greenfields Limited | UK | Indirect | SPV | 100% |
| Hanwha UK Solar 1 Ltd | UK | Indirect | SPV | 100% |
| NESF – Ellough LTD | UK | Indirect | SPV | 100% |
| NextEnergy Solar Holding II Limited | UK | Direct | HoldCo | 100% |
| NextEnergy Solar Holding III Limited | UK | Direct | HoldCo | 100% |
| NextEnergy Solar Holding IV Limited | UK | Direct | HoldCo | 100% |
| NextEnergy Solar Holding Limited | UK | Direct | HoldCo | 100% |
| NextPower Ellough LLP | UK | Indirect | SPV | 100% |
| NextPower Gover Farm Ltd | UK | Indirect | SPV | 100% |
| NextPower Higher Hatherleigh Ltd | UK | Indirect | SPV | 100% |
| NextPower Radius Ltd | UK | Indirect | SPV | 100% |
| NextPower Shacks Barn Ltd | UK | Indirect | SPV | 100% |
* Acquisition not yet completed – will be 100% owned following completion.
| Direct or | ||||
|---|---|---|---|---|
| Country of | indirect | Principal | ||
| Name | incorporation | holding | activity | Ownership |
| North Farm Solar Park Limited | UK | Indirect | SPV | 100% |
| Push Energy (Birch) Ltd | UK | Indirect | SPV | 100% |
| Push Energy (Boxted Airfield) Ltd | UK | Indirect | SPV | 100% |
| Push Energy (Croydon) Ltd | UK | Indirect | SPV | 100% |
| Push Energy (Decoy) Ltd | UK | Indirect | SPV | 100% |
| Push Energy (Hall) Ltd | UK | Indirect | SPV | 100% |
| Push Energy (Langenhoe) Ltd | UK | Indirect | SPV | 100% |
| SSB Condover Ltd | UK | Indirect | SPV | 100% |
| ST Solarinvest Devon 1 Limited | UK | Indirect | SPV | 100% |
| Sunglow Power Limited | UK | Indirect | SPV | 100% |
| Thurlestone-Leicester Solar Ltd | UK | Indirect | SPV | 100% |
| Tower Hill Farm Renewables Ltd | UK | Indirect | SPV | 100% |
| Trowbridge PV Ltd | UK | Indirect | SPV | 100% |
| Wellingborough Solar Limited | UK | Indirect | SPV | 100% |
The country of incorporation of the Company's subsidiaries is also their principal place of business.
| Date of issue/ sale |
Transaction | No. of Ordinary Shares issued/ (repurchased) |
Issue price / (repurchase price) |
|---|---|---|---|
| 25-Apr-14 | Issue – placing & offer for subscription (IPO) | 85,600,000 | 100.00p |
| 19-Nov-14 | Issue – placing & offer for subscription (2014 SIP) | 91,000,000 | 104.90p |
| 23-Dec-14 | Issue – placing (2014 SIP) | 4,000,000 | 103.00p |
| 27-Feb-15 | Issue – placing & offer for subscription (2014 SIP) | 59,750,000 | 102.77p |
| 30-Sep-15 | Issue – placing & offer for subscription (2014 SIP) | 37,607,105 | 103.30p |
| 9-Nov-15 | Issue – placing (2014 SIP) | 30,850,000 | 104.00p |
| 9-Nov-15 | Market purchase into treasury | (30,850,000) | (104.00p) |
As at 31 March 2016, the Company's issued share capital comprised 308,807,105 issued Ordinary Shares (all of which were fully paid), of which 30,850,000 were held in treasury. During the period commencing on 1 April 2016 and ending on the date of this Registration Document, the following sales from treasury and issues of Ordinary Shares by the Company took place:
| Date of Admission |
Transaction | No. of Ordinary Shares issued or sold from treasury |
Issue or sale price |
|---|---|---|---|
| 27-Jul-16 | Sale out of treasury – placing (2016 TIP) | 30,850,000 | 100.40p |
| 27-Jul-16 | Issue – placing (2016 TIP) | 11,141,242 | 100.40p |
| 27-Jul-16 | Issue – placing (2016 TIP) | 1,822,656 | 100.40p |
| 4-Aug-16 | Issue – placing (2016 TIP) | 4,254,855 | 101.00p |
| 4-Aug-16 | Issue – placing (2016 TIP) | 740,690 | 101.00p |
| 4-Aug-16 | Issue – placing (2016 TIP) | 300,000 | 101.00p |
| 9-Aug-16 | Issue – placing (2016 TIP) | 5,775,557 | 101.00p |
| 15-Sep-16 | Issue – placing (2016 TIP) | 9,215,926 | 103.25p |
| 30-Sep-16 | Issue – scrip dividend alternative | 1,139,374 | 104.626p |
All of the issues pursuant to the IPO, the 2014 Share Issuance Programme and the 2016 Tap Issuance Programme, and the sale of Ordinary Shares from treasury, referred to in this paragraph 2.2 were on a non-pre-emptive basis for cash, in each case at a price representing a premium to the estimated prevailing NAV per Ordinary Share at the time the relevant issue, or sale, was agreed.
3.1 At the date of this Registration Document, the interests (all of which were beneficial) of the Directors (and, so far as is known to or could with reasonable diligence be ascertained by the Directors, any persons connected with them) in the Ordinary Shares are as set out in the following table.
| No. of | % of | |
|---|---|---|
| Director | Ordinary Shares | voting rights |
| Kevin Lyon (Chairman) | 60,000 | 0.018 |
| Patrick Firth | 20,000 | 0.006 |
| Vic Holmes | 10,000 | 0.003 |
Assuming that the Initial Issue is fully subscribed for, the interests of the Directors (following Admission in respect of the Initial Issue), in the Company's Ordinary Shares will be:
| Director | No. of Ordinary Shares |
% of voting rights |
|---|---|---|
| Kevin Lyon | 60,000 | 0.014 |
| Patrick Firth | 20,000 | 0.005 |
| Vic Holmes | 10,000 | 0.002 |
Save as disclosed in this paragraph 3.1, at the date of this Registration Document, none of the Directors (and, so far as is known to or could with reasonable diligence be ascertained by the Directors, any persons connected with them) had:
In recognition of the additional work the Directors have done in connection with the Share Issuance Programme, the Company has agreed that each Director is entitled to an additional fee of £10,000 on completion of the Initial Issue.
| Current directorships/partnerships | Past directorships/partnerships | |
|---|---|---|
| Kevin Lyon | NextEnergy Solar Fund Limited ROVOP Limited Drilling Systems Group Limited KJ Lyon Associates Ltd Inoapps Limited |
Ambrian plc (formerly East West Resources plc) Cutis Developments Ltd (entered administration April 2016) DCK Group Limited Ithaca Petroleum Limited Mono Global Limited Mono Global Group Limited Smart Metering Systems plc Tigermetal Topco Limited |
| Patrick Firth | Associated Partners GP Limited Celtic Pharma Holdings GP Limited Celtic Pharma Holdings GP III Limited DW Catalyst Limited(formerly BH Credit Catalysts Limited) GLI Finance Limited (formerly Greenwich Loan Income Fund Limited) GLIF BMS Holdings Limited Global Private Equity One Limited Guernsey Finance LBG Guernsey Portfolios PCC Limited Heritage Diversified Investments PCC Limited (formerly Rufford & Ralston PCC Limited) ICG-Longbow Senior Secured UK Property Debt Investments Limited Inflexion (2010) General Partner Limited Inflexion Buyout Fund IV General Partner Limited Inflexion Curtis General Partner Guernsey Limited Inflexion Enterprise Fund I Guernsey Limited Inflexion Partnership Capital Fund 1 General Partner Limited Inflexion Supplemental Fund IV Guernsey Limited Investec World Axis PCC Limited JZ Capital Partners Limited LMP Bell Farm Limited LMP Dagenham Limited LMP Green Park Cinemas Limited LMP Green Park Holdings Limited LMP Omega 1 Limited LMP Omega II Limited LMP Retail Warehouse JV Holdings Limited LMP Retail Warehouse JV Management Limited LMP Thrapston Limited LMP Wakefield Limited London & Stamford Offices Unitholder 2 Limited (in liquidition) London & Stamford Offices Limited (in liquidition) London & Stamford Property Limited London & Stamford Property Subsidiary Limited LSP Green Park Distribution Holdings Limited LSP Green Park Management Limited (formerly LSP Cavendish Management Limited) (in liquidition) LSP London Residential Holdings Limited |
Asset Management Investment Company Limited (formerly Asset Management Investment Company PLC) Bullion Funds GP Limited DWM Inclusive Finance Income Fund FF&P Alternative Strategy Income Subsidiary Limited FF&P Enhanced Opportunities PCC Limited FF&P Russia Real Estate Adviser Holdings Limited Porton Capital Technology Funds FF&P Venture Funds Subsidiary Limited FF&P General Partner I Limited FF&P World Equity Fund PCC Limited Patria Brazil Fund Limited FP Holdings Limited GLIF BMS Holdings Limited L&S Distribution II Limited L&S Distribution III Limited (formerly L&S Distribution II Unitholder 2 Limited) L&S Distribution IV Limited Victoria Capital PCC Limited L&S Distribution Limited L&S Distribution V Limited L&S Leeds Limited London & Stamford (Anglesea) II Limited London & Stamford Retail Limited (in liquidation) EISER Infrastructure II Limited LSP Green Park Offices Holdings Limited LSP Green Park Logistics Holdings Limited EuroDekania Limited LSP Leatherhead Limited (formerly LSP Green Park Leatherhead Limited) LSP RI Moore House (Ground Rents) Limited LSP RI Wandsworth Limited Prosperity Quest II Unquoted Limited Stonehage Fleming Investment Management Guernsey Limited (formerly FF&P Asset Management (Guernsey) Limited Suningdale Alpha Fund Limited |
LSP London Residential Investments Limited LSP Marlow Limited (formerly LSP Green Park Marlow Limited) LSP RI Moore House Limited MRIF Guernsey GP Limited NextEnergy Solar Fund Limited Pera Capital Partners GP Limited Riverstone Energy Limited Saltus (Channel Islands) Limited Sierra GP Limited Sniper China Logistics Properties Limited Vic Holmes Ashmore Asian Special Opportunities Fund Limited Ashmore Emerging Markets Corporate High Yield Fund Limited Ashmore Emerging Markets Debt and Currency Fund Limited Ashmore Emerging Markets Distressed Debt Fund Limited Ashmore Emerging Markets High Yield Plus Fund Limited Ashmore Emerging Markets Short Duration Corporate Debt Fund Limited Ashmore Emerging Markets Sovereign and Corporate Debt Fund Limited Ashmore Emerging Markets Special Situations Opportunities Fund (GP) limited Ashmore Emerging Markets Tri Asset Fund Limited Ashmore Global Special Situations Fund 2 Limited Ashmore Global Special Situations 3 (GP) Limited Ashmore Global Special Situations Fund 4 (GP) Limited Ashmore Global Special Situations Fund 5 (GP) Limited Ashmore Greater China Balanced Holding Company Limited Ashmore Greater China Fund Limited Ashmore Growing Multi Strategy Fund Limited Ashmore Investments (Brazil) Limited Ashmore Institutional Multi Strategy Holding Company Limited Ashmore Management Company Limited Ashmore Special Opportunities (GB) Limited Ashmore Venezuela Recovery Fund Limited Asset Holder PCC Limited Asset Holder PCC No 2 Limited Atlantis Investment Management (Ireland) Limited Cambridge Park Pendulum Fund Limited DBG Management GP (Guernsey) Limited F&C Alternative Strategies Limited F&C Property Growth & Income Fund Limited F&C Warrior Fund Limited F&C Warrior Fund II Limited GAM (Guernsey) GP Limited Generali Portfolio Management (CI) Limited Generali Worldwide Insurance Company Ashmore Global Special Situations Fund 6 (GP) Limited Ashmore Global Special Situations Fund Limited Ashmore Global Consolidation and Ashmore Emerging Markets Short Duration Corporate Debt Limited Recovery Fund PCC Limited (in voluntary winding up) Ashmore Greater China Balanced Holding Company Limited Ashmore Global Special Situations Ireland Public Limited Company (in voluntary liquidation) Ashmore Management CI (Brasil) Ltd Ashmore Multi Strategy Fund Holding Company Limited Ashmore Institutional Multi Strategy Holding Company Limited Conversus GP Limited Conversus Investment GP Limited Cantrip Investments Limited (in voluntary liquidation) Cazenove Euro Alpha Return Fund Limited (in voluntary liquidation) Cazenove European Equity Absolute Return Fund Limited (in voluntary liquidation) Cazenove International Fund plc Cazenove Leveraged UK Equity Absolute Return Fund Limited (in voluntary liquidation) Cazenove UK Dynamic Absolute Return Fund Limited (in voluntary liquidation) Cazenove UK Equity Absolute Return Fund Limited (in voluntary liquidation) Cazenove Worldwide Absolute Return Fund Limited (in voluntary liquidation) IIBU Fund II Public Limited Company Korea Special Opportunities Fund plc (in voluntary liquidation) Northern Trust Fiduciary Services (Jersey) Limited Nelson Representatives Limited Nevsky Fund plc Northern Trust International Fund Administration Services (Guernsey) Limited Northern Trust International Fund Administration Services (Jersey) Limited The Leveraged Fund Limited Thames River 1X Currency Alpha Fund Limited (in voluntary liquidation) Generali International Limited
GPF Real Estate Co-Investment Ltd. Highbridge Multi-Strategy Fund Limited (formerly BlueCrest AllBlue Fund Limited) HDS (Guernsey) Limited Lake Erie Real Estate GP Ltd Liontrust Panthera Fund Limited (formerly F&C Directional Opportunities Fund) MMIP Investment Management Limited Permira Holdings Limited Picton (General Partner) No 2 Ltd Picton (General Partner) No 3 Ltd Picton (UK) Listed Real Estate Nominee (No 1) Limited Picton (UK) Listed Real Estate Nominee (No 2) Limited Picton (UK) Listed Real Estate Ltd Picton (UK) REIT (SPV No 2) Ltd Picton (UK) REIT (SPV) Ltd Picton Capital (Guernsey) Ltd Picton Finance Limited Picton Property Income Limited Picton Property No 3 Ltd Picton Property Nominee (No 3) Ltd Picton Property Nominee (No 4) Ltd Picton Property Nominee (No 5) Limited Picton Property Nominee (No 6) Ltd Picton UK Real Estate (Property) Ltd Picton UK Real Estate Trust (Property) No 2 Ltd Picton ZDP Limited Redwood Offshore Limited Renshaw Bay GP I Ltd Roundshield 1 Co-Investment GP1 Limited Roundshield Fund I GP Limited Roundshield Holdings Limited RS Carry I GP Limited Thames River Multi Hedge PCC Limited Townsend Lake Constance GP Limited
Thames River Capital Holdings Limited (in voluntary liquidation) Thames River Guernsey Property Holdings Limited Thames River Traditional Multi Funds Public Limited Company (in voluntary liquidation) Stenham Real Estate Equity Fund Limited Northern Trust Directors Services (Guernsey) Limited Northern Trust GFS Holdings Limited Northern Trust Guernsey Holdings Limited Northern Trust Partners Guernsey Limited Permira (Europe) Limited Permira (Guernsey) Limited Permira Advisors Group Holdings Limited Permira Advisors LLP Permira Carried Interest G.P. Limited Permira Debt Managers Group Holdings Limited Permira Europe I Nominees Limited Permira Europe II Managers BV Permira Europe II Nominees Limited Permira Europe III G.P. Limited Permira Group Investments Limited Permira Investments Limited Permira IP Limited Permira IV GP Limited Permira IV Limited Permira IV Managers Limited Permira Nominees Limited Permira V G.P. Limited Renshaw Bay GP2 Ltd Renshaw Bay Partners GP Ltd Saline Nominees Limited Trafalgar Representatives Limited The AUB Pan Asian Investment Fund I Traditional Funds plc
4.1 As at 11 November 2016, the Company was aware that the persons set out in the table below, directly or indirectly, were interested in 3.0 per cent. or more of the issued Ordinary Shares:
| No. of | % of issued | |
|---|---|---|
| Investor | Ordinary Shares | Ordinary Shares |
| Prudential plc group of companies | 77,382,737 | 22.54 |
| Artemis Investment Management LLP | 62,308,962 | 18.16 |
| Investec Wealth & Investment Limited | 44,693,239 | 13.02 |
| Baillie Gifford | 18,037,062 | 5.26 |
| Smith & Williamson Investment Management | 14,916,638 | 4.35 |
| Newton Investment Management | 13,440,810 | 3.92 |
The Articles contain provisions, among others, to the following effect:
The Company may issue an unlimited number of shares in any currency including, without limitation, unclassified shares which may be designated and issued as Ordinary Shares, C Shares or otherwise as the Directors may from time to time determine.
Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, any share (or option, warrant or other right in respect of a share) in the Company may be issued with such preferred, deferred or other special rights or restrictions, whether as to dividend, voting, return of capital or otherwise, as the Board may determine. The Board is authorised to issue an unlimited number of shares (or options, warrants or other rights in respect of shares) including without limitation, Ordinary Shares and C Shares on a pre-emptive basis, and with shareholder authority, on a pre-emptive basis.
(A) Income
Subject to the rights of any shares which may be issued with special rights or privileges, the Ordinary Shares of each class carry the right to receive all income of the Company attributable to the Ordinary Shares, and to participate in any distribution of such income by the Company, pro rata to the relative NAVs of each of the classes of Ordinary Shares and, within each such class, income shall be divided pari passu amongst the holders of Ordinary Shares of that class in proportion to the number of Ordinary Shares of such class held by them.
(B) Capital
On a winding up of the Company or other return of capital (other than by way of a repurchase or redemption of Ordinary Shares in accordance with the provision of the Articles and the Companies Law), the surplus assets of the Company attributable to the Ordinary Shares remaining after payment of all creditors shall, subject to the rights of any Ordinary Shares that may be issued with special rights or privileges, be divided amongst the holders of Ordinary Shares of each class pro rata to the relative NAVs of each of the classes of Ordinary Shares and, within each such class, such assets shall be divided pari passu amongst the holders of Ordinary Shares of that class in proportion to the number of Ordinary Shares of that class held by them.
(C) Voting
The holders of the Ordinary Shares shall be entitled to receive notice of and to attend, speak and vote at general meetings of the Company.
(A) Definitions
The following definitions apply for the purposes of this paragraph 5.3:
''Calculation Date'' means the earliest of the:
''Conversion'' means, in relation to any class of C Shares, conversion of that class of C Shares in accordance with paragraph 5.3(H) below;
''Conversion Date'' means a date which falls after the Calculation Date and is the date on which the admission of the new Ordinary Shares arising on Conversion to trading on the London Stock Exchange becomes effective, such date being either the earlier of:
''Conversion Ratio'' is the ratio of the Net Asset Value per C Share of the relevant class of C Share to the Net Asset Value per Ordinary Share of the corresponding class, which is calculated to six decimal places as at the Calculation Date as:
"Consersion Ratio" =
$$
\frac{A}{B}
$$
A = $\frac{(C - d) - D}{E}$
B = $\frac{(F - d) - G}{H}$
where:
where:
''C'' is the value of the investments of the Company attributable to the C Shares of the relevant class calculated in accordance with the accounting principles adopted by the Company from time to time (as if that class was equity);
''D'' is the amount (to the extent not otherwise deducted from the assets attributable to the C Shares of the relevant class on the Calculation Date) which, in the Directors' opinion, fairly reflects the amount of the liabilities of the Company attributable to the C Shares of the relevant class on the Calculation Date;
''E'' is the number of C Shares of the relevant class in issue on the Calculation Date;
''F'' is the value of the investments of the Company attributable to the Ordinary Shares calculated in accordance with the accounting principles adopted by the Company from time to time;
''G'' is the amount (to the extent not otherwise deducted in the calculation of F) which, in the Directors' opinion, fairly reflects the amount of the liabilities of the Company attributable to the Ordinary Shares on the Calculation Date;
''H'' is the number of Ordinary Shares in issue on the Calculation Date (excluding any Ordinary Shares of the relevant class held in treasury); and
''d'' is, to the extent not already taken into account in D or G (as appropriate) the amount of any dividend payable in respect of any period ending before the Conversion Date and payable by reference to a record date falling on or prior to the Conversion Date;
provided that:
''Existing Shares'' means the Ordinary Shares in issue immediately prior to Conversion;
''Force Majeure Circumstances'' means in relation to any class of C Shares:
''Net Proceeds'' means the net cash proceeds of the issue of the C Shares of the relevant class (after deduction of those commissions and expenses relating thereto and payable by the Company).
References to the auditor confirming any matter should be construed to mean confirmation of their opinion as to such matter whether qualified or not.
References to ''shareholders'' and ''C shareholders'' in this paragraph 5.3 should be construed as references to holders for the time being of Ordinary Shares of the relevant class and C Shares of the relevant class respectively.
For the purposes of the definition of Calculation Date and the definition of Force Majeure Circumstance in relation to any class of C Shares, the assets attributable to the C Shares of that class shall be treated as having been ''invested'' if they have been expended by or on behalf of the Company in the acquisition or making of an investment (whether by subscription or purchase) or if an obligation to make such payment has arisen or crystallised (in each case unconditionally or subject only to the satisfaction of normal pre-issue conditions) in relation to which the consideration amount has been determined or is capable of being determined by operation of an agreed contractual mechanism.
(B) Income
The holders of the C Shares shall, subject to the provisions of the Articles, have the following rights as to income:
At a time when any C Shares are for the time being in issue and prior to the Conversion Date, on a winding up of the Company or other return of capital (other than by way of a repurchase or redemption of C Shares in accordance with the provisions of the Articles and the Companies Law), the surplus capital and assets of the Company attributable to the C Shares remaining after payment of all creditors shall, subject to any rights of C Shares that may be issued with special rights or privileges, be divided amongst the holders of C Shares of each class pro rata to the relative NAVs of each of the classes of C Shares and within each such class such assets shall be distributed pari passu amongst the holders of C Shares of that class in proportion to the number of C Shares of that class held by them.
(D) Voting
As regards voting the C Shares shall carry the right to receive notice of and to attend, speak and vote at any general meeting of the Company. The voting rights of holders of C Shares will be the same as that applying to holders of Ordinary Shares as if the C Shares and Ordinary Shares were a single class.
Without prejudice to the generality of the Articles, for so long as any C Shares are for the time being in issue it shall be a special right attaching to the Ordinary Shares as a class and to the C Shares as a separate class that without the sanction or consent of such holders given in accordance with the Articles:
For the avoidance of doubt but subject to the rights or privileges attached to any other class of shares, the previous sanction of a special resolution of the holders of Ordinary Shares and C Shares, as described above, shall not be required in respect of:
For so long as any C Shares are for the time being in issue, until Conversion of such C Shares and without prejudice to its obligations under applicable laws the Company shall in relation to each class of C Shares:
The C Shares are issued on such terms that they shall be redeemable by the Company in accordance with the terms set out in the Articles. At any time prior to Conversion, the Directors may determine to redeem the C Shares then in issue by agreement with holders thereof in accordance with such procedures as the Directors may determine (subject to the facilities and procedures of CREST), in accordance with the provisions of the Articles and in consideration of the payment of such redemption price as may be agreed between the Company and the relevant C shareholders.
(a) In relation to each class of C Shares, the Directors shall procure that within 10 Business Days of the Calculation Date:
(i) the Conversion Ratio as at the Calculation Date and the numbers of Ordinary Shares of the relevant class to which each C Shareholder shall be entitled on Conversion shall be calculated; and
Subject to the authority to issue shares referred to in paragraph 5.1 above or any extension thereof, and to paragraph 5.5, the unissued shares shall be at the disposal of the Board which may allot, grant options, warrants or other rights over or otherwise dispose of them to such persons on such terms and conditions and at such times as the Board determines but so that no share shall be issued at a discount to par value (if applicable) except in accordance with the Companies Law and so that the amount payable on application on each share shall be fixed by the Board.
and any such resolution must: (a) state the maximum number of equity securities in respect of which the restriction referred to in paragraph 5.5(A) is excluded or modified; and (b) specify the date on which such exclusion or modifications will expire, which must be not more than five years from the date on which the resolution is passed.
(b) references to the allotment of equity securities includes: (i) the grant of a right to subscribe for, or to convert any securities into, any class of shares of the Company (but excludes the allotment and/or conversion of any class of shares of the Company pursuant to the exercise of such a right); and (ii) the sale of any class of shares of the Company that immediately before the sale are held by the Company as treasury shares.
If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue) may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of threefourths of the issued shares of that class or with the sanction of a special resolution of the holders of the shares of that class.
The Board may, pursuant to section 306 of the Companies Law, or if authorised by an ordinary resolution of the Company, offer Shareholders the right to elect to receive further shares (whether or not of that class), credited as fully paid, instead of cash in respect of all or part of any dividend in accordance with article 43 of the Articles. The Board shall give notice to the Shareholders of their rights of election and shall specify the procedure to be followed in order to make an election. The dividend in respect of which an election is made shall not be paid and instead further shares shall be allotted in accordance with elections duly made.
(c) cancel shares which, at the date of the passing of the resolution, have not been taken up or agreed to be taken up by any person, and diminish the amount of its share capital by the amount of shares so cancelled;
(d) convert all or any of its shares the nominal amount of which is expressed in a particular currency or former currency into shares of a nominal amount of a different currency, the conversion being effected at the rate of exchange (calculated to not less than three significant figures) current on the date of the resolution or on such other date as may be specified therein; or
(C) Notices and other documents may be sent in electronic form or published on a website in accordance with section 208 of the Companies Law.
(D) Notice of a general meeting of the Company must be sent to every Shareholder entitled to attend, speak and vote thereat, every Director and every alternate Director registered as such.
(g) he becomes resident in the United Kingdom and, as a result thereof, a majority of the Directors are resident in the United Kingdom; or
(h) he becomes ineligible to be a Director in accordance with section 137 of the Companies Law.
(C) A general disclosure to the Board to the effect that a Director has an interest (as director, officer, employee, member or otherwise) in a party and is to be regarded as interested in any transaction which may after the date of the disclosure be entered into with that party is sufficient disclosure of interest in relation to that transaction.
(D) Nothing in paragraphs 5.15(A), 5.15(B) applies in relation to:
The Directors, secretary and officers (excluding, for the avoidance of doubt, the Auditor) for the time being of the Company and their respective heirs and executors shall, to the extent permitted by section 157 of the Companies Law, be fully indemnified out of the assets and profits of the Company from and against all actions expenses and liabilities which they or their respective heirs or executors may incur by reason of any contract entered into or any act in or about the execution of their respective offices or trusts except such (if any) as they shall incur by or through their own negligence, default, breach of duty or breach of trust respectively and none of them shall be answerable for the acts receipts neglects or defaults of the others of them or for joining in any receipt for the sake of conformity or for any bankers or other person with whom any moneys or assets of the Company may be lodged or deposited for safe custody or for any bankers or other persons into whose hands any money or assets of the Company may come or for any defects of title of the Company to any property purchased or for insufficiency or deficiency of or defect in title of the Company to any security upon which any moneys of the Company shall be placed out or invested or for any loss misfortune or damage resulting from any such cause as aforesaid or which may happen in or about the execution of their respective offices or trusts except the same shall happen by or through their own negligence, default, breach of duty or breach of trust.
The Board may exercise all the powers of the Company to borrow money and to mortgage, hypothecate, pledge or charge all or part of its undertaking property and uncalled capital and to issue debentures and other securities whether outright or as collateral security for any liability or obligation of the Company or of any third party. The Board may exercise all the powers of the Company to engage in currency or interest rate hedging in the interests of efficient portfolio management.
the Shareholder shall not be entitled to attend or vote (either personally or by representative or by proxy) at any general meeting or meeting of the holders of any class of shares of the Company or to exercise any other right conferred by membership in relation to any such meetings; and
If in any financial year of the Company the Ordinary Shares have traded, on average over that year, at a discount in excess of 10 per cent. to the Net Asset Value per Ordinary Share, then the Board shall propose a special resolution at the Company's next annual general meeting that the Company ceases to continue in its present form. If such a special resolution is passed (requiring the approval of at least 75 per cent. of the votes cast in respect of it), the Board shall be required to put forward proposals to Shareholders at a general meeting of the Company, to be held within four months of the resolution being passed, to wind up or otherwise reconstruct the Company, bearing in mind the illiquid nature of the Company's underlying assets. The discount prevailing on each business day will be determined by reference to the closing market price of Ordinary Shares on that day and the most recently published Net Asset Value per Ordinary Share.
Auditors shall be engaged in accordance with Part XVI of the Companies Law.
The following are all of the contracts, not being contracts entered into in the ordinary course of business, that have been entered into by the Company in the two years immediately preceding the publication of this Registration Document and are, or may be, material or that contain any provision under which the Company has any obligation or entitlement which is or may be material to it as at the date of this Registration Document:
Pursuant to a share issuance programme agreement dated 15 November 2016 between the Company, the Investment Manager, the Investment Adviser, the Sponsor, Cantor Fitzgerald, Fidante Capital, Macquarie and SCS, and subject to certain conditions, the Joint Bookrunners agreed on a several, and not a joint or joint and several, basis to use their respective reasonable endeavours to procure subscribers for New Shares at the Issue Price under each Placing. In addition, the Sponsor was appointed as sponsor in connection with the applications for Admission of Shares issued pursuant to the Share Issuance Programme. The Share Issuance Programme is not underwritten.
The obligations of the Company to issue, and of the Joint Bookrunners to use their respective reasonable endeavours to procure subscribers for, New Shares are typical for an agreement of this nature, including being subject to certain conditions. These conditions included, among others: (i) in respect of each Issue, Admission occurring by not later than 8.00 a.m. on such date as the Company, the Sponsor and the Joint Bookrunners may agree; and (ii) the Share Issuance Programme Agreement not having been terminated in accordance with its terms.
In consideration for its services in relation to the Share Issuance Programme, the Sponsor and Cantor Fitzgerald will each be paid a corporate finance fee by the Company. In addition, in respect of each Issue, the Company will pay the Joint Bookrunners a commission calculated by reference to the gross proceeds of that Issue.
The Company, the Investment Adviser and the Investment Manager have given warranties to the Sponsor and the Joint Bookrunners concerning, inter alia, the accuracy of the information contained in the Prospectus. The Directors have also given certain warranties to the Sponsor and the Joint Bookrunners as to the accuracy of certain information in the Prospectus and as to themselves. In addition, the Company, the Investment Adviser and the Investment Manager have given indemnities to the Sponsor and the Joint Bookrunners. The warranties and indemnities given by the Company, the Investment Adviser, the Investment Manager and the Directors are standard for an agreement of this nature.
The Share Issuance Programme Agreement can be terminated by the Sponsor and Joint Bookrunners in certain customary circumstances.
The Share Issuance Programme Agreement is governed by the laws of England and Wales.
Pursuant to a debt facility agreement dated 31 March 2016 between NextPower Radius Limited (Borrower and Obligor), NextEnergy Solar Holdings IV Limited (Holdco and Obligor), ReAssure Limited (Lender), P.A.T. (Pensions) Limited (Lender), Swiss Re Europe S.A.(Lender), MIDF UK1B Ireland Limited (Lender) and Elavon Financial Services Limited (Agent) it was agreed to make available (i) a term loan facility on a fixed interest rate basis in an aggregate amount not exceeding £27,500,000, and (ii) a term loan facility on a RPI-linked interest basis in an aggregate amount not exceeding £27,500,000 in order to finance specified ground mounted solar parks. The use of the funds under the facility is restricted to the making of specified payments.
The document also incorporates by reference a Common Terms Agreement dated 31 March 2016 between NextPower Radius Limited (Borrower and Obligor), NextEnergy Solar Holdings IV Limited (Holdco and Obligor), Macquarie Infrastructure Debt Investment Solutions (Mandated Lead Arranger), Elavon Financial Services Limited (Agent), U.S. Bank Trustees Limited (Security Trustee), Swiss Re Europe S.A. (Lender), P.A.T. (Pensions) Limited (Lender), ReAssure Limited (Lender) and MIDF UK1B Ireland Limited (Lender).
The debt is long-term and fully amortising, with payments due for both tranches every six months. The first repayment of the RPI-linked facility was on 30 September 2016 and the first repayment of the fixed facility will take place on 31 March 2018. The final repayment for both tranches is due on 30 September 2034.
In relation to the fixed facility the agreement imposes a base interest rate of 1.651 per cent. and a margin of 2.46 per cent. The overall interest rate for this tranche is therefore 4.11 per cent. In relation to the RPI-linked tranche the agreement imposes a base rate of -1.016 per cent. and a margin of 2.46 per cent. The overall interest rate for this tranche is therefore a minimum of 1.44 per cent. variable in accordance with the RPI.
The loan is secured by way of debentures granted by NextEnergy Solar Holdings IV Limited, NextPower Radius Limited and each asset holding SPV over all of its assets including fixed and floating charges, assignment of relevant interests (including rights in respect of group debt arrangements) and a share charge in respect of NextEnergy Solar Holdings IV Limited's interest in NextPower Radius Limited.
(A) Fenland Renewables Limited
Pursuant to a debt facility agreement dated 23 July 2015 between Fenland Renewables Limited (Borrower) and Bayerische Landesbank (Lender) it was agreed to make available (i) a term loan facility of £15,089,900, and (ii) a short-term loan facility of £3,235,100.
All amounts borrowed under the facilities agreement are to be used towards the payment of specified eligible costs.
The short-term facility is fully amortising, with repayments due every six months. The first repayment date for the short-term facility was on 31 December 2015 and the final repayment is due on 30 June 2020. The term facility is long-term and fully amortising, with repayments due every six months. The first repayment date for the term facility is on 31 December 2020 and the final repayment is due on 31 December 2032.
The rate of interest payable on both tranches is the percentage rate per annum which is the aggregate of the applicable margin and LIBOR.
In relation to the term loan, the margin is as follows:
In relation to the short term loan it is 1.8 per cent.
The facility is secured by way of:
Pursuant to a debt facility agreement dated 23 July 2015 between Green End Renewables Limited (Borrower) and Bayerische Landesbank (Lender) it was agreed to make available (i) a term loan facility of £17,985,600, and (ii) a short-term loan facility of £4,014,400.
All amounts borrowed under the facilities agreement are to be used towards the payment of specified eligible costs.
The short-term facility is fully amortising, with repayments due every six months. The first repayment date for the short-term facility was on 31 December 2015 and the final repayment is due on 30 June 2020. The term facility is long-term and fully amortising, with repayments due every six months. The first repayment date for the term facility is on 31 December 2020 and the final repayment is due on 31 December 2032.
The rate of interest payable on both tranches is the percentage rate per annum which is the aggregate of the applicable margin and LIBOR.
In relation to the term loan, the margin is as follows:
In relation to the short term loan it is 1.8 per cent.
The facility is secured by way of:
Pursuant to a debt facility agreement dated 13 October 2015 between Tower Hill Farm Renewables Limited (Borrower) and Bayerische Landesbank (Lender) it was agreed to make available (i) a term loan facility of £5.053,400, and (ii) a short-term loan facility of £1,146,600.
All amounts borrowed under the facilities agreement are to be used towards the payment of specified eligible costs of any Funds Flow Statement delivered.
The short-term facility is fully amortising, with repayments due every six months. The first repayment date for the short-term facility was on 31 December 2015 and the final repayment is due on 30 June 2020. The term facility is long-term and fully amortising, with repayments due every six months. The first repayment date for the term facility is on 31 December 2020 and the final repayment is due on 30 June 2033.
The rate of interest payable on both tranches is the percentage rate per annum which is the aggregate of the applicable margin and LIBOR.
In relation to the term loan, the margin is as follows:
In relation to the short term loan it is 1.8 per cent.
The facility is secured by way of:
Pursuant to the non-pre-emptive tap issuance programme agreement dated 15 July 2016 between the Company, the Investment Manager, the Investment Adviser, the Sponsor, Cantor Fitzgerald, Macquarie, Fidante Capital and SCS (the ''2016 Tap Issue Programme Agreement''), and subject to certain conditions Cantor Fitzgerald, Macquarie, Fidante Capital, the Sponsor and SCS agreed on a several, and not a joint or joint and several, basis to use their respective reasonable endeavours to procure subscribers for new Shares to be issued pursuant to each placing under the 2016 Tap Issue Programme. In addition, the Sponsor was appointed as sponsor in connection with the applications for admission of the new Shares issued pursuant to the 2016 Tap Issue Programme to trading on the London Stock Exchange's Main Market and to listing on the Official List. The 2016 Tap Issue Programme was not underwritten.
The obligations of the Company to issue, and of Cantor Fitzgerald, Macquarie, Fidante Capital, the Sponsor and SCS to use their respective reasonable endeavours to procure subscribers for, new Shares pursuant to the 2016 Tap Issue Programme were typical for an agreement of this nature, including being subject to certain conditions. These conditions included the 2016 Tap Issue Programme Agreement not having been terminated in accordance with its terms.
In respect of each issue of new Shares pursuant to the 2016 Tap Issue Programme, the Company paid Cantor Fitzgerald, Macquarie, Fidante Capital, the Sponsor and SCS a commission calculated by reference to the gross proceeds of that issue.
The Company, the Investment Adviser and the Investment Manager gave warranties to the Sponsor, Cantor Fitzgerald, Macquarie, Fidante Capital, the Sponsor and SCS concerning, inter alia, the accuracy of the information contained in the prospectus relating to the 2016 Tap Issue Programme. In addition, the Company, the Investment Adviser and the Investment Manager gave indemnities to the Sponsor, Cantor Fitzgerald, Macquarie, Fidante Capital, SCS, the affiliates of these parties. The warranties and indemnities given by the Company, the Investment Adviser, the Investment Manager were standard for an agreement of this nature.
The 2016 Tap Issue Programme Agreement was governed by the laws of England and Wales.
Pursuant to the Revolving Credit Facility agreement dated 17 September 2014 between among others, Macquarie Bank Limited, London Branch and NextEnergy Solar Holdings Limited it was agreed to make available a revolving credit facility.
The amount available under the Revolving Credit Facility as at 17 September 2014 was £31,500,000. The amount available under the Revolving Credit Facility was increased by an Amendment and Restatement Deed dated 30 October 2015 to £100,000,000. The amount available under the Revolving Credit Facility was further increased by an Amendment and Restatement Deed dated 17 May 2016 to £120,000,000. The amount available under the Revolving Credit Facility as at 30 September 2016 was £88,500,000 of which £43,000,000 was drawn down as at that date. Pursuant to a transfer certificate dated 31 March 2016 Abbey National Treasury Services plc (trading as Santander Global Corporate Banking) became a lender.
The interest rate on Tranche A was a margin of 2.75 per cent. plus one month LIBOR. The interest rate on Tranche B is a margin of between 1.95 and 2.50 per cent. (dependent on certain time periods and an output gearing tests) plus one month LIBOR.
Tranche A has now terminated. Tranche B has an initial termination date of 17 December 2016, which can be extended by a maximum of six months to 17 June 2017. Tranche C has a termination date of 17 May 2017, which can be extended by a maximum of six months to 17 November 2017.
The use of the funds under the Revolving Credit Facility is restricted to specific purposes which include the acquisition of operational assets, the finance of construction of Solar PV plants and the making of certain investments by the Company pursuant to the Revolving Credit Facility Agreement, the minimum amount of each loan requested is £2,000,000. The maximum amount available for drawdown is the remaining available commitment under the facility.
The Revolving Credit Facility Agreement contains representations, warranties and default provisions usual for agreements of this nature, including a negative pledge. In addition, there are borrowing covenants which require operational assets to comply with specific criteria (in particular, in relation to performance) and levels of gearing.
In connection with the Revolving Credit Facility, security has been granted over the shares and assets of NextEnergy Solar Holdings Limited and its subsidiaries.
The Revolving Credit Facility Agreement is governed by the laws of England and Wales.
Pursuant to a debt facility agreement dated 1 July 2016 between NextEnergy Solar Holdings II Limited, ESF Llwyndu Limited, Trowbridge PV Limited, NIBC Bank N.V. and NIBC Financing N.V and, subject to certain conditions, NIBC has made available a debt facility of up to £21,680,000 (the ''NIBC Facility'') to refinance existing debt incurred to finance the Company's Cock Hill Farm and Llwyndu projects and is fully drawn. The total investment value of the two projects amounts to £32,700,000. The NIBC Facility has a termination date of 4 July 2019.
The interest rate on the facility is a margin of 2.20 per cent. plus three month LIBOR plus (if applicable) an additional ''mandatory cost'' designed to compensate the lenders for the cost of compliance with their regulatory requirements.
The Debt Facility Agreement contains representations, warranties and default provisions usual for agreements of this nature.
In connection with the NIBC Debt Facility Agreement, security has been granted over the shares and assets of NextEnergy Solar Holdings II Limited and its subsidiaries.
The Debt Facility Agreement is governed by the laws of England and Wales.
On 11 November 2016 the Company entered into a placing letter with Old Mutual Global Investors (UK) Limited (''OM'') pursuant to which it secured the OM Commitment. The OM Commitment Letter provides for a commitment by OM to subscribe £56,743,500 for 54,300,000 New Shares in the Initial Placing, subject to the Share Issuance Programme Agreement becoming unconditional and to Admission of the New Shares on or prior to 25 November 2016 (or such later date as may be agreed in accordance with the Share Issuance Programme Agreement) and to the other terms of the Initial Placing. The first £35,000,000 (being 33,492,823 Ordinary Shares) of the OM Commitment is not subject to scaling back.
Pursuant to an asset management agreement dated 15 May 2014 between WiseEnergy UK and the Company, WiseEnergy UK has been engaged by the Company to provide asset management services (on an exclusive basis) to the Company its affiliates (in practice, the project SPVs).
The Asset Management Agreement is a framework agreement whereby the Company will procure that its affiliates (the project SPVs) enter into a specific asset management agreement with WiseEnergy UK substantially in the same form as provided in the schedule to the Asset Management Agreement and WiseEnergy UK has agreed to enter into such an agreement no later than the date of the acquisition by the relevant affiliate of a solar PV plant.
The project specific asset management agreement template as scheduled to the Asset Management Agreement provides that WiseEnergy UK is appointed by the relevant affiliate (project SPV) to provide asset management services with a view to ensuring the efficient and long-term management of the PV plants owned by that affiliate. WiseEnergy UK's services provided include periodic site visits and periodic site reports.
Pursuant to an agreement dated 18 March 2014 between the Company and the Investment Manager, the Investment Manager has been appointed as the sole discretionary investment manager of the Company, to the exclusion of any other person, to consider and approve potential investments for the Company (in accordance with the Company's investment objective and policy) and otherwise to manage and invest the Current Portfolio on a day-today and discretionary basis, subject to the overall control and supervision of the Board. The powers of the Investment Manager in respect of the Company's investments are limited to investments (or potential investments) recommended to the Investment Manager by the Investment Adviser. The Investment Manager is the single external AIFM of the Company.
The Investment Manager is entitled to the management fee described under the heading ''Fees and expenses'' in Part 6 of this Registration Document.
The Management Agreement is terminable by either the Investment Manager or the Company giving to the other not less than 12 months' written notice, such notice not to be given before the fourth anniversary of admission of the Ordinary Shares to trading on the London Stock Exchange's Main Market pursuant to the IPO (which occurred on 25 April 2014).
The Management Agreement may be terminated forthwith by either party, inter alia, if:
(A) certain events of insolvency occur in respect of the other party or the Investment Adviser;
In addition, the Company may terminate the Management Agreement if a Key Executive Event occurs in circumstances where replacement Key Executives reasonably satisfactory to the Board have not been appointed by the Investment Manager or its associates within four months from the occurrence of the relevant Key Executive Event. For these purposes, a ''Key Executive'' means each of Aldo Beolchini, Michael Bonte-Friedheim and Abid Kazim together with any replacement Key Executive appointed in accordance with the terms of the Management Agreement and ''Key Executive Event'' means any two or more Key Executives ceasing to devote substantially the whole of their business time to the business of the Investment Adviser and/or its associates.
The Company may direct the termination by the Investment Manager of the Investment Advisory Agreement, where certain ''for cause'' termination events have arisen in respect of the Investment Advisory Agreement.
Upon termination of the Management Agreement, the Investment Manager has no further obligations with respect to the investments of the Company, provided that the Investment Manager shall provide reasonable cooperation with respect to the migration of the Investment Manager's functions and deliver (or procure delivery of) certain documents to the Company. These services on termination will generally be at the Company's expense, save in certain limited situations.
The Company has given certain standard indemnities in favour of the Investment Manager, its associates and certain persons connected thereto in respect of certain losses and claims incurred by or asserted against them in connection with the exercise of the Investment Manager's powers, or the performance of its obligations and duties, under the Management Agreement.
The Management Agreement is governed by the laws of England and Wales.
Pursuant to an agreement dated 18 March 2014 between the Investment Manager and the Investment Adviser, the Investment Adviser has been appointed to provide investment advice and recommendations to the Investment Manager in connection with the Company's investments and the execution of its investment policy. The Investment Adviser also provides advice and recommendations to the Investment Manager as to investment opportunities and in respect of acquisitions and disposals by the Company, as well as general investment strategy. The Investment Adviser does not have authority to make investment decisions on behalf of the Company but assists and advises in respect of the execution of investment decisions made by the Investment Manager.
The Investment Manager is responsible for the fees and expenses of the Investment Adviser, which are payable at a rate agreed between them from time to time.
The Investment Advisory Agreement is terminable by either the Investment Adviser or the Investment Manager giving to the other not less than 12 months' written notice, such notice not to be given before the fourth anniversary of admission of the Ordinary Shares to trading on the London Stock Exchange's Main Market pursuant to the IPO.
The Investment Advisory Agreement may be terminated forthwith by either party, inter alia, if:
The Investment Manager has given certain standard indemnities in favour of the Investment Adviser, its associates, and certain persons connected thereto in respect of certain losses or claims incurred by or asserted against them in connection with the exercise of the Investment Adviser's powers of the performance of its obligations and duties in carrying on its responsibilities under the Investment Advisory Agreement.
The Investment Advisory Agreement is governed by the laws of England and Wales.
Pursuant to a project sourcing agreement dated 18 March 2014 between the Company and the Developer, the Developer has agreed to use all reasonable endeavours to source and present to the Company large scale ground-mounted or building-integrated solar PV projects located within the United Kingdom, and falling within the Company's investment objective and policy. The Developer has also agreed to offer all such suitable projects of which it has actual knowledge to the Company on a ''first offer'' basis.
The Developer shall not be entitled to receive any fees in respect of its services under the Project Sourcing Agreement, but will be entitled to reimbursement of expenses in certain circumstances as described under the heading ''Project Costs'' in Part 6 of this Registration Document .
The Project Sourcing Agreement can be terminated by the Company giving not less than three months' written notice to the Developer or by the Developer giving not less than 12 months' written notice to the Company (such notice, in each case, not to expire before the fourth anniversary of admission of the Ordinary Shares to trading on the London Stock Exchange's Main Market pursuant to the IPO, which occurred on 25 April 2014).
The Project Sourcing Agreement may be terminated forthwith by either party, inter alia, if:
The Company has given certain standard indemnities in favour of the Developer, its associates and certain persons connected thereto in respect of certain losses or claims incurred by or asserted against them in connection with the exercise of the Developer's powers or the performance of the Developer's obligations and duties under the Project Sourcing Agreement.
The Project Sourcing Agreement is governed by the laws of England and Wales.
Pursuant to an administration agreement dated 18 March 2014 between the Company and the Administrator, the Company has appointed the Administrator to act as its administrator and company secretary.
Under the terms of the Administration Agreement, the Administrator is entitled to an annual fee in respect of administration, accounting, corporate secretarial, corporate governance, regulatory compliance and Listing Rule continuing obligations, accruing daily and calculated on a sliding scale based on Net Asset Value. In addition, the Administrator will be entitled to receive a fee of £2,500 for each ad hoc meeting of the Board at which its attendance is required. The Administrator will, in addition, be entitled to recover third party expenses and disbursements.
The Company has given certain market standard indemnities in favour of the Administrator in respect of the Administrator's potential losses in carrying out its responsibilities under the Administration Agreement and there are certain limitations on the Administrator's liability to the Company for liabilities suffered by the Company arising as a result of or in the course of the provision by the Administrator of services pursuant to the Administration Agreement.
The Administration Agreement is terminable, inter alia, by either party;
The Administration Agreement is governed by the laws of the Island of Guernsey.
The Company operates as an externally managed, non-EU AIF. The Investment Manager acts as the single external non-EU AIFM of the Company.
The Investment Manager is not required to ensure, and has not ensured, that the Company and/or any of the HoldCos have appointed a depositary for the purposes of the AIFM Directive.
The Investment Manager is not required to cover potential professional liability risks in accordance with the AIFM Directive. However, the Investment Manager has agreed, pursuant to the Management Agreement, to maintain until the sixth anniversary of the date of termination of the Management Agreement, professional indemnity cover of not less than £5 million.
As at the date of this Registration Document, the Investment Manager has not delegated any of its investment management functions.
The Company's valuation arrangements are summarised under the heading ''Valuations'' in Part 6 of this Registration Document.
Liquidity risk management is part of the Investment Manager's overall risk management process. However, the Investment Manager is not required to implement liquidity management arrangements in accordance with AIFM Directive in respect of either the Company or any of the HoldCos.
As at the date of this Registration Document, neither the Company, nor any of the HoldCos had any assets that are subject to special arrangements arising from their illiquid nature.
As at the date of this Registration Document, the Company is employing no leverage. However, its subsidiaries have entered into the financing arrangements described in paragraphs 6.2, 6.3, 6.5 and 6.6 of this Part 8.
There have not been in the last 12 months any Governmental, legal or arbitration proceedings, nor are no Governmental, legal or arbitration proceedings nor, so far as the Company is aware, are there any Governmental, legal or arbitration proceedings pending or threatened which may have, or have since incorporation had, a significant effect on the Company's or the Group's financial position or profitability.
Summaries of the Management Agreement, the Project Sourcing Agreement, the Asset Management Agreement and the appointment letters entered into between the Company and each Director are set out in paragraphs 6 and 3 of this Part 8 of this Registration Document.
The entry into of the Asset Management Agreement on 15 May 2014 constituted a ''smaller related party transaction'' under Listing Rule 11.1.10. The agreement was therefore subject to the disclosure requirements in relation to smaller related party transactions in force prior to 16 May 2014. Details of the arrangements aggregate costs payable under the Asset Management Agreement and any other relevant details are included in the Company's historical financial information.
In the context of the definition of a smaller related party transaction under the Listing Rules, the aggregate costs under the Asset Management Agreement are not expected to exceed 5 per cent. of the Net Asset Value of the Company. Such costs will not exceed the threshold beyond which Shareholder approval would be required pursuant to the Listing Rules.
Save as disclosed in Note 15 of the historical financial information to 31 March 2015 incorporated by reference and Note 16 of the historical financial information to 31 March 2016 incorporated by reference, the Company has not entered into any related party transactions in the period from incorporation to 31 March 2016 (which for these purposes are those set out in the standards adopted according to Regulation (EC) 1606/2002). For the period from 1 April 2016 to the date of this document the Company has not entered into any such related party transactions save for payment of the management fee under the Management Agreement (£1,438,706) and payment of the asset management fee under the Asset Management Agreement (£1,172,737).
Where information contained in this Registration Document has been sourced from a third party, the Company confirms that such information has been accurately reproduced and, as far as the Company is aware and able to ascertain from information published by such third party, no facts have been omitted which would render the reproduced information inaccurate or misleading.
Under the AIFM Directive, certain conditions must be met to permit the marketing of shares in AIFs to prospective and existing investors in the EU, including that prescribed disclosures are made to such investors. Implementation and interpretation of the AIFM Directive varies among Member States and it is therefore difficult to predict the effect of the AIFM Directive, as implemented, on the Company, the Investment Manager and the Investment Adviser may vary over time. The AIFM Directive requires certain reports and disclosures to be made to regulators in those Member States and of members of the EEA in which ordinary shares in the Company are marketed. Such reports and disclosures may become publicly available.
The Company operates as an externally managed non-EU AIF for the purposes of the AIFM Directive and, as such, neither it nor the Investment Adviser will be required to seek authorisation under the AIFM Directive. However, following national transposition of the AIFM Directive in a given Member States, the marketing of shares in AIFs that are established outside the EU (such as the Company) to investors in that Member States is prohibited unless certain conditions are met. Certain of these conditions are outside the Company's control as they are dependent on the regulators of the relevant third country (in this case Guernsey) and the relevant Member States entering into regulatory co-operation agreements with one another.
The Company cannot guarantee that such conditions will be satisfied at all relevant times. In cases where the conditions are not satisfied, the ability of the Company to market Shares or raise further equity capital in the EU may be limited or removed. Any regulatory changes arising from implementation of the AIFM Directive (or otherwise) that limit the Company's ability to market future issues of its Shares may materially adversely affect the Company's ability to carry out its investment policy successfully and to achieve its investment objective, which in turn may adversely affect the Company's business, financial condition, results of operations, NAV and/or the market price of the Shares.
The Board confirms that it conducts the Company's affairs, such that the Company would qualify for approval as an investment trust if it were resident in the United Kingdom. It is the Board's intention that the Company will continue to conduct its affairs in such a manner (although no guarantee can be given that this will be achieved or will continue) and that independent financial advisers should therefore be able to recommend its Shares to ordinary retail investors in accordance with the FCA's rules relating to non-mainstream pooled investment products. It should be noted that, as investment trust status requires (inter alia) that the Company retain no more than 15 per cent. of its income (as established in accordance with the requirements of the relevant UK tax regime), the Company may be obliged to distribute cash otherwise available for reinvestment.
cent. of gross proceeds, the net assets of the Company would increase by approximately £358,435,000 immediately after their Admission. The Company derives earnings from its gross assets in the form of dividends and interest.
13.5 There will be no dilution in NAV as the price at which New Ordinary Shares are issued pursuant to the Share Issuance Programme will be at a premium to the aggregate of the prevailing NAV per Ordinary Share at the time of issue and the costs associated with the Issue. In the case of an issue of C Shares, the costs of that issue will be paid out of the pool of assets attributable to the C Shares and once the C Shares will convert into Ordinary Shares on a NAV to NAV basis; accordingly, such an issue will not dilute the NAV of the Ordinary Shares.
Copies of the following documents will be available for inspection at the registered office of the Company during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) until the closure of the Share Issuance Programme.
Section 406 of ERISA and section 4975 of the Code prohibit certain transactions involving the assets of employee benefit plans and other plans (including individual retirement accounts) subject to such provisions (''Plans''), as well as certain entities in which such Plans invest and whose assets are treated as plan assets of such Plans for purposes of ERISA or section 4975 of the Code, and persons which have certain specified relationships with respect to such Plans (such persons are referred to as ''parties in interest'' under ERISA or as ''disqualified persons'' under section 4975 of the Code). A party in interest or disqualified person which engages in a nonexempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. Title I of ERISA also sets forth fiduciary responsibility standards applicable to Plans.
The Company has been established to engage primarily in acquiring and operating solar PV plants. The Manager routinely engages in services relating to the acquisition and operation of solar energy facilities or interests therein on behalf of the Company, and the Company expects to acquire at least a majority ownership stake in a majority of its solar energy facilities. The Company believes it qualifies as an ''operating company'' within the meaning of the U.S. Department of Labor plan assets regulation, 29 C.F.R. 2510.3-101, as modified by section 3(42) of ERISA.
Governmental plans, church plans and non-US plans, while not subject to the fiduciary responsibility and prohibited transaction provisions of ERISA or the provisions of section 4975 of the Code, may be subject to Similar Law. Fiduciaries of any such plans should consult with their counsel before authorising an investment of plan assets for the purchase of Shares.
| ''2014 Share Issuance Programme'' or ''2014 SIP'' |
the share issuance programme of up to 250 million Ordinary Shares, as described in the prospectus published by the Company dated 10 November 2014 which closed on 9 November 2015 |
|---|---|
| ''2016 Tap Issuance Programme'' or ''2016 TIP'' |
the tap issuance programme to sell Ordinary Shares out of treasury and to issue new Ordinary Shares without having to publish a prospectus, which was announced by the Company through a Regulatory Information Service on 15 July 2016 |
| ''Administration Agreement'' | the administration agreement between the Company and the Administrator, a summary of which is set out in paragraph 6.12 of Part 8 of this Registration Document |
| ''Administrator'' | Ipes (Guernsey) Limited |
| ''Admission'' | in respect of any Issue, admission to trading on the London Stock Exchange's Main Market of the New Shares issued pursuant to that Issue becoming effective in accordance with the LSE Admission Standards and admission of the relevant New Ordinary Shares or C Shares (as applicable) to listing on the premium segment or standard segment respectively of the Official List |
| ''AIC'' | the Association of Investment Companies |
| ''AIC Code'' | the AIC Code of Corporate Governance as modified from time to time for Guernsey domiciled member companies, and including commentary on the interaction with the GFSC Code |
| ''AIC Guide'' | the AIC Corporate Governance Guide for Guernsey Domiciled Investment Companies |
| ''AIF'' | an alternative investment fund, as defined in the AIFM Directive |
| ''AIFM'' | an alternative investment fund manager, as defined in the AIFM Directive |
| ''AIFM Directive'' | Directive 2011/61/EU of the European Parliament and the Council of the European Union on alternative investment fund managers and any implementing legislation or regulations thereunder |
| ''Articles'' | the articles of incorporation of the Company, as amended |
| ''Asset Management Agreement'' | the asset management agreement between the Company and WiseEnergy UK, a summary of which is set out in paragraph 6.8 of Part 8 of this Registration Document |
| ''Benefit Plan Investor'' | (i) an employee benefit plan (as defined in section 3(3) of ERISA) subject to Title I of ERISA, (ii) a plan described in section 4975(e)(1) of the Code to which section 4975 of the Code applies or (iii) any other entity whose underlying assets could be deemed to include plan assets by reason of an employee benefit plan or a plan's investment in the entity within the meaning of the Plan Asset Regulation |
| ''Board'' | the board of directors of the Company, or any duly constituted committee thereof |
| ''Brown Power'' | sale of electricity to energy consumers and suppliers |
| ''Business Day'' | a day on which the London Stock Exchange and banks in Guernsey are normally open for business |
| ''C Shareholders'' | the holders of the C Shares (prior to the conversion of the C Shares into new Ordinary Shares) |
| ''C Shares'' | redeemable convertible shares of no par value in the capital of the Company issued as ''C Shares'' and having the rights and being subject to the restrictions set out in paragraph 5.3 of Part 8 of this Registration Document, which will convert into Ordinary Shares as set out in that paragraph |
|---|---|
| ''Capita Asset Services'' | a trading name of Capita Registrars Limited |
| ''Cantor Fitzgerald'' | Cantor Fitzgerald Europe, financial adviser and joint lead bookrunner |
| ''Certificated'' or ''Certificated Form'' |
not in Uncertificated Form (that is, not in CREST) |
| ''CCA'' | Climate Change Act 2008 |
| ''CfDs'' | contracts for differences for FiTs |
| ''Code'' | US Internal Revenue Code of 1986, as amended |
| ''Companies Law'' | the Companies (Guernsey) Law, 2008, as amended |
| ''Company'' | NextEnergy Solar Fund Limited |
| ''CREST'' | the facilities and procedures for the time being of the relevant system of which Euroclear UK & Ireland Limited has been approved as the operator pursuant to the Uncertificated Securities Regulations 2001 (SI 2001 No. 2001/3755) of the UK |
| ''CRS'' | the Organisation for Economic Co-operation and Development's Common Reporting Standard |
| ''Current Portfolio'' | the portfolio of solar PV plants held by the Group as at the Latest Practicable Date, details of which are set out in Part 4 of this Registration Document |
| ''DECC'' | the Department of Energy and Climate Change |
| ''Developer'' | NextPower Development Limited |
| ''Directors'' | the directors of the Company |
| ''Disclosure Guidance and Transparency Rules'' |
the disclosure guidance and transparency rules made by the FCA under Part VI of FSMA |
| ''EBITDA'' | earnings before income, taxation, depreciation and amortisation |
| ''EEA'' | the European Economic Area |
| ''EMR'' | Electricity Market Reform |
| ''EPC'' | energy procurement and construction |
| ''ERISA'' | the US Employee Retirement Income Security Act of 1974, as amended and the applicable regulations thereunder |
| ''EU'' | the European Union |
| ''Exchange Act'' | the US Securities Exchange Act of 1934, as amended |
| ''FATCA'' | the US Foreign Account Tax Compliance Act of 2010, as amended, and the applicable regulations thereunder |
| ''Fidante Capital'' | Fidante Partners (Europe) Limited, joint lead bookrunner |
| ''Financial Conduct Authority'' or ''FCA'' |
the UK Financial Conduct Authority and, where applicable, acting as the competent authority for listing in the UK |
| ''First PV Consultation'' | the UK Government document entitled ''Consultation on changes to financial support for solar PV'', dated 13 May 2014 |
| ''FiT'' | feed-in tariff |
| ''FSMA'' | the UK Financial Services and Markets Act 2000, as amended |
| ''Future Securities Note'' | any securities note to be issued in the future by the Company in respect of any Issue under the Share Issuance Programme which includes an open offer and/or offer for subscription component |
| and made pursuant to this Registration Document and subject to separate approval by the FCA |
||
|---|---|---|
| ''Future Summary'' | any summary to be issued in the future by the Company in respect of any Issue under the Share Issuance Programme which includes an open offer and/or offer for subscription component and made pursuant to this Registration Document and subject to separate approval by the FCA |
|
| ''GFSC'' | the Guernsey Financial Services Commission | |
| ''GFSC Code'' | the Corporate Governance Code issued by the GFSC | |
| ''GHG'' | greenhouse gas emissions | |
| ''Gross Asset Value'' | the aggregate of: (a) the fair value of the Group's underlying investments (whether or not subsidiaries) valued on an unlevered, discounted cashflow basis as described in the International Private Equity and Venture Capital Valuation Guidelines (latest edition December 2012); (ii) the Group's proportionate share of the cash balances and cash equivalents of Group companies and non-subsidiary companies in which the Group holds an interest; and (iii) the other relevant assets or liabilities of the Group valued at fair value (other than third party borrowings) to the extent not included in (a) and (ii) above |
|
| ''Group'' | the Company, the HoldCos, the SPVs and any other direct or indirect subsidiaries of any of them (together, individually or in any combination as appropriate) |
|
| ''GW'' | gigawatt, equal to one billions watts, a measure of power | |
| ''HoldCos'' | intermediate holding companies established by the Company from time to time to acquire and/or hold (directly or through SPVs) the Company's investments and being, as at the Latest Practicable Date: |
|
| (a) NextEnergy Solar Holdings Limited, incorporated and registered in England with registered number 8956168; |
||
| (b) NextEnergy Solar Holdings II Limited, incorporated and registered in England with registered number 09438822; |
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| (c) NextEnergy Solar Holdings III Limited, incorporated and registered in England with registered number 09693016; and |
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| (d) NextEnergy Solar Holdings IV Limited, incorporated and registered in England with registered number 10066420; |
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| each of which has its registered office at 5th Floor North Side, 7-10 Chandos Street, Cavendish Square, London W1G 9DQ |
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| ''IEA'' | International Energy Authority | |
| ''IFRS'' | International Financial Reporting Standards | |
| ''Initial Issue'' | the first issue of New Shares pursuant to the Share Issuance Programme, being comprised of the Initial Placing and the Initial Offer |
|
| ''Investment Adviser'' | NextEnergy Capital Limited | |
| ''Investment Advisory Agreement'' | the investment advisory agreement between the Investment Manager and the Investment Adviser, a summary of which is set out in paragraph 6.10 of Part 8 of this Registration Document |
| ''Investment Committee'' | the investment committee of the Investment Adviser, details of which are set out under the heading ''Investment Committee'' in Part 5 of this Registration Document |
|---|---|
| ''Investment Company Act'' | the US Investment Company Act of 1940, as amended |
| ''Investment Manager'' | NextEnergy Capital IM Limited |
| ''IPO'' | the initial public offering of the Company whereby, on 25 April 2014, 85,600,000 Ordinary Shares were admitted to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange's Main Market under the ticker ''NESF'' |
| ''IPO Cornerstone Shareholder'' | the shareholder who subscribed for at least 25 per cent of the Ordinary Shares issued at the time of the IPO and continued to subscribe for at least 25 per cent of the Ordinary Shares issued subsequently, until the Company's NAV reached £300 million |
| ''IRR'' | internal rate of return |
| ''Issue'' | an issue of New Shares pursuant to the Share Issuance Programme as described in the Prospectus |
| ''Joint Bookrunners'' | together Cantor Fitzgerald, Fidante Capital, Macquarie and SCS |
| ''KW'' | kilowatt, equal to one thousand watts, a measure of power |
| ''KWh'' | kilowatt hour, a measure of energy |
| ''Latest Practicable Date'' | 11 November 2016 |
| ''Listing Rules'' | the listing rules made by the FCA pursuant to Part VI of FSMA |
| ''London Stock Exchange'' or ''LSE'' |
The London Stock Exchange plc |
| ''London Stock Exchange's Main Market'' |
the London Stock Exchange's main market for listed securities |
| ''LSE Admission Standards'' | the rules issued by the London Stock Exchange in relation to the |
| admission to trading of, and continuing requirements for, securities admitted London Stock Exchange's Main Market |
|
| ''Macquarie'' | Macquarie Capital (Europe) Limited, joint lead bookrunner |
| ''Management Agreement'' | the management agreement between the Company and the Investment Manager, a summary of which is set out in paragraph 6.9 of Part 8 of this Registration Document |
| ''Market Abuse Regulation'' | the EU Market Abuse Regulation (Regulation 596/2014), which repealed and replaced the Market Abuse Directive (2003/6/EC) and its implementing legislation |
| ''Member States'' | those states which are members of the EU from time to time |
| ''Memorandum'' | the memorandum of incorporation of the Company |
| ''MW'' | megawatt, equal to one million watts, a measure of power |
| ''MWh'' | megawatt hour, a measure of energy |
| ''MWp'' | megawatt peak, being the power produced when a solar project is at peak operating performance with the sun shining strongly at midday |
| ''NEC Group'' | NextEnergy Capital SarL (Luxembourg) and its subsidiaries including the Investment Manager, the Investment Adviser, the Developer and WiseEnergy UK |
| ''Net Asset Value'' or ''NAV'' | the net asset value of the Company in total or (as the context requires) per Ordinary Share or C Share calculated in accordance with the Company's valuation policies and as described in this Registration Document |
''New Ordinary Shares'' new Ordinary Shares issued pursuant to the Share Issuance Programme
''New Shares'' New Ordinary Shares and/or new C Shares issued, or available for issue, pursuant to the Share Issuance Programme
''NGET'' National Grid Electricity Transmission plc
''NIBC'' NIBC Bank N.V.
''Non-Qualified Holder'' any person whose ownership of Shares may:
''Non-US Holder'' a beneficial owner of Ordinary Shares other than a partnership or an entity treated as a partnership for United States federal income tax purposes, that is not a US Holder (if an entity treated as a partnership for United States federal income tax purposes holds Ordinary Shares, the United States federal income tax treatment of a partner in the partnership generally will depend on the status of the partner and the partnership).
''O&M'' operation and maintenance
''Official List'' the official list maintained by the Financial Conduct Authority
''Ofgem'' The Office of Gas and Electricity Markets
''Ordinary Shareholders'' holders of Ordinary Shares
''Ordinary Shares'' redeemable ordinary shares of no par value in the capital of the Company
''Plan Asset Regulation'' regulations promulgated by the U.S. Department of Labor at 29 CFR 2510.3-101, as modified in application by section 3(42) of ERISA
''PPA'' power purchase agreement
''Project Sourcing Agreement'' the agreement between the Company, the Investment Adviser and the Developer a summary of which is set out in paragraph 6.11 of Part 8 of this Registration Document
''Prospectus'' the prospectus published by the Company in respect of the Share Issuance Programme comprising this Registration Document, the Securities Note and the Summary (or, where a Future Securities
| Note and a Future Summary are issued in respect of any Issue, this Registration Document, that Future Securities Note and that Future Summary) |
|
|---|---|
| ''Prospectus Rules'' | the prospectus rules made by the FCA under section 73A of FSMA |
| ''PV'' | a photovoltaic panel, usually made from silicon, turns solar radiation into electricity |
| ''PV Consultations'' | the First PV Consultation and the Second PV Consultation |
| ''QIB'' | qualified institutional buyer within the meaning of Rule 144A |
| ''Radius Portfolio'' | the portfolio of five solar PV plants comprising Branston, Great Wilbraham, Berwick, Bottom Plain and Emberton, details of which are set out in Part 4 of this Registration Document |
| ''Registrar'' | Capita Registrars (Guernsey) Limited or such other person or persons from time to time appointed by the Company to act as its registrar |
| ''Regulation S'' | Regulation S promulgated under the Securities Act |
| ''Regulatory Information Service'' or ''RIS'' |
a regulatory information service approved by the FCA and on the list of Regulatory Information Services maintained by the FCA |
| ''Renewable Energy Directive'' | Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC |
| ''Revolving Credit Facility'' | The Facility described in paragraph 6.5 of Part 8 of this Registration Document |
| ''Renewables Obligation'' or ''RO'' | the financial mechanism by which the UK Government has incentivised the deployment of large-scale renewable electricity generation by placing a mandatory requirement on licensed UK electricity suppliers to source a specified and annually increasing proportion of electricity they supply to customers from eligible renewable sources or pay a penalty |
| ''ROCs'' | Renewable Obligation certificates |
| ''RPI'' | the retail prices index as published by the Office for National Statistics or any comparable index which may replace it for all items |
| ''Rule 144A'' | Rule 144A under the Securities Act |
| ''Rules'' | the Registered Collective Investment Schemes Rules 2015 issued by the GFSC under The Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended |
| ''SCS'' | Shore Capital Stockbrokers Limited, joint bookrunner |
| ''SEC'' | the US Securities and Exchange Commission |
| ''Second PV Consultation'' | the UK Government document entitled ''Consultation on changes to financial support for solar PV'', dated 22 July 2015 |
| ''Securities Act'' | the US Securities Act of 1933, as amended |
| ''Securities Note'' | the securities note dated 15 November 2016 and published by the Company in respect of the Share Issuance Programme |
| ''Shareholder'' | a holder of Shares |
| ''Share Issuance Programme'' | the proposed programme of Issues of up to 350,000,000 New Ordinary Shares and/or C Shares (in aggregate), as described in Part 2 of the Securities Note |
| ''Shares'' | a share in the capital of the Company (of whatever class and including Ordinary Shares and C Shares of any class, and any Ordinary Share arising on conversion of a C Share) |
''UK Corporate Governance Code''
''Uncertificated'' or ''in
Uncertificated''
''W/m2
''Similar Law'' federal state, local or non-US law that is substantially similar to the prohibited transaction provisions of section 406 of ERISA and/ section 4975 of the Code
''Sponsor'' Shore Capital and Corporate Limited
''SPV'' a special purpose vehicle, being a company or other entity whose sole purpose is the holding of a particular asset
''Sterling'' the lawful currency of the UK
''Three Kings Portfolio'' the portfolio of three solar PV plants comprising Fenland, Green End and Tower Hill, details of which are set out in Part 4 of this Registration Document
''TWh'' terawatt hour equal to one million watts, a measure of power
the UK Corporate Governance Code as published by the Financial Reporting Council
''UK'' or ''United Kingdom'' the United Kingdom of Great Britain and Northern Ireland
recorded on the register as being held in uncertificated form in CREST and title to which may be transferred by means of CREST
''UNFCC'' United Nations Framework Convention on Climate Change
''United States'' or ''US'' the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia
''US Holder'' a beneficial owner of the Ordinary Shares that is, for US federal income tax purposes, (a) a citizen or individual resident of the United States, (b) a corporation or other business entity treated as a corporation created or organised under the laws of the United States, any state thereof or the District of Columbia, (c) an estate the income of which is subject to US federal income tax without regard to its source or (d) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust one or more US persons and have the authority to control all substantial decisions of the trust, or the trust has elected to be treated as a domestic trust for US federal income tax purposes
'' watts per square metre
''WiseEnergy'' WiseEnergy International Limited and/or its subsidiaries (including WiseEnergy UK), as the context may require
''WiseEnergy UK'' WiseEnergy (Great Britain) Limited
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