Interactive Investor

Investment trust board calls for closure of suspended trust

1st August 2023 12:15

by Sam Benstead from interactive investor

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Shareholders will vote this month on whether this troubled renewable energy trust will continue operating.

The board of the suspended ThomasLloyd Energy Impact Trust has urged shareholders to vote against its continuation, as the trust struggles to carry out its objective of investing in sustainable energy infrastructure in Asia.

The trust was suspended on 25 April 2023 after it failed to publish its annual accounts following difficulties valuing some of its assets.

SolarArise, a solar farm business in India that the trust owns outright, was at the root of the valuation issues.

The farm was valued at $13.9 million (£11.1 million) last September, but is likely to face a valuation downgrade, which would impact the net asset value (NAV) of the trust. 

Price rises in relation to the components and construction costs of a 200 megawatt solar farm, the Rewa Ultra Mega Solar Park (RUMS Project), meant that additional capital was likely to be required to construct the project, potentially decreasing the project returns and its commercial viability.

A vote on ThomasLloyd Energy Impact Trust’s future is due on 24 August. The board is urging investors to vote against its continuation because three months since the suspension it still does not have the full picture of what happened with the RUMS Project, and has no information regarding who at the investment manager knew about the economic viability of the project. It is also concerned that issues were not raised with board until April 2023.

Sue Inglis, chair of ThomasLloyd Energy Impact Trust, said: The board is extremely disappointed that the investment manager has failed to explain who knew what and when about the economic unviability of the RUMS Project.

“The investment manager's approach is forcing us to commission due diligence reports to ensure we have complete and reliable information on the company's investments, further delaying publication of the annual report and lifting the suspension.

“Combined with the significant loss arising from the RUMS Project, an expected material downward adjustment to the valuation of other investments, and the lack of a forward-looking plan from the investment manager, this leaves us with no option but to recommend voting against continuation.

The trust owns solar assets in India, Bangladesh, Vietnam and Indonesia, and is seeking to add a project in the Philippines, where it already owns a biomass plant. 

Its investment case is that renewable energy infrastructure is cheaper to build in Asia than fossil fuel plants are, and the quality of sunshine in the region is excellent. Renewable energy investments can also help investors mitigate the erosive impact of inflation, it argues, as cash flows are derived from a combination of long-term fixed prices or inflation-linked prices. 

The UK government, via the Foreign Office, is an investor in ThomasLloyd Energy Impact Trust.

Shares have fallen 12% this year and were suspended at 84p. They launched at 75.8p in late 2021. 

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