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Investment trust suspends trading on valuation uncertainty

25th April 2023 11:33

by Sam Benstead from interactive investor

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ThomasLloyd Energy Impact Trust is unable to publish its annual reports on time due to issues at one of it solar farms, explains Sam Benstead.

solar panel 600

Difficulties valuing renewable energy assets has led to the suspension of share trading of government-backed ThomasLloyd Energy Impact Trust (TLEP), which owns solar farms across Asia.  

Sue Inglis, chair of the £148 million trust which launched in December 2021, said there was “material uncertainty” establishing the fair value of some of its assets and liabilities. 

SolarArise, a solar farm business in India that ThomasLloyd Energy Impact Trust owns outright, was at the root of the valuation issues. 

Price rises in relation to the components and construction costs of a 200 megawatt solar farm meant that additional capital is likely to be required to construct the project, potentially decreasing the project returns and its commercial viability, according to Inglis.  

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.  

The trust said it needs to carry out further work with auditors and investment consultants to give an accurate figure for its NAV. The 2022 accounts of the trust will therefore not be ready until this work has been done.   

Missing the deadline of 29 April 2023 to publish its annual results for 2022 was grounds for a request that share trading be suspended. 

Inglis said the trust is seeking to publish its 2022 accounts as soon as practicable and intends to request a restoration of the listing of its ordinary shares at that time. 

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.  

TLEP is the second investment trust to suspend shares this year, after Home Reit did so in January followings its failure to publish its annual reports on time after an investor report highlighted valuation issues and difficulties of its tenants paying rent.  

ThomasLloyd Group is a Swiss investment firm founded in 2003, specialising in renewable energy assets. 

In 2021, it was the first fund group to participate in the Mobilising Institutional Capital Through Listed Product Structures (MOBILIST) competition, a programme run by the UK government to encourage financial groups to invest in renewable energy infrastructure. The UK government invested $32.3 (£26 million) in ThomasLloyd Energy Impact Trust.

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

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