Renewable energy investment trust faces continuation vote

Aquila European Renewables’ shareholders will vote on 14 June, reports Sam Benstead.

The London market’s only Europe-focused renewable energy investment trust faces the risk of being wound up, with investors set to vote on its continuation on 14 June.

Aquila European Renewables, which was launched in summer 2019, owns solar, hydro and wind renewable energy assets across Europe, with a particular focus on Spain, Portugal, Denmark and Norway.

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Its aim is to generate an income for investors from these assets and generate long-term returns of between 6% and 7.5% a year.

Shares in the €375 million (£321 million) market cap trust yield just over 5% and trade on a 12.5% discount to net asset value (NAV). Shares are down 6% since they began trading four years ago, with the discount opening up in late 2021.

Following completion of the solar project Guillena in Spain, as announced in May this year, the portfolio is now fully operational with total operating capacity of 464 megawatts of electricity a year.

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James Carthew, head of investment trust research at QuotedData, an analyst, says he expects investors to convincingly vote in favour of continuing the trust.

He said: “The date for this continuation vote was set when the trust launched four years ago. With NAV returns at around 7% a year since then, the trust has executed well and is now fully invested, even after multiple fundraising rounds.

“The only blip came a year ago when it raised money but did not proceed with an investment, but those issues are now behind it. It has lots of cash and a well covered dividend, and has been buying back shares, which is a huge tick for shareholders.”

He therefore says that the outcome of the vote should be clear. Nevertheless, should shareholders vote against the trust, Carthew says there are three other London-listed trusts that give exposure to renewable energy in Europe: Octopus Renewables, Downing Renewables and Greencoat Renewables.

The board is also strongly in favour of continuing the trust, arguing that there “remains an attractive and sizeable opportunity” for the renewable energy investors. It “unanimously” recommends investors support its continuation.

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The share buyback programme earlier this year has helped to close the discount. As of 26 May 2023, the trust has purchased €18.1 million of its €20 million share buyback programme, cutting the share count by 4.6%.

The board is currently in discussions with regards to a secondary listing on a European stock exchange, given its euro denomination. It hopes this will enhance its marketability and appeal in Europe.

The board is proposing another continuation vote towards the end of next year, and at every fourth annual general meeting thereafter.

Carthew says another vote may “prove overkill” but he expects it also to pass.

Aquila Capital, the fund group managing the trust, which holds approximately 2.1% of the issued share capital of the trust, will abstain from voting, reflecting their views on good corporate governance.