TIDMTLEI TIDMTLEP
RNS Number : 6436H
ThomasLloyd Energy Impact Trust PLC
31 July 2023
LEI: 254900VC23329JCBR9G82
31 July 2023
ThomasLloyd Energy Impact Trust plc (the " Company " )
Notices of Requisitioned General Meeting and Adjourned Annual
General Meeting
Introduction
On 11 July 2023, the Company received a requisition notice
pursuant to section 303 of the Companies Act 2006 in respect of
shares beneficially owned by ThomasLloyd Cleantech Infrastructure
Fund SICAV and ThomasLloyd SICAV - Energy Impact Credit Fund
requiring three resolutions which were not voted on at the annual
general meeting held on 30 June 2023 (the "AGM"), including a vote
on the continuation of the Company (the "Continuation Resolution"),
to be put before shareholders (the "Requisition"). As a result of
the Requisition, the Company is now required to convene a general
meeting (the "Requisitioned General Meeting") for the purpose of
allowing shareholders to consider and vote on those three
resolutions. The full text of the resolutions is set out in the
Notice of Requisitioned General Meeting at the end of the circular
which is today being posted to shareholders (the "Circular");
copies will shortly be available for inspection on the Company's
website, www.tlenergyimpact.com , and at the National Storage
Mechanism, which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
The AGM was adjourned prior to the Continuation Resolution and
two other resolutions (being the Company's authority to make market
purchases of its own shares and to hold general meetings on shorter
notice) being put to the vote on the basis that the Board
considered that shareholders should have been given the opportunity
to make a fully-informed decision on the Company's future once the
annual report for the financial period ended 31 December 2022 (the
"Annual Report") had been published. The Company is still required
to reconvene the adjourned annual general meeting (the "Adjourned
Annual General Meeting") in order to propose the business that was
not put to the vote at the AGM. To satisfy that requirement and to
remove that burden from the Company at a future date, the Adjourned
Annual General Meeting is now also being reconvened to be held
immediately following the conclusion of the Requisitioned General
Meeting. The resolutions to be proposed at the Adjourned Annual
General Meeting are necessarily exactly the same as the resolutions
being proposed at the Requisitioned General Meeting (save for the
numbering of the resolutions).
This announcement highlights a number of reasons why the Board
is unanimously recommending that shareholders vote against the
Continuation Resolution at both the Requisitioned General Meeting
and the Adjourned Annual General Meeting (together the "Meetings").
This is not a recommendation that the Board is making lightly
because, like many shareholders, the Board believes in the value of
the impact strategy the Company was established to deliver.
Before setting out the detailed reasoning for its
recommendation, the Board sets out below some introductory
remarks.
The Board, with complete independence and with no pre-set
agenda, is assessing the position of the Company and whether the
Board believes that shareholders should vote for the Company to
continue in its present form. It is the Board's duty to deliver
effective governance and oversight of the Company's investment
manager, ThomasLloyd Global Asset Management (Americas) LLC (the
"Investment Manager"), on behalf of shareholders.
The Board has been engaging with shareholders following the
suspension of listing and trading of the Company's shares on 25
April 2023 (the "Suspension") and understands fully that an end to
the Suspension is one of shareholders' highest priorities. In order
for this to be achieved, the financial statements for the financial
period ended 31 December 2022 (the "Financial Statements"), Annual
Report and audit for the financial period ended 31 December 2022
(the "2022 Audit") must be completed and the Annual Report and
Financial Statements published.
The holding of a continuation vote is not a precondition to the
ending of the Suspension and the outcome of the vote on the
Continuation Resolution will not prevent or further delay the
Financial Statements, Annual Report and the 2022 Audit being
completed or the Suspension being lifted.
When the Board first became aware of the serious issues facing
the Company in relation to the 200 MW DC solar PV to-be-constructed
project in Rewa Ultra Mega Solar Park in India (the "RUMS
Project"), the Board resolved that it was not in the interests of
the Company and its shareholders to have a public dispute with the
Investment Manager and the Board wished to work constructively with
the Investment Manager to seek to ensure that the Board and
shareholders have a full understanding of the position, that the
completion of the Financial Statements, Annual Report and 2022
Audit is achieved as quickly as possible and that the Suspension
can be lifted. To be clear, a vote against the Continuation
Resolution will not preclude or delay the completion of the
Financial Statements, Annual Report and 2022 Audit or the lifting
of the Suspension. The impact of the Continuation Resolution not
passing is explained below under the heading "Impact of the
Continuation Resolution not passing".
The Board's recommendation to adjourn the AGM on 30 June 2023
prior to voting on the Continuation Resolution was primarily based
on its judgement that it was simply not sensible or realistic at
that time to expect anyone to form a considered view on the
financial position and prospects of the Company (i) whose valuation
is uncertain, (ii) whose principal construction asset is
economically unviable and where the non-completion penalties may be
substantial, (iii) whose Financial Statements, Annual Report and
2022 Audit cannot currently be completed, (iv) whose shares are
suspended from trading and (v) where there is no clear strategy for
the future of the Company.
The Board's secondary motivation was to work privately with the
Investment Manager to ensure that the Board, its advisers and the
Company's auditor, Deloitte LLP (the "Auditor"), could establish
with confidence what had happened with the RUMS Project and to
undertake other significant workstreams required to get the Company
back on track, if possible. As a result of the Requisition, the
Board now has to explain in further detail some of the key issues
facing the Company and provide shareholders with a recommendation
now on whether to vote for or against the Continuation
Resolution.
For the reasons stated below the Board recommends that
shareholders should vote against the Continuation Resolution at
each of the Meetings.
Reasons why The Board is recommending that SHAREHOLDERS vote
against the Continuation Resolution
Continued delay in finalising valuations and completing the
Financial Statements, Annual Report and 2022 Audit
It should be possible to readmit the Company's shares to trading
as soon as the Company is able to complete the Financial
Statements, the Annual Report and 2022 Audit and publish the Annual
Report. The Board is, therefore, working as hard as it can to
achieve this. Much, however, depends on the information supplied to
the Board and the Auditor and the trust and confidence which each
of them has in that information because the Financial Statements
must show a true and fair view of the Company.
In accordance with standard practice, the Investment Manager
should provide oral and written representations to the Board and
the Auditor in connection with the valuations of the Company's
assets and the audit of the Financial Statements. In order to be
confident that those representations are complete and accurate and
can therefore be relied upon, as well as complying with their
duties more generally, it is essential for the Board and the
Auditor to understand fully the circumstances which led to the
Suspension and specifically:
-- who at the Investment Manager was aware the RUMS Project had
become economically unviable and at what time;
-- why the economic unviability was not disclosed to the Board
or the Auditor until 17 April 2023; and
-- why the liabilities relating to non-completion of the RUMS
Project provided to the Board on 21 April 2023 were estimated to be
only US$5 million whereas subsequent analysis has revealed they
could be up to US$33.5 million.
Furthermore, material information has only very recently been
provided to the Board in relation to Talettutayi Solar Projects
Eight Private Limited, a subsidiary of the Company's Indian
renewable energy platform ("SolarArise"), which, on 5 December 2022
won 100 MW AC of capacity in a reverse auction for a solar PV
project with an estimated cost of US$69 million to be constructed
in the State of Maharashtra. Information on this project should
have been provided to the Board and the Auditor for the purposes of
evaluating the 31 December 2022 valuations - it was not. In
addition, the potential cash equity requirements included in the
investment deployment of existing cash resources and cashflow
projections for the Company provided to the Board and the Auditor
in connection with the 2022 Audit and the preparation of the Annual
Report did not include this project.
The issues set out above, as well as the other valuation issues
referred to below, illustrate the challenges that the Board and the
Auditor now have in being able to satisfy themselves about the
quality and reliability of the information being given to them by
the Investment Manager.
Against this backdrop:
-- The Board discussed with the Investment Manager the
requirement for a comprehensive investigation into what happened
with the RUMS Project and, in particular, who at the Investment
Manager knew what and when regarding the economic viability of the
project, and why the Board was not informed of its economic
unviability until April 2023. Such an investigation would require
the full cooperation of the Investment Manager, typically including
granting access to emails and telephone and other records at the
Investment Manager. Accordingly, the Board determined it was better
to work jointly with the Investment Manager in this regard to
expedite the conclusion of the investigation.
In response, however, the Investment Manager (or one of its
affiliated companies) has appointed an investment operations and
risk advisory services firm to investigate some matters on its own
behalf. The Investment Manager has refused to give the Board the
opportunity to approve or input into, or even access to, that
consultant's scope of work. The Investment Manager has shared a
copy of the scope with the Auditor but prohibited the Auditor from
sharing the scope with the Board.
The Board has also been informed by the Investment Manager that
neither the Board nor the Auditor will be given access to the
consultant's final report. Instead, the Investment Manager has
proposed that its own summary of the findings of its consultant's
report is presented only to the Auditor, again prohibiting the
Auditor from sharing that information with the Board. Prohibiting
the Auditor from sharing information with the Board is
inappropriate because the Auditor would then be asked to rely on
information for which the Board is not able to take
responsibility.
Having recently been made aware that the Investment Manager's
Chief People Officer was present throughout the consultant's
interview of at least one employee of the Investment Manager, the
Board is concerned about the independence of the investigation
being undertaken on behalf of the Investment Manager.
-- Separately, for the purposes of corporate governance and
independently of the investigation referred to above and with a
view to establishing the key facts regarding what happened with the
RUMS Project, the Board has sent the Investment Manager a list of
critical questions for it to answer. These questions were first
sent to the Investment Manager on 19 June 2023, with follow-up
emails sent on 27 June and 13 July 2023 and, to date, the Board has
not received any meaningful answers to them.
In short, some three months since the Suspension, the Board
still does not have the full picture of what happened with the RUMS
Project and, in particular, has no information regarding who at the
Investment Manager knew what and when in relation to the economic
viability of the project and why material matters were not brought
to the Board's attention until April 2023.
The Board is disappointed with the approach taken by the
Investment Manager and has been left with no alternative but to
discuss an alternative plan for securing the information required
to enable the Financial Statements, Annual Report and 2022 Audit to
be completed. Accordingly, the Board has agreed with the Auditor
that additional audit evidence will be required to finalise the
Annual Report and 2022 Audit, including financial, tax and,
potentially, other due diligence reports on the Company's
investments. This is necessary, in the absence of the ability to
rely on the representations of the Investment Manager, to ensure
the completeness and accuracy of all information required to
prepare the valuations and finalise the Annual Report. The Board is
in the process of having discussions on the scope, costs and
timelines for this work. Inevitably, this will result in further
costs and delays in finalising the Financial Statements, Annual
Report and 2022 Audit.
Continuing uncertainty over the Company's financial position
As notified in the announcements on 24 April, 6 June and 12 July
2023, and for the reasons set out below and elsewhere in this
announcement, there remains considerable uncertainty over the
valuation of the Company's investments.
In May 2023, the Board appointed PricewaterhouseCoopers LLP
("PwC") to assist the Company's AIFM and the Board with the
finalisation of the valuation of the Company's portfolio as at 31
December 2022. As announced on 12 July 2023, the Board has received
a draft report from PwC on the valuation of the Company's assets.
Based on the issues being considered, the Board believes that the
portfolio valuation as at 31 December 2022 could reflect a material
downward movement relative to the 30 September 2022 valuation and
to the draft valuations as at 31 December 2022 provided to the
Board in February 2023.
Shareholders should also note that the 31 December 2022
valuations will also reflect: (i) a leading independent power
consultancy's price forecasts for the Philippines wholesale
electricity spot market price, which was commissioned by the Board
in December 2022 and were below the forecasts previously used by
the Investment Manager; and (ii) amendments to the Investment
Manager's valuation models following an external audit of them
commissioned by the Board in January 2023.
The Board is currently considering several matters, which are
wider ranging and more concerning than just the macro-economic
factors which have driven valuation revisions across the
infrastructure sector, including whether revenue, operating cost
and tax projections were unrealistically optimistic.
In addition to the above and, as previously announced, US$8.2
million of costs are expected to be written off if the RUMS Project
does not proceed and a further reduction in the fair value as at 31
December 2022 is expected to be required due to the contingent
liability risk associated with non-completion penalties for the
project and legal costs which are estimated to be up to US$33.5
million on the basis that the project would not have gone ahead at
that date.
The price of solar modules has fallen in recent weeks and the
Investment Manager has determined that there are circumstances
where it could now be in shareholders' interests to proceed with
construction and is currently assessing this option with the Board.
If the RUMS Project does proceed, which the Board expects would be
subject to prior FCA and Shareholder approval for a material change
to the country limit in the Company's investment policy, the
project would still be expected to have a material negative net
present value at the current time.
In short, therefore, the Company's financial position is hard to
ascertain based on the information currently available but is
likely to show a material downward adjustment in the Company's NAV
as at 31 December 2022 relative to 30 September 2022. In such
circumstances, the Board cannot recommend voting in favour of the
Continuation Resolution.
Lack of a plan from the Investment Manager to assist in the
potential relaunch of the Company
As part of the process to prepare the Annual Report, in light of
the slow deployment of capital by the Company, changed
macro-economic conditions affecting the sector and the issues that
have arisen in the management of the Company's assets, the Board
had asked for an updated fund model from the Investment Manager to
confirm whether the Company's target returns are still realistic
and whether changes to the Company's investment strategy or policy
in order to achieve acceptable returns for shareholders should be
considered. Despite repeated requests for this information, it has
not been received by the Board.
The Investment Manager agreed some weeks ago to deliver an
investment proposal to assist in the potential relaunch of the
Company, addressing matters such as the future investment strategy
and policy and realistic target returns, to the Board by the end of
July 2023. At the time of this announcement, the Board is still
awaiting delivery of this proposal.
The Board does not believe that it would be prudent to vote in
favour of the Continuation Resolution where the future direction
and prospective financial returns of the Company are unclear.
Conclusion
In summary, the Board has been working tirelessly to provide
shareholders with full information on the Company's position,
facilitate the completion of the 31 December 2022 valuations and
the 2022 Audit and enable trading in the Company's shares to
resume. The Board was seeking to work privately with the Investment
Manager and present shareholders with a full picture prior to
asking them to vote on the Continuation Resolution, but the Board's
hand has been forced by the Requisition.
The Board considers that there are serious and currently
unanswered questions regarding the valuation of the Company's
investments and the approach taken by the Investment Manager. The
Board therefore has no alternative but to recommend that
shareholders vote against the Continuation Resolution at each of
the Meetings.
Impact of the Continuation Resolution not passing
In the event that the Continuation Resolution is not passed, the
Board will consult with shareholders with a view to establishing
the most appropriate way forward for the Company. Based on feedback
from recent shareholder engagement, the Board is aware of the
importance of the impact strategy which the Company was established
to deliver to many shareholders. Accordingly, proposals to be
considered by the Board may include a relaunch of the Company as
well as an orderly managed wind-down. However, any proposal to
relaunch the Company would be required to offer a compelling
investment proposition for both existing and prospective investors
and, therefore, enable the Company to scale up its size
significantly over time. As required by the Company's articles of
association, the Board's proposals regarding the Company's future
will be put to shareholders for their approval within four months
of the date of the Meetings. In the meantime, the Board will
continue to work tirelessly to finalise the Financial Statements,
Annual Report and
2022 Audit and get the Suspension lifted.
As announced on 12 July 2023, shareholders should be aware that,
if the Continuation Resolution is not passed, the Company will be
entitled to terminate its investment management agreement with the
Investment Manager summarily at any time and without further
payment in respect of the Investment Manager's initial five-year
term of appointment. In the circumstances, the Board believes that
it is in the interests of shareholders to have that option to
terminate.
Further information regarding the Suspension
Trading in the Company's shares was suspended on 25 April 2023
on the basis that the Company was not at that time able to assess
accurately its financial position.
As a result of the issues arising in relation to the RUMS
Project and broader issues described in this announcement, the
Company was also unable to meet the deadline of 30 April 2023
required by the FCA for the publication of the Annual Report, which
would have resulted in a suspension of listing and trading of the
Company's shares in any event.
Based on the Company's recent engagement with shareholders it
seems that some shareholders are under the impression that the
Company's listing will be cancelled automatically by the FCA if the
Suspension lasts for more than six months. This is not the case.
The FCA has the right to cancel the Company's listing after this
deadline, but in practice is unlikely to do so while the Company
continues to take active steps towards the publication of the
Annual Report.
As set out above, the Board and its advisers continue to take
all possible steps to ensure that the Financial Statements, Annual
Report and 2022 Audit can be completed, the Annual Report
published, and the Suspension lifted as soon as practicable. It
should also be noted that a vote against the Continuation
Resolution will not prevent or further delay the finalisation of
the Financial Statements, Annual Report and 2022 Audit or the
lifting of the Suspension.
ARRANGEMENTS FOR THE REQUISITIONED GENERAL MEETING AND THE
ADJOURNED ANNUAL General Meeting
The Meetings will be held on Thursday, 24 August 2023 at the
offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M
7SH. The Requisitioned General Meeting will commence at 10.00 a.m.
and will be followed by the Adjourned Annual General Meeting.
The Meetings will be held in person. If you decide not to attend
the Meetings in person, it is important that you do still cast your
votes in respect of the business of the Meetings and you can do so
by voting by proxy in accordance with the instructions set out in
the Circular under the heading "Action to be taken in respect of
the Meetings".
The results of each Meeting will be announced through a
Regulatory Information Service and on the Company's website,
www.tlenergyimpact.com , as soon as possible once known.
Resolutions to be proposed at the MEETINGS
As explained above, the resolutions to be proposed at the
Requisitioned General Meeting and the Adjourned Annual General
Meeting are necessarily exactly the same (save for the numbering of
the resolutions).
The full text of the resolutions is set out in both the Notice
of Requisitioned General Meeting and the Notice of Adjourned Annual
General Meeting set out at the end of the Circular. The resolutions
are being proposed as ordinary and special resolutions as set out
below. An ordinary resolution requires more than 50 per cent. of
the votes cast to be in favour in order for the resolution to be
passed. A special resolution requires at least 75 per cent. of the
votes cast to be in favour in order for the resolution to be
passed.
Ordinary resolution 1 at the Requisitioned General Meeting
(being the same as ordinary resolution 5 at the Adjourned Annual
General Meeting)
This is the Continuation Resolution which has been explained in
detail elsewhere in this announcement.
Special resolution 2 at the Requisitioned General Meeting (being
the same as special resolution 6 at the Adjourned Annual General
Meeting)
The Company's existing power to buy back its own shares through
the market will lapse at the conclusion of the Adjourned Annual
General Meeting. This resolution seeks authority for the Company to
make market purchases of its own ordinary shares. If passed, the
resolution gives authority for the Company to purchase up to
26,335,137 of its ordinary shares, representing 14.99 per cent. of
the Company's issued ordinary share capital as at the date of this
announcement. The Company currently has no treasury shares.
Shareholders should note that as this resolution is the same at
each Meeting, the resolution(s), if passed, will only give
authority to purchase up to 26,335,137 ordinary shares and not any
higher or aggregated number of ordinary shares.
The resolution specifies the minimum and maximum prices which
may be paid for any ordinary shares purchased under this authority.
The authority will expire at the conclusion of the Company's next
annual general meeting to be held in 2024.
The Directors believe that the ability to buy-back shares is an
important capital management tool and that, from time to time and
subject to market conditions, it may be in shareholders' best
interests to buy back the Company's shares. The Company would only
buy back shares when they are trading at a discount to the net
asset value per share.
The Company may either cancel any shares it purchases under this
authority or transfer them into treasury (and subsequently sell or
transfer them out of treasury or cancel them). The Company does not
have any options or outstanding share warrants.
Special resolution 3 at the Requisitioned General Meeting (being
the same as special resolution 7 at the Adjourned Annual General
Meeting)
The Companies Act 2006 stipulates that the notice period for
general meetings (other than annual general meetings) is 21 days
unless shareholders' approval to reduce the notice period has been
given. This resolution would allow the Company to hold general
meetings (other than annual general meetings) on at least 14 clear
days' notice.
If approved, the resolution will be effective until the end of
the Company's next annual general meeting to be held in 2024. The
Board will consider, on a case-by-case basis, whether the use of
the flexibility offered by the shorter notice period is merited,
taking into account the circumstances, including whether the
business of the meeting is time sensitive.
Recommendation
For the reasons set out above, the Directors unanimously
recommend shareholders vote against resolution 1 to be proposed at
the Requisitioned General Meeting and against resolution 5 to be
proposed at the Adjourned Annual General Meeting. The Directors
intend to vote against both of those resolutions in respect of
their holdings of ordinary shares, amounting to 131,000 ordinary
shares in aggregate (representing approximately 0.07 per cent. of
the issued share capital of the Company as at the date of this
announcement).
The Directors unanimously recommend shareholders vote for
resolutions 2 and 3 to be proposed at the Requisitioned General
Meeting and for resolutions 6 and 7 to be proposed at the Adjourned
Annual General Meeting for the reasons set out above. The Directors
intend to vote for all of those resolutions in respect of their
holdings of ordinary shares.
Sue Inglis, Chair of ThomasLloyd Energy Impact Trust plc, 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."
Enquiries:
ThomasLloyd Energy Impact Trust plc Tel: +4 4 (0)20 3757 1892
Sue Inglis, Chair
Shore Capital (Joint Corporate Broker) Tel: +44 (0)20 7408 4050
Robert Finlay / Rose Ramsden (Corporate)
Adam Gill / Matthew Kinkead / William Sanderson (Sales)
Fiona Conroy (Corporate Broking)
Peel Hunt LLP (Joint Corporate Broker) Tel: +44 (0)20 7418 8900
Luke Simpson / Huw Jeremy (Investment Banking Division)
Alex Howe / Richard Harris / Michael Bateman / Ed Welsby (Sales)
Smith Square Partners LLP Tel: +44 (0)20 3696 7260
(Financial Adviser to the Company)
Ben Mingay / John Craven
Camarco (PR Adviser) Tel: +44 (0)20 3757 4982
Louise Dolan / Eddie Livingstone-Learmonth / Phoebe Pugh thomaslloyd@camarco.co.uk
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END
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