## AQUILA EUROPEAN RENEWABLES PLC ###  ## ANNUAL REPORT ## FOR THE YEAR ENDED 31 DECEMBER 2022  ## CONTENTS ## STRATEGIC REPORT          ### Why Invest            ###   Market Overview            ## GOVERNANCE               ## FINANCIAL STATEMENTS             ## OTHER INFORMATION ### For more information   ###            Other InformationFinancialsGovernanceStrategic Report ## INVESTMENT OBJECTIVE ## Aquila European Renewables Plc (“AER”, the “Company”) ## seeks to generate stable returns, principally in the form ##  ##  ### Direct Asset Exposure to   > Read more on page 7 > Read more on page 18 and 19 ###  ###  > Read more on pages 5 and 6 ###  Solar PV  Sagres, Portugal Olhava, FinlandOurique, Portugal ### Aquila European Renewables Plc Annual Report 2022 1 (formerly Aquila European Renewables Income Fund plc) ## HIGHLIGHTS ## FINANCIAL INFORMATION – AS AT 31 DECEMBER 2022 | 451.7 | | 110.6 | | | 12.9% | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Net assets | NAV per Ordinary | | | Total NAV return per | | | | | | | | 1 | | | 1,2 | | | (EUR million) | | Share (cents) | | Ordinary Share | | | | | 2021: 417.4 | | 2021: 102.6 | | | 2021: 7.6% | | | | 5.25 | | | 1.4x | | | 1.1% | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Dividend per Ordinary | | | | | Dividend | | | Ongoing | | | | | | 3 | | | 1,4 | | | 1,5 | | | Share (cents) | | | | cover | | | charges | | | | | 2021: 5.0 | | | 2021: 1.1x | | | 2021: 1.1% | | | | 92.3 | | (4.5%) | | | (16.6%) | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Ordinary Share price | | | Total Shareholder | | | Ordinary Share price | | | | | | | | | 1,6 | | | 1 | | | | (cents) | | return | | | discount to NAV | | | | 2021: 102.0 | | | 2021: 0.5% | | | 2021: (0.6%) | | Tesla, Nor way 1.  performance measures used, together with how these measures have been calculated, can be found on page 112. All references to cents are in euros, unless stated otherwise. 2. Calculation based on NAV per Ordinary Share in euros, includes dividends and assumes no reinvestment of dividends. 3. Dividends paid/payable and declared relating to the period. 4. Calculation based on the operational result at special purpose vehicle (“SPV”) level. Refer to page 22 for further details. 5. Calculation based on average NAV over the period and regular recurring annual operating costs of the Company, further details can be found on page 43. 6. Calculation based on Ordinary Share price in euros, includes dividends. ### 2 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## HIGHLIGHTS ### 80.7% growth in portfolio operating capacity Electricity production during 2022 increased 1 ### (+184.7 MW ) during 2022, resulting in a by 27.6% compared to 2021 to 666.4 GWh ### step-change in earnings capacity (2021: 522.3 GWh) | | 2 | | 2 | | --- | --- | --- | --- | | 2022 total NAV return of 12.9% | , the highest | Annualised total NAV return of 7.1% | since | | one-year return since IPO | | IPO, at the top end of long-term target | | ###  ### 2022 revenue of the portfolio 24.2% ahead EUR 150.5 million of capital deployed or ### of budget, driven by favourable electricity committed during 2022 in unlevered solar PV, 3 ### pricing environment increasing solar portfolio exposure to 51.5% ### Robust dividend cover: 1.4x in 2022. 1.8x 4 ### expected in 2023 and 1.6x on average over ###  ## SUBSEQUENT EVENTS ### EUR 20.0 million share buyback announced Completion of the construction project ### on 3 February 2023, in addition to a 5.0% Guillena and The Rock EPCM takeover 5 ### increase in target dividend for 2023 declared in April 2023 | In April 2023, the Company extended the | Members of the Board of Directors and | | --- | --- | | maturity date of the Revolving Credit Facility | Investment Adviser announced their | | (“RCF”) by twelve months to April 2025 | commitment to acquire AER Ordinary Shares | 1. Includes the investments in and the completion of The Rock and the Spanish solar PV Assets in 2022. 2. Calculation is based on NAV per Ordinary Share in euros, includes dividends and assumes no reinvestment of dividends. 3.  4. As announced in February 2023 based on forward-looking assumptions as at 31 December 2022. Dividend cover presented is net of existing project debt repayments, excludes the impact of the share buyback and assumes the 2023 target dividend is paid in 2023 to 2027.   5. Subject to the portfolio performing in line with expectations. ### Aquila European Renewables Plc Annual Report 2022 3 (formerly Aquila European Renewables Income Fund plc) ## WHY INVEST? ## We seek to generate stable returns, principally ##  ##  ##  ## MARKET ## OPPORTUNITY POSITIONING RETURNS | • Opportunity to | | | • European focused | | • Long-term return target | | | --- | --- | --- | --- | --- | --- | --- | | | participate in Europe’s | | |  | | of 6.0 to 7.5% (net of fees | | | green energy transition. | | | by geography and | | and expenses). | | | •  | | | technology. | • Ordinary Share price | | | | | required to meet | • High contracted revenues | | | discount to NAV | 3 ### green energy targets; (PPAs, Regulated Tariffs) to  . ### and ensure earnings visibility. • Total NAV return of 1,3 | • Heterogenous power | | • Fully invested. | | | | 12.9% | in 2022. | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | markets provide | • Low gearing levels | | | • Annualised total NAV | | | | | | | | | | 3 | | | | 1,2,3 | | | |  | | (25.6% | ). | | return of 7.1% | | | since | | | optionality. | • Strong dividend cover | | | | IPO. | | | | | | | |  | | • Two consecutive | | | | | ### • Highly experienced and ### operating portfolio. increases in annual ### credentialed Investment ### dividend by 5.0% since ### Adviser: ### 2021. ### • Managing a 19 GW ### clean energy portfolio ### across Europe; ### • 10 GW clean energy ### development and ### construction pipeline; ### and ### • Ambitious CO 2 ### reduction targets. 1. Includes dividends and assumes no reinvestment. 2. Assumes an opening NAV per share of 0.98. 3.  performance measures used, together with how these measures have been calculated, can be found on page 112. All references to cents are in euros, unless stated otherwise. ### 4 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## AT A GLANCE 1 ###  4.6% 5.5% 100.0% 5.7% 40.7% 15.3% ### By By By ### Technology Country Status 51.5% 43.9% 15.5% 17.3% Hydropower Spain Portugal Operating Solar PV Denmark  Wind energy Norway Finland ###  ###  Solar PV  ##  p  ## One Two Four ### country countries countries Sagres, Portugal Jaén, Spain Holmen II, Denmark 1.  ### Aquila European Renewables Plc Annual Report 2022 5 (formerly Aquila European Renewables Income Fund plc) ## AT A GLANCE CONTINUED ##  ##  ##  ##  ##  | |  | | | Solar PV | | |  | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 1 | | | 1 | | | 1 | | |  | | | p | | |  | | | SAGRES | | | BENFICA III | | | TESLA | | | | 107.6 MW | | | 19.7 MWp | | | 150.0 MW | | | Ownership: 18.0% Ownership: 100.0% Ownership: 25.9% ### ALBENIZ HOLMEN II 50.0 MWp 18.0 MW Ownership: 100.0% Ownership: 100.0% ### OURIQUE OLHAVA 62.1 MWp 34.6 MW Ownership: 50.0% Ownership: 100.0% ### GRECO SVINDBAEK I + II 100.0 MWp 32.0 MW Ownership: 100.0% Ownership: 99.9% ### TIZA THE ROCK 30.0 MWp 400.0 MW Ownership: 100.0% Ownership: 13.7% ### DESFINA 40.0 MW Ownership: 89.0% 1. AER share. ### 6 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report   Solar PV ## SAGRES ## CASE STUDY The Rock See page 24 for more information  Tesla Holmen II  ## SPANISH PPAs ## CASE STUDY See page 25 for more information Sagres Tiza   Albeniz Ourique Greco ### Aquila European Renewables Plc Annual Report 2022 7 (formerly Aquila European Renewables Income Fund plc) ## CHAIRMAN’S STATEMENT ## I am pleased to present the ##  ##  ##  ##  ##  ### Ian Nolan Chairman ###  In combination, these two events have led  to a step-change in the earnings capacity In my statement last year, I expressed The Board also announced on  the hope that our Company was now  capabilities and dividend cover to support close to achieving the goals of its initial target dividend by 5.0% to 5.51 cents a progressive dividend policy. | stage of development, namely to have an | | per Ordinary Share for 2023, subject | | --- | --- | --- | |  | Our announcement on 3 February 2023 | to the portfolio performing in line with | |  | highlighted the positive outlook for the | expectations. | |  |  | | In 2023, the Company is expecting | dividend. The transformation of both our | dividend cover guidance in the short to | | 1 | | --- | --- | --- | --- | | | | dividend cover of 1.8x | and over the next | | portfolio and our technological balance | medium term. More details of this outlook | | |  | is now evident, as we managed to achieve | were provided in that announcement | | 1 | | --- | --- | --- | --- | | | | average cover of 1.6x |  | | these objectives during the 2022 calendar | and are also available later in this report. | | | our fully invested balance sheet, and our  I would also refer our Shareholders to robust and resilient portfolio. been achieved. the investor presentation of 6 February 2023 on our website (https://www.aquila-  european-renewables.com/investor- construction projects, Albeniz, The Rock relations/reports-publications#submenu),  which sets out in detail the assumptions our total portfolio operating capacity behind this analysis and models numerous increased by approximately 80.7% in sensitivities in relation to both power 2022. The Company also successfully prices and production levels. deployed and committed an incremental  sheet resources, representing our largest year on record for capital deployment. 1. These are targets only and not 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. These forecasts do not include the buybacks. ### 8 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report Albeniz, Spain ### Share Buyback Programme  During 2022, the Investment Adviser’s onshore Norwegian wind farm in which  As a result of last autumn’s volatility in the AER owns 13.7% interest, became concluded three new Power Purchase   Agreements (“PPAs”) for our new solar the Company’s share price fell to trade at from high electricity prices observed in PV investments in Spain and were able to a large and sustained discount to NAV per the NO4 pricing region. Over the next lock-in attractive prices for up to seven Ordinary Share, in line with the peer group.  years, further enhancing the portfolio’s  Alcoa’s Aluminium smelter in Mosjøen income visibility and dividend cover over  with renewable energy. Alcoa’s Aluminium the medium term. belief that the current share price did smelter is a key contributor to employment  ### and growth in Mosjøen. As at 25 April,  underlying portfolio and consequently there have been no new developments The Company’s remaining commitments  in the Sami appraisal case which is (via its wholly owned subsidiary, share buyback programme. The share scheduled to commence on 30 May 2023. Tesseract Holdings Limited) amount buyback programme is expected to be In April 2023, the Company announced  accretive to NAV per Ordinary Share and that the takeover under the Engineering,   Procurement and Construction project which has been completed in Members of the AER Board of Directors Management (“EPCM”) agreement April 2023. AER has a very conservative and Investment Adviser employees also | | for The Rock has been achieved. Key | gearing structure, with low levels of | | | --- | --- | --- | --- | | bought additional AER Ordinary Shares. | | | 1 | | | provisions are in place to ensure the EPCM |  | | | | contractor, Eolus, remains responsible for |  | | ### 2022 Performance the appraisal case. project level debt is fully amortising with During the reported period, revenue of   the portfolio was 24.2% above budget Holdings Limited, the Company also workable solutions to safeguard migration due to higher than expected power  of the reindeer and we look forward to prices, particularly in the Nordics. This was its  updating Shareholders in due course. partially offset by the lower than expected Facility (“RCF”), which at 31 December production of the portfolio by 6.9%, 2  , with  the option to be increased by a further that impacted Portugal during the period,  as well as lower than expected wind subject to bank consent. In April 2023, the  Company extended the maturity date of  the RCF by twelve months to April 2025. Company’s dividend cover, which was 1.4x during the reported period. 1.  performance measures used, together with how these measures have been calculated, can be found on page 112. 2. Includes EUR 10.9 million provided as guarantees to offtakers when securing PPAs and town council as a part of dismantling guarantee and grid connection guarantee. ### Aquila European Renewables Plc Annual Report 2022 9 (formerly Aquila European Renewables Income Fund plc) ## CHAIRMAN’S STATEMENT CONTINUED ### ESG Regulatory Change The Investment Adviser is actively contributing to the consultation process The Company is committed to Recently, the European Commission in combination with the broader contributing to the UN Sustainable (“EC”) announced a public consultation industry. AER is well positioned given  process to reform the European its pan-European investment strategy, ensure access to affordable, reliable, electricity market design in order to which reduces our reliance on any single sustainable and modern energy for all. better protect consumers from excessive power market, combined with a strong  price volatility and support their access contracted revenue base in the form of wind farm in Norway (AER interest: to secure energy from clean sources. Power Purchase Agreements or subsidies,  Importantly, the EC has committed to increasing our earnings visibility. membership award; this prize is given to securing European energy sovereignty a member who has excelled in positive and achieving climate neutrality, whilst ###  | engagement with the community through | recognising that renewables is the key | | | --- | --- | --- | | social or environmental sustainability. | driver to achieve these goals, further | Since undergoing rapid growth in 2022, | |  | reinforcing the positive tailwinds in | AER now offers a fully invested balance | | assessment results for the year with a | this sector. Additionally, the EC has |  | | score of 88 out of 100, representing an |  | portfolio which the Board believes | | improvement compared to our 2021 | which aims to provide a more supportive |  | |  | environment for the scaling up of the EU’s | than is implied by the recent share price | | average of 82 points. | manufacturing capacity for the net-zero | discount to NAV. As illustrated in our | | | technologies and products required | short and medium-term dividend cover |  to meet Europe’s ambitious climate guidance, the portfolio is expected to reduced from 4 out of 5 to 3 out of 5 stars targets. This will be done on four pillars:  due to the relative net underperformance  over time, supporting our progressive compared to its peer group. In response, environment, speeding up access to    various improvements which are expected It is the Board’s view that there remains for resilient supply chains. | to be introduced in 2023 and we look | an attractive and sizeable opportunity | | --- | --- | | forward to keeping Shareholders updated | to deploy incremental capital to help | | on our progress throughout the year. | fund the build-out of the very substantial |  European geographies) developed by Aquila Capital, our Investment Adviser. Sagres, Portugal ### 10 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Outlook The Board and the Investment Adviser On behalf of the Board, we thank you for have been engaging with our major the support that you have shown and we The Board remains of the view that the Shareholders in light of the disappointing hope, will continue to show, for a company market outlook for renewable energy performance of the share price, despite  generation in Europe is strong, reinforced 1 the 12.9% NAV return achieved this year. our collective objective of achieving a net by a combination of geopolitical and Your feedback as Shareholders is highly zero economy. macro-economic factors, along with the valued and we hope our actions since ever-more urgent need to decarbonise the announcement on 3 February 2023 Europe’s energy supply. We expect this to demonstrate that we are listening and ensure a continuing favourable regulatory will act decisively in the interests of all backdrop at the European level. Shareholders. The Board and its advisers It is the ambition of the Board to build a will, over the coming year, continue to larger-scale portfolio to further enhance ### explore a number of different initiatives Ian Nolan the investment proposition for our current to help secure recognition in the share Chairman and future Shareholders. Clearly our price of the real underlying value of the share price needs to regain a premium 25 April 2023 portfolio with a commitment to review to our NAV to enable us to fund the broader options if that value fails to be investment opportunities provided by  the Investment Adviser. We hope that the Company’s continued strong operational performance, combined with clear and consistent communication of our strengths and opportunities, can set us  journey involves the inaugural Shareholder continuation vote, which will be tabled at  and which the Board is recommending that Shareholders should support. I am  approximately 2.1% of the issued share capital, will not be voting their shares in respect of the continuation vote, given the  do so. Tesla, Nor way 1.  performance measures used, together with how these measures have been calculated, can be found on page 112. All references to cents are in euros, unless stated otherwise. ### Aquila European Renewables Plc Annual Report 2022 11 (formerly Aquila European Renewables Income Fund plc) ## INVESTMENT ADVISER’S REPORT ##  ## European Renewables ## INVESTMENT ADVISER BACKGROUND ## WHAT’S IN ##  Aquila Capital is one of the leading The Investment Adviser currently has Investment Adviser Background 12 | | investment and industrial development |  | | --- | --- | --- | | Investment Portfolio 14 | companies, managing over EUR | of development and construction | | |  | assets in the EMEA region, primarily in | Portfolio Updates 15 investors worldwide and managing one solar PV located in Southern Europe. of the largest clean energy portfolios This represents an attractive source of Contracted Revenue Position 18 in Europe. Over the past two decades, growth opportunities for AER. Financial Performance 20 Aquila Capital and its subsidiaries have Aquila Capital’s in-house Markets committed to support the green energy Market Commentary and Outlook 31  transition and create a more sustainable of experts dedicated to sourcing and  structuring Power Purchase Agreements, company manages wind energy, solar PV, market analysis, trading, origination, hydropower energy and battery storage FX, interest rates and other hedge  products, has facilitated the Company’s Additionally, it has projects in sustainable proactive approach to hedging and risk real estate and green logistics, either management. completed or under development. Aquila  The Company’s Alternative Investment carbon forestry and data centres. Fund Manager (“AIFM”), FundRock  The Investment Adviser’s dedicated, Limited (previously known as expert investment teams comprise over International Fund Management 700 employees worldwide. Moreover, Limited), has appointed Aquila Capital a strategic partnership since 2019 with as its Investment Adviser in respect Japan´s Daiwa Energy & Infrastructure of the Company. Aquila Capital’s key draws on their sector networks and responsibilities are to originate, analyse  and assess suitable renewable energy manage and operate investments along infrastructure investments and advise the entire value chain. As this business the AIFM accordingly. model requires local management teams, Aquila Capital is represented across 17  ### Overall CO eq  Households 2 1 1 1 ###  produced supplied ##    1.  ### 12 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report 1 ### Current Renewables Portfolio of Aquila Capital in Europe : ### Portfolio Capacity ###  980 MW 281 plants ### Solar PV 11,704 MW 343 PV parks ###  4,581 MW  ### Energy storage ### systems 1,735 MW 25 projects ###  1.  indicative of size. ### Aquila European Renewables Plc Annual Report 2022 13 (formerly Aquila European Renewables Income Fund plc) ## INVESTMENT ADVISER’S REPORT CONTINUED ## INVESTMENT PORTFOLIO | | | | | | | | |  | | Equipment | Energy | | Ownership | | | Acquisition | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Type Project Country | | | Capacity | 1 | Status COD | | 2 | from COD | | 2 manufacturer | offtaker | 3 Offtaker | in asset  | | |   | | | | | | | | | | | 6 | | | | | 5 | | | | | Sagres | Portugal | 107. 6 M W | | Operational | 1951-2006 n/a | | | | Various FiT EDP/Renta 18.0% | | | | | 23.4% Jul-19 | |  Portugal 19.7 MWp Operational 2017/2020 30y AstroNova PPA Axpo 100.0% 0.0% Oct-20 Albeniz Spain 50.0 MWp Operational 2022 30y Canadian PPA Statkraft 100.0% 0.0% Dec-20 Solar 5 Ourique Portugal 62.1 MWp Operational 2019 30y Suntec CfD ENI 50.0% 0.0% Jun-21 Greco Spain 100.0 MWp Construction 2023 30y Jinko PPA Statkraft 100.0% 0.0% Mar-22 /Operational Tiza Spain 30.0 MWp Operational 2022 30y Canadian PPA Axpo 100.0% 0.0% Jun-22 Solar 5 | Tesla | Norway | 150.0 MW | Operational | 2013, 2018 25y Nordex PPA Statkraft 25.9% | | 20.2% Jul-19 | | --- | --- | --- | --- | --- | --- | --- | | Holmen II | Denmark | 18.0 MW | Operational | 2018 25y Vestas FiP Energie.dk 100.0% 25.6% Jul-19 | | | |  | Finland | 34.6 MW | Operational | 2013-2015 27.5y Vestas FiT Finnish | 100.0% 41.4% Sep-19 | | Energy  Denmark 32.0 MW Operational 2018 25y Siemens FiP Energie.dk 99.9% 14.2% Dec-19 & Mar-20 5 | | The Rock | Norway | 400.0 MW | Operational | 2022 30y Nordex PPA Alcoa 13.7% | | 50.6% Jun-20 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | 7 | | 8 | | | |  |  | 40.0 MW | Operational | 2020 25y Enercon FiP DAPEEP 89.0% | | 52.9% | | Dec-20 | | Total | | | 463.8 MW | | | | | | | (AER share) Tesla, Nor way Albeniz, Spain Sagres, Portugal 1. Installed capacity at 100% ownership. 2. COD = Commercial Operations Date. 3. PPA = Power Purchase Agreement, FiT = Feed-in tariff, FiP = Feed-in premium, CfD = Contract for Difference. 4. Leverage level calculated as a percentage of debt plus fair value as at 31 December 2022. 5. Majority of remaining shares are held by entities managed and/or advised by Aquila Capital. 6. 21 individual assets. Approximately ten years remaining asset life when calculated using net full load years. 7. Represents voting interest. Economic interest is approximately 93.0%. 8. Calculation based on voting interest. ### 14 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## PORTFOLIO UPDATES – AS AT 31 DECEMBER 2022 ##  ### Capital deployed or committed during 2022 |  | | Tiza | | | --- | --- | --- | --- | |  Spain | Solar PV | : Spain | Solar PV | |  March 2022 | |  June 2022 | | |  Construction/Operational | |  Operational | | |  100.0 MWp | |  30.0 MWp | |  In June 2022, the Company acquired 100.0% interest in Tiza, a solar solar PV project located in the region of Andalucía, southern Spain. PV asset with 30 MWp capacity, located in the region of Almeria,   of two assets with a total capacity of 100.0 MWp, comprising Jaén   Solutions, which covers 70% of P50 production.   EUR 90.0 million, excluding earn-out, with the majority due at annually over its lifetime, representing approximately 62 kt of completion. The remaining consideration for the portfolio is EUR CO equivalent avoidance over its lifetime. During construction, 2   deferred payment for Jaén that was paid after the reporting period restoration and relocation of olive trees, the building of over ten  rabbit refuges built and the introduction of a natural barrier of  plants around the perimeter to protect the local fauna. Jaén achieved completion and started producing electricity in November 2022, having secured a pay-as-produced PPA in October    project expected by the second quarter of 2023.  electricity annually over its lifetime, equivalent to approximately  avoidance in its lifetime. 2 Jaén, Spain Tiza, Spain ### Aquila European Renewables Plc Annual Report 2022 15 (formerly Aquila European Renewables Income Fund plc) ## INVESTMENT ADVISER’S REPORT CONTINUED ## PORTFOLIO UPDATES – AS AT 31 DECEMBER 2022 continued | Albeniz | |  | | | --- | --- | --- | --- | |  Spain | Solar PV |  Norway |  | |  December 2020 | |  June 2020 | | |  Operational | |  Operational | | |  50.0 MWp | |  400.0 MW | | The project is part of a cluster of four separate solar PV parks in  various stages of development and construction, owned by funds approximately 70% of production. The asset has been operational managed by Aquila Capital. The portfolio is located in the south since November 2022 following takeover under the Turbine Supply  Agreement (“TSA”). In April 2023, the Company announced that the solar PV technology. takeover under the EPCM agreement for The Rock has also been achieved. Following takeover under the EPCM, all parties agreed that The project was completed and became operational in June Eolus will remain responsible for the upcoming appraisal case with the  Sami district, which is due to commence on 30 May 2023, and the result commissioning taking place in August 2022. The asset is expected of the case is expected on or before autumn 2023. to have an operating life of 30 years after commissioning. Albeniz  The project company, the developer and the turbine supplier are  currently involved in an arbitration process to settle outstanding claims related to construction delays and extensions of time under the TSA. The project company does not expect the arbitration case to negatively  Albeniz, Spain The Rock, Norway Albeniz, Spain The Rock, Norway ### 16 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information ## Capital Deployment Profile since IPO$^{1}$ ![img-0.jpeg](img-0.jpeg) During 2022 the Company has successfully deployed or committed EUR 150.5 million on new acquisitions and existing assets, increasing its total capital deployment since IPO to EUR 434.8 million. As at 31 December 2022, the Company's only remaining commitments (via its wholly owned subsidiary, Tesseract Holdings Limited) amounted to approximately EUR 47.5 million relating to the deferred payment for Guillena (the second asset of the Greco portfolio), and the 5% remaining deferred consideration to Jaén, which was paid during the first quarter of 2023. Remaining capital commitments are expected to be funded from AER's existing surplus liquidity comprising cash on hand and the RCF (please refer to the gearing section on page 26 for further details). The Company, together with its Investment Adviser, has identified an attractive pipeline of investment opportunities which are consistent with the Company's investment objectives. The pipeline offers the potential for further diversification in terms of geography and technology, whilst also offering potential to invest in construction projects which could enable further value creation opportunities over time. These assets are spread across northern, eastern and southern Europe, over wind energy, solar PV, hydropower and energy storage technologies. 1. Data show invested capital as at 31 December of each year. Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 17 ## INVESTMENT ADVISER’S REPORT CONTINUED ## CONTRACTED REVENUE POSITION 1 ###   1,2 ###  90% 26.1% 80% Aquila will proactively seek to 48.1% replace expired PPA/tariff contracts 70% over time in order to maintain a high degree of contracted revenues 60% 50% 40% 30% 20% 25.8% 10% 0% 2023 2028 2033 2043 2038 Market Fixed price PPA  | | EUR | | | | EUR | | | | | | 7.4 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 3 | | | | 4 | | 1,2 | | | | 5 | | 292m | | | | 411m | | | 51.9% | | | years | | | |  | | | |  | | |  | | |  | | | |  | | |  | | | |  | |  | | | | 100%  1. Includes replacement PPA assumed to be secured for Olhava once the FiT runs out from 2025 for a tenor of three years. 2. Asset revenues are discounted by the weighted average portfolio discount rate as of 31 December 2022 and are taken from 1 January 2023 onwards. 3. Contracted revenue as at 31 December 2022, discounted by the weighted average portfolio discount rate. 4. Aggregate contracted revenue over entire asset life (not discounted). 5. Weighted based on investment value and on production hedged. Olhava future PPAs has been excluded as it has not yet been secured. ### 18 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report |  | However, the Company has continued | • | Jaén: 70% of P50 production, | | --- | --- | --- | --- | | countries and six different price zones in | to focus on maintaining a high degree | | pay-as-produced with Statkraft | | Norway (NO2 and NO4 regions), Iberia | of contracted revenues to mitigate its | |  | | (Spain and Portugal), Finland, Denmark |  | |  | •  short-term events which have the potential pay-as-produced with Statkraft different subsidy schemes as well as PPAs. to increase volatility in electricity prices. Markets, seven years;  Contracted revenues expected over the •  periods of higher power prices, whilst   simultaneously enabling the Company have decreased to 51.9% (December   2021: 68.5%) as a result of the increases  The Company was pleased to secure in electricity price forecasts (boosting these PPAs at such attractive price levels, merchant exposure), combined with The Company has continued to implement which were almost double what had been the expiry of existing tariffs and PPAs,  observed for similar PPA terms over the  the year. During the year, the Investment last few years. |  |  | | | --- | --- | --- | | | secured attractive PPAs for the Company | The portfolio has good visibility of future | | | (see Spanish PPAs section on page 25 for |  | | | further detail): | contract life of approximately 7.4 years for | revenues contracted (31 December 2021:  contracts its revenues with investment grade counterparties. Tiza, Spain ### Aquila European Renewables Plc Annual Report 2022 19 (formerly Aquila European Renewables Income Fund plc) # INVESTMENT ADVISER'S REPORT CONTINUED ## FINANCIAL PERFORMANCE ### Performance #### Electricity production$^{1}$ (GWh) | Technology | Region | 2022 | 2021 | Variance | Variance 2022 against P50 Budget | | --- | --- | --- | --- | --- | --- | | Wind energy | Denmark, Finland, Norway, Greece | 440.8 | 395.0 | 11.6% | (5.5%) | | Solar PV | Portugal, Spain | 187.5 | 79.0 | 137.3% | (2.9%) | | Hydropower | Portugal | 38.2 | 48.4 | (21.1%) | (32.1%) | | **Total** | | **666.4** | **522.3** | **27.6%** | **(6.9%)** | #### Load factors$^{1}$ | Technology | 2022 | 2021 | | --- | --- | --- | | Wind energy | 31.9% | 28.0% | | Solar PV | 15.9% | 18.1% | | Hydropower | 22.5% | 29.9% | | **Total** | **25.9%** | **26.7%** | #### Technical availability$^{1,4}$ | Technology | 2022 | 2021 | | --- | --- | --- | | Wind energy | 96.6% | 98.6% | | Solar PV | 99.9% | 94.4% | | Hydropower | 99.2% | 98.6% | | **Total** | **97.5%** | **98.2%** | #### Revenues$^{2,3}$ (EUR million) | Technology | 2022 | 2021 | Variance | | --- | --- | --- | --- | | Wind energy | 46.2 | 33.6 | 37.6% | | Solar PV | 12.2 | 4.2 | 190.1% | | Hydropower | 4.8 | 4.5 | 8.0% | | **Total** | **63.2** | **42.2** | **49.6%** | 1. Data includes Tiza from March 2022, Albeniz from June 2022 and The Rock and Jaén from November 2022. Desfina based on voting share (89.0%). 2. Includes merchant revenue, contracted revenue & other revenue (e.g. Guarantees of Origin, Electricity Certificates). 3. Revenues reflect the whole year 2022 for all assets. Desfina based on economic share (93.0%). 4. Average technical availability based on weighted installed capacity (AER share). 20 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ###  Jaén and The Rock 100.0 commencement 90.0 80.0 70.0 Tiza commencement Albeniz commencement 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Wind Solar PV Hydropower Budget | Electricity production during 2022 | For 2022, revenue was 24.2% over | Production performance was 6.9% | | --- | --- | --- | |  | budget because of high electricity prices | below budget, while technical availability | |  |  | remained strong in all asset classes, | | acquisition of Tiza (30.0 MWp), the | 2021 across Europe. The upward trend | at 97.5%. The underperformance in | | operating solar PV asset, and the |  | production was due to the severe drought | | completion of three of the four |  |  | | assets under construction: The Rock | in Ukraine, which drove commodity | the year in Portugal; this led to Sagres | |  | prices up, most notably for gas and coal. | production to be 32.1% below budget. | |  | Prices in the Nordics were also impacted | Also, lower than expected wind levels | 1 |  | due to tighter hydrological balance |  | | --- | --- | --- | | of production to the portfolio and | and increased interconnection links to | be 12.3% below budget. Furthermore, | | represent approximately 20.7% of |  | irradiation in Iberia was slightly below | | 2022 total production. As a result, the | | budget and this led to production being | | portfolio is well positioned given these | | 2.9% below budget at the Iberian solar | |  | | PV assets, whilst slower wind levels in | |  | | the Nordics led to production being | 4.0% below budget. Underperformance in December was driven by lower than  and Norway. Production forecasts which underpin the Company’s net asset value are based on P50 production assumptions sourced from leading technical advisers. GWh 1. Accumulated production since economic transfer date of each asset, except for The Rock accumulated since completion occurred. ### Aquila European Renewables Plc Annual Report 2022 21 (formerly Aquila European Renewables Income Fund plc) # INVESTMENT ADVISER'S REPORT CONTINUED ## FINANCIAL PERFORMANCE continued ### Financial Performance and Dividend Cover¹ #### Dividend Cover | EUR million² | 2022 | 2021 | Variance (%) | | --- | --- | --- | --- | | Asset income | **63.2** | 42.2 | 49.6% | | Asset operating costs | **(12.3)** | (7.9) | 57.0% | | Interest and tax | **(6.0)** | (4.5) | 32.3% | | **Underlying asset earnings** | **44.9** | 29.9 | 50.3% | | Asset debt amortisation | **(10.9)** | (12.2) | (10.3%) | | Company and HoldCo³ expenses³, other | **(4.9)** | 1.9 | nmf⁴ | | **Total underlying asset earnings** | **29.1** | 19.6 | 48.8% | | Dividends paid | **21.2** | 17.0 | 24.4% | | **Dividend cover** | **1.4x** | 1.1x | nmf⁴ | #### Reconciliation to Company Cash Flow Statement | EUR million | 2022 | 2021 | Variance (%) | | --- | --- | --- | --- | | Total underlying asset earnings | **29.1** | 19.6 | 48.8% | | **SPV** | | | | | Distributions to HoldCo | **(31.1)** | (6.9) | 356.4% | | Movement in working Capital | **(2.7)** | (10.8) | (75.1%) | | **HoldCo** | | | | | Expenses (excluding investment expenses) | **1.6** | 0.6 | 181.1% | | **Company** | | | | | Investment advisory fee funded by share issuance⁶ | **(1.3)** | (2.7) | (50.6%) | | Interest and dividend income | **17.1** | 11.8 | 45.4% | | Movement in working capital | **4.5** | (3.3) | (238.8%) | | Construction income | – | (4.0) | n/a | | Other⁷ | **(0.1)** | 0.2 | (165.1%) | | **Company net cash flow from operating activities** | **16.9** | 4.4 | 281.0% | The table above calculates dividend cover based on the underlying earnings of its investment portfolio, sourced from the profit & loss ("P&L") statements from each of the Company's investments, held by HoldCo, with the exception of debt amortisation which is sourced from the cash flow statement. Each of the investments are held through special purpose vehicles ("SPV")⁸. The majority of SPV financial statements are audited. Total underlying asset earnings are calculated by aggregating the P&L of the Company's SPVs (adjusted for AER's share), less any repayments of project level debt at the SPV level (adjusted for AER's share), less fund level costs at the Company and HoldCo level. 1. This disclosure is considered to represent the Company's alternative performance measures ("APMs"). Definitions of these APMs and other performance measures used, together with how these measures have been calculated, can be found on page 112. Numbers and percentages may vary due to rounding differences. 2. Non-euro currencies converted to EUR as at 31 December for each year. Desfina contribution reflects AERs economic interest (93.0% in 2022, 100.0% in 2021) rather than voting interest (89%). 3. Tesseract Holdings Limited. 4. nmf = not meaningful. 5. Expenses reflect recurring ordinary costs and expenses at AER and THL level. Legal fees, investment expenses and Investment Adviser fee (which is financed by the issuance of new ordinary shares, where applicable) is not included. The figure for 2021 includes income accrued by AER in relation to shareholder loans provided to construction assets. 6. Investment advisory fee funded by share issuance treated as a cash flow expense for Company net cash flow from operating activities. 7. Deduction of legal costs and currency losses, addition of financing costs. 8. References to SPVs in this section also includes holding companies, where applicable. 22 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information The Company reported robust dividend cover of 1.4x during the period, compared to 1.1x reported in 2021, driven by a 48.8% increase in total underlying asset earnings. The improvement in total underlying asset earnings was primarily driven by higher power prices across the portfolio whilst production also increased as a result of the successful completion of construction projects (Albeniz, The Rock) and the acquisition of an operating asset (Tiza). Dividends paid increased by 24.4% as a result of higher shares in issue due to capital raising in late 2021, combined with a 5.0% increase in the dividend target for 2022. ## Cash Dividend Cover | EUR million | 2022 | 2021 | Variance (%) | | --- | --- | --- | --- | | **Company** | | | | | Net cash flow from operating activities | **16.9** | 4.4 | 281.0% | | Investment advisory fee funded by share issuance | **1.3** | 2.7 | (50.6%) | | **HoldCo** | | | | | Net cash flow from operating activities | **(2.7)** | 31.4 | (108.5%) | | Shareholder loan repayments^{1} | **10.6** | 0.5 | 2139.2% | | Acquisition of accrued interest from shareholder loan^{2} | **1.5** | 2.4 | (39.1%) | | Other^{3} | **0.3** | – | n/a | | Consolidation adjustments | **(2.6)** | (37.0) | (92.9%) | | **Adjusted net cash flow from operating activities** | **25.3** | 4.4 | 476.0% | | Dividends paid | **21.2** | 17.0 | 24.4% | | **Cash dividend cover** | **1.2x** | 0.3x | nmf | The table above provides an alternative dividend cover calculation based on actual cash distributions received by the Company and HoldCo from the investment portfolio or SPVs. Cash distributions are paid in the form of dividends or Shareholder loan payments (interest or principal). Adjusted net cash flow from operating activities is calculated by consolidating net cash flow from operating activities at the Company and HoldCo, subject to certain adjustments (as shown in the table above), the most notable being distributions from the Company's assets in the form of Shareholder loan repayments. Cash dividend cover increased significantly from 0.3x to 1.2x in 2022 as a result of the increase in net cash flow from operating activities, which was primarily driven by the completion of construction assets (Albeniz, The Rock), the acquisition of an operating asset (Tiza) and the timing of distributions paid by the respective assets. 1. Distributions from operating activities in the form of shareholder loan repayments from Olhava, Benfica III, Tiza and Desfina (2021: Benfica III). 2. Accrued shareholder loan interest purchased at the Tiza acquisition (2021: Ourique). 3. Other: refund of refinancing fee (The Rock), payment of legacy receivables (Ourique). Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 23 ## CASE STUDY: ## SAGRES OPTIMISATION Capacity 107.6 MW Sagres is a 107.6 MW hydropower asset in which AER acquired an 18.0% interest in  Location Sagres, Portugal     also being accretive to economic returns.   annual production for the asset (resulting in an increase in maximum net capacity from 102.7 MW to 107.6 MW). This can be attributed to a series of improvements to the hydropower plants performed by the Aquila Capital Asset Management team between 2019 and 2022, such as upgrades to the control systems, major  hydromechanical equipment. This increase in production has been included in the fourth quarter valuation of the asset , which increased by 1.8%. However, this was offset by a rise in the discount rate during the same period. ###  100.0 98.3 98.0 96.0 94.0 93.1 92.0 90.0 88.0 86.0 84.0 82.0 80.0 2021 202220202010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Prior ownership Average availability under prior ownership Aquila / AER ownership Average availability under Aquila / AER ownership ### 24 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information # CASE STUDY: SPANISH PPAs | Capacity | 130 MWp | | --- | --- | | Location | Spain | The Investment Adviser's MMG was active in negotiating PPA contracts in Spain, where the majority of the Company's investment activities took place in 2022. During the second half of 2022, the Spanish government introduced measures to cap the price of electricity on merchant revenues and introduced a clawback on PPA revenues for prices above EUR 67.0/MWh. The MMG team had to adapt its PPA strategy in response to regulatory changes and accordingly sought to maximise the PPA tenor up to the pricing cap. As a result, the MMG team secured attractive PPAs for three solar PV assets located in Spain, with tenors ranging from five to seven years, providing AER with a greater visibility on future revenues. As illustrated in the graph below, two of the three PPAs were secured at peak pricing levels (Tiza and Guillena), whilst with the remaining PPA (Jaén), a more conservative approach was taken in order to gain greater visibility of the expected start of operations and thus minimise any delivery risks under the PPA. Furthermore, prices entered for these three PPAs were almost double what had been observed historically for comparable terms. ## PPA Price Development ![img-1.jpeg](img-1.jpeg) Source: Aquila PPA pricing tool. Note that the Tiza PPA started in July 2022. Aquila European Renewables Pte Annual Report 2023 Formerly Aqueous European Renewables International Fund 25 # INVESTMENT ADVISER'S REPORT CONTINUED ## FINANCIAL PERFORMANCE continued ### Gearing$^{1}$ | EUR million | As at 31 December 2022 | As at 31 December 2021 | Variance | | --- | --- | --- | --- | | NAV | **451.7** | 417.4 | 8.2% | | Debt^{2} | **155.2** | 144.3 | 7.5% | | GAV | **606.9** | 561.8 | 8.0% | | Debt (% of GAV)^{3} | **25.6** | 25.7 | (0.1 bps) | | Weighted average maturity (years) | **14.6** | 13.9 | 0.7 | | Weighted average interest rate (%)^{4} | **2.5** | 2.5 | 0.0 bps | | RCF interest rate (%)^{5} | **1.85** | 1.85 | 0.0 bps | The portfolio remains conservatively levered with the Company operating at a gearing ratio of 25.6% of GAV (2021: 25.7%)$^{6}$. The Company's prospectus allows it to operate with a maximum gearing level of 50.0% of GAV$^{7}$. The Company's asset level debt is largely fully amortising with fixed interest rates. Approximately EUR 13.1 million of asset level debt (AER share) was repaid in 2022, offset by increased utilisation of the Company's RCF. During the period the Company increased the RCF limit from EUR 40.0 million to EUR 100.0 million (via its wholly owned subsidiary, Tesseract Holdings Limited, which is the borrowing entity), with the maturity date extended by twelve months until April 2024. After the reporting period, the Company subsequently exercised a further twelve month extension option under the RCF, extending the maturity from April 2024 to April 2025. As at 31 December 2022, the RCF was drawn to EUR 34.9 million (EUR 65.1 million undrawn), including bank guarantees. It is expected that the RCF will be used to fund the Company's remaining commitments for Greco (estimated at EUR 47.5 million). ### Debt Summary as at 31 December 2022$^{1}$ | Project | AER share | Drawn debt (EUR million) | Currency | Bullet/ amortising | Maturity | Hedged proportion | Type | | --- | --- | --- | --- | --- | --- | --- | --- | | Tesla | 25.9% | 9.0 | EUR | Partly amortising | Mar-29 | 100.0% | Bank Debt | | Sagres | 18.0% | 7.0 | EUR | Fully amortising | Jun-33 | 70.0% | Bank Debt | | Olhava | 100.0% | 19.2 | EUR | Fully amortising | Dec-30/ Sep-31 | 100.0% | Bank Debt | | Holmen II | 100.0% | 13.6 | DKK | Fully amortising | Dec-37 | 93.2% | Bank Debt | | Svindbaek I | 99.9% | 7.8 | DKK | Fully amortising | Dec-37 | 100.0% | Bank Debt | | The Rock: USPP Bond | 13.7% | 31.8 | EUR | Fully amortising | Sep-45 | 100.0% | Debt Capital Markets | | The Rock: Green Bond | 13.7% | 11.0 | EUR | Bullet | Sep-26 | 100.0% | Debt Capital Markets | | Desfina | 89.0% | 31.9 | EUR | Fully amortising | Dec-39 | 100.0% | Bank Debt | | **Subtotal** | | **131.2** | | | | **97.7%** | | | RCF | 100.0% | 24.0^{6} | EUR | | Apr-25 | 0.0% | Bank Debt | | **Total** | | **155.2** | | | | **82.6%** | | 1. Foreign currency values converted to EUR as at 31 December 2022. Data represents AER's share of debt. AER share of Desfina debt based on voting interest. 2. Debt corresponds to senior debt secured at project level and RCF at HoldCo level. 3. This disclosure is considered to represent the Company's alternative performance measures ("APMs"). Definitions of these APMs and other performance measures used, together with how these measures have been calculated, can be found on page 112. All references to cents are in euros, unless stated otherwise. 4. Weighted average all interest rate for EUR denominated debt (excl. RCF). DKK denominated debt has an average weighted interest rate of 2.8% (2021: 2.7%). 5. Margin over EURIBOR. 6. Excludes bank guarantees of EUR 10.9 million. 7. The Company may take on long-term structural debt provided that, at the time of entering into such debt, it does not exceed 50% of the prevailing Gross Asset Value. Any short-term debt, such as a Revolving Credit Facility, will be subject to a separate gearing limit so as not to exceed 25% of the Gross Asset Value at the time of entering into such debt. 26 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Valuation ### Fair Value The table below shows the fair values of the investments on HoldCo level as well as the reconciliation to the respective item on Company level. Variance EUR million 2022 2021 (%) Tesla 35.5 31.4 13.1 Sagres 23.0 15.8 45.5 Holmen II 39.5 24.5 61.7 Olhava 27.2 27.3 (0.5) Svindbaek 46.9 40.6 15.5 The Rock 41.7 45.0 (7. 3)      17.1 16.7 2.2 Albeniz 55.1 46.0 19.8  28.5 40.9 (30.3) Ourique 36.4 29.5 23.3  66.5 n/a n/a Tiza 34.1 n/a n/a 1  451.5 317. 6 42.2 Cash and other current assets of HoldCo 6.4 9.2 (30.2) Revolving credit facility drawn by HoldCo  — n/a Elimination of intercompany shareholder loans  (9.8) (46.6)     428.6 317.0 35.2 Svindbaek, Denmark 1.   ### Aquila European Renewables Plc Annual Report 2022 27 (formerly Aquila European Renewables Income Fund plc) ## INVESTMENT ADVISER’S REPORT CONTINUED ## FINANCIAL PERFORMANCE continued ### Valuation continued ###  12.3 11.0 1.3 451.7 30.8 (21.2) 417.4 | | 2021 | Movements in | |  |  | Dividends | Other | 2 | | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 102.6 cents | | valuation of | | (loss) (THL) | (loss) (AER) | paid | | | 110.6 cents | | | | NAV per | investments | 1 | | | | | | | NAV per | | Ordinary Share | | | | | | | | | Ordinary Share | | ###  6.3 2.8 5.4 0.4 15.1 6.5 (3.2) (0.1) 4.9 (12.4) 4.1 103.1 1.0 451.5 317.6 2021 Acquisition Tesla Sagres Holmen II Aalto Svindbaek The Rock  Albeniz  Ourique Greco Tiza 2022 costs of new investments 3 1. Excludes the impact of capital contributions. 2. Includes share issue costs (EUR -0.06 million), settlement of investment advisory fees (EUR 1.3 million) and FX losses (EUR -0.01 million). 3.  million), capital injection (Sagres: EUR 2.2 million) and other (EUR 0.3 million). ### 28 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information - The Company's NAV as at 31 December 2022 was EUR 451.7 million or 110.6 cents per Ordinary Share. Compared to 31 December 2021 (EUR 417.4 million or 102.6 cents per Ordinary Share) this represents a NAV total return of 12.9% per Ordinary Share (including dividends). - Dividends of EUR 21.2 million (5.2 cents per Ordinary Share) were paid during the year with respect to the fourth quarter of 2021 to the third quarter of 2022. - The main drivers of NAV movements throughout the reporting period include: - Forecast power prices: increase in short-term electricity price forecasts across the majority of the portfolio resulted in an increase of 13.2 cents per Ordinary Share; the methodology continues to assume an average of two power price curves from independent market analysts over the life of each asset. No forward or futures curves are used; - Inflation: increase in short-term CPI forecasts¹ boosted the NAV per Ordinary Share by 6.9 cents, whilst medium and long-term assumptions remain unchanged; - discount rate: the Company's discount rate has increased by 70 bps to 7.2% (31 December 2021: 6.5%), following the increase in risk-free rates across the portfolio, which has the effect of decreasing the valuation of each asset; and - Norwegian onshore wind taxes for Tesla and The Rock (-1.7 cents).² ### Valuation Methodology The Company owns 100.0% of its subsidiary Tesseract Holdings Limited ("HoldCo" or "THL"). The Company meets the definition of an investment entity as described by IFRS 10. As such, the Company's investment in the HoldCo is valued at fair value. The Company has acquired underlying investments in SPVs through its investment in the HoldCo. The Investment Adviser has carried out fair market valuations of the SPV investments as at 31 December 2022 and the Directors have satisfied themselves as to the methodology, the discount rates and key assumptions applied, and the valuations. All SPV investments are at fair value through profit or loss and are valued using the IFRS 13 framework for fair value measurement. The economic assumptions shown on page 30 were used in the valuation of the SPVs. ![img-2.jpeg](img-2.jpeg) 1. Short-term inflation forecast sourced from Bloomberg. 2. Includes production tax, high price contribution tax, and natural resources tax. Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 29 ## INVESTMENT ADVISER’S REPORT CONTINUED ## FINANCIAL PERFORMANCE continued ### Valuation Assumptions As at 31 December 2022  The discount rate used in the valuations is calculated according to internationally recognised methods.     Power prices are based on captured power price forecasts from leading market analysts. The forecasts are independently sourced from providers with coverage in almost all European markets as well as providers with regional expertise. The approach applied to all asset classes (wind energy, solar PV and hydropower)  a blend of three power price curve providers.  Estimates are based on third-party energy yield assessments, which consider historic production data (where applicable) and other relevant factors.    another two years to the long-term rate. Asset life In general, an operating life of 25 to 30 years for onshore wind energy and 30 years for solar PV is assumed. In individual cases, a longer operating life is assumed where the contractual arrangement (i.e. O&M agreement with availability guarantee) supports such an assumption. The operating lives of hydropower assets are estimated in accordance with their expected concession terms. The Investment Adviser is currently undertaking a review of its portfolio to evaluate the prospect of asset life extensions. Operating expenses Operating expenses are primarily based on respective contracts and, where not contracted, on the assessment of a technical adviser. Taxation rates    Based on the contractual position (e.g. EPC agreement), where applicable. ### Portfolio Valuation – Key Assumptions Metric 2022 2021 Discount rate Weighted average  6.5%      2.0% 1 Remaining asset life Wind energy (years) 22 23 Solar PV (years) 29 27 Hydropower (years) 10 11 2 Operating life assumption Wind energy (years) 26 26 Solar PV (years) 30 30 Hydropower (years) n/a n/a  1. Remaining asset life based on net full load years. Does not consider any potential asset life extensions. 2. Asset life assumption from date of commissioning. ### 30 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information ## MARKET COMMENTARY AND OUTLOOK Electricity Price Forecasts - All Assets (Weighted Average)¹ ![img-3.jpeg](img-3.jpeg) Valuation Sensitivities ![img-4.jpeg](img-4.jpeg) ### Asset Life Extensions The Company's assets continued to be valued based on asset life assumptions of 25 to 30 years for wind energy and 30 years for solar PV, which is generally lower compared to the peer group and broader market, where up to +10 years in operating life have been observed. The Company's Investment Adviser is undertaking due diligence for each of the Company's assets to validate a potential asset life extension on a case-by-case basis across the portfolio. To demonstrate how an extension of asset life could impact the Company's NAV, if the life of wind energy assets were to be extended to 35 years, the Company's NAV as of 31 December 2022 would increase by 8.6% or 10 cents per Ordinary Share¹. Similarly, if the life of the Company's solar PV assets were to increase from 30 to 40 years (as seen in the market) this would increase the NAV by 3.2% or 3 cents per Ordinary Share². 1. Data reflects latest pricing forecast as at 31 December 2022. All power prices are in nominal terms as at 31 December 2022 and reflect the captured price. The methodology has changed compared to what was reported previously. Current methodology reflects the actual weighted captured price based on merchant revenue and merchant production. Previous methodology applied weighting based on last reported asset valuation. 2. Excludes any potential changes to opex/capex assumptions, which would be subject to further due diligence which would offset against some of the potential increase in NAV. Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 31 ## INVESTMENT ADVISER’S REPORT CONTINUED ## MARKET COMMENTARY AND OUTLOOK continued ### Market Prices In 2022 power markets witnessed the continuation of the uprise in power prices underway since the second half of 2021, with   However, since mid-2022 the governments of the jurisdictions in which the Company operate, together with the European Commission, introduced measures in order to reduce these impacts. Nevertheless, near-term power price forecasts continue to abide the demand and supply law, and are further enhanced by weather conditions. Thus, near-term forecasts provided by independent markets analysts continue to be above historical levels. 1 ###  0 January February March April May June July August September October November December January 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2023 Iberia Nordics  ###  In 2022, power prices in the Nordics presented an increasing convergence from prices in continental Europe and were thus subjected to increasing fuel prices. This was due to tighter hydrological balance, with hydro reservoirs below the average levels for 2021, and EUR/MWh  800.0 (2021: EUR 62.3 per MW). Additionally, due to the different patterns for southern and northern price areas in Norway, the impact of higher commodity prices differs 700.0   600.0 demand and abundant wind resources; however, a higher interconnection to the southern zones has resulted in an increase in prices. 500.0 400.0 300.0 200.0 1.  100.0 ### 32 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report 1 ### Iberia EU Market Design  ### Whilst spot prices remained high across As a result of soaring energy prices Putting Europe’s Net-zero all European geographies, average and with the aim to increase the ###  spot prices in Iberia were at a discount resilience of the EU’s energy market, In February 2023, the European when compared to other geographies.   This was due to the temporary gas price unveiled its draft proposal for a reform Industrial Plan (the “Plan”) to enhance “cap” mechanism introduced by the of the EU electricity market. The the competitiveness of Europe’s net-zero Spanish and Portuguese governments proposal aims to boost the deployment industry and support a faster transition in mid-June 2022, which held back the of renewables by 2030, improve to climate neutrality. The Plan aims to impact of escalating fuel prices on power consumer protection and enhance provide a more supportive environment prices. In Iberia, spot prices were, on industrial competitiveness. In doing for the scaling up of the EU’s net-zero average, traded at EUR 167.9 per MW in so, it aims to reduce the link between technologies and products that are 2022 (2021: EUR 111.9 per MW). electricity bills and volatile short-term required to meet Europe’s ambitious fossil fuel prices, whilst better protecting As described in the case study on page climate targets. consumers from future price spikes 25, the Investment Adviser with its and potential market manipulation. The Plan aims to build on former   initiatives implemented in the EU, operating assets. This, together with the various directives to promote the whilst being based on four pillars: high degree of contracted revenue in use of more stable, long-term Power  the remaining Iberian assets, has limited Purchase Agreements (“PPAs”), in environment; (2) speeding up access to the impact of the new regulations on the order to make the energy market more  asset valuations. resilient following the expiration of trade for resilient supply chains. emergency tools. It aims to increase ### Greece ###    ### and transparency by ensuring security  impacted by elevated fuel prices more of supply, and fully utilising alternatives ###  than other European countries due to to gas, such as storage and demand the higher proportion of hours in which The Commission is to provide a response from individual Member  regulatory framework that allows for States. | price in the wholesale market. During | |  | | --- | --- | --- | | 2022, power prices averaged EUR | The proposal seeks to enhance | and fast-track permitting, while | |  | the predictability and stability of | promoting European strategic projects | |  | energy costs to boost industrial | and developing standards to support | | an EUR 85.0 MW threshold applied | competitiveness. In this context, | the scale-up of technologies across the | | for revenue in the Day-Ahead Market. |  | EU Single Market. | | However, since 100% of the revenues | revenue stability, all public support | | |  | for new investments in infra-marginal | Pillar 2 – Faster Access | | regulations had no impact on the | renewable electricity generation is set | | ###   to be in the form of two-way Contracts This pillar aims to speed up investment for Difference (CfDs). Finally, the  proposal aims to boost liquidity for region. By guaranteeing a level playing forward contracts that lock-in future  prices and facilitate the integration of  renewables into the system by means of able to invest and/or grant aid to help transparency obligations relating to grid fast-track the green transition. congestion and trading deadlines closer to real time. 1. Source: https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1591. ### Aquila European Renewables Plc Annual Report 2022 33 (formerly Aquila European Renewables Income Fund plc) ## INVESTMENT ADVISER’S REPORT CONTINUED ## MARKET COMMENTARY AND OUTLOOK continued ### Pillar 3 – Enhancing Skills Energy prices are forecast to decrease Finally, grid access has become an over the medium and long term, having increasingly critical concern across Between 35% and 40% of all jobs could fallen from the peaks of 2022, with several jurisdictions. Projects are be affected by the green transition, governments likely to continue to utilise coming to market with grid connection and so developing the skills needed for  dates for the end of the decade and well-paid quality jobs will be a priority reduce costs to consumers, who are beyond, in large part due to aging for the Commission. Therefore, it will already feeling the pressure of higher networks and the need for capacity propose to establish Net-Zero Industry  upgrades, adding further urgency to Academies to roll out up-skilling and the Company’s business model and public and private investment in the re-skilling programmes in strategic investment portfolio have demonstrated near future. Other technologies are industries. their resilience in enduring these also gathering momentum, such as changes, continuing to deliver strong the rising trend of (co-located) battery ###   energy storage systems (“BESS”), ### Resilient Supply Chains prudent capital structure.  There will be an expected increase green hydrogen power plants. The Adding further impetus to the renewable in global co-operation under the Investment Adviser is well positioned energy sector is the EU’s developing principles of fair competition and open to participate in this stage of the green  trade. To that end, the Commission energy transition given its dedicated Act, focused on ensuring Europe’s will develop the EU’s network of  continued industrial competitiveness Free Trade Agreements and other of installed capacity, across a pipeline throughout the energy transition. forms of co-operation with partners of 25 projects throughout Europe, and Support by the EU through the to support the green transition. It the Company can invest up to 20% of earmarking of substantial funding will also explore the creation of a  for renewable projects, including the Critical Raw Materials Club, to bring  REPowerEU plan, is being accelerated together raw material “consumers” and grids to integrate the rising demand for with measures to give member states resource-rich countries. This will help renewable generation while improving greater freedom to support industry to ensure the global security of supply reliability of supply. Overall, tailwinds and the fast-tracking of permitting and  behind the sector continue to be strong, access to funding for relevant projects. industrial base, and of Clean Tech/  This increased certainty and visibility Net-Zero Industrial Partnerships. It will multiple opportunities whilst delivering over the regulatory landscape is an  on a progressive dividend. encouraging tailwind for the Company by ensuring foreign subsidies do not and the sector. Moreover, we envisage  a continued acceleration of national deployment plans for renewables in ### Outlook order to meet existing net zero targets, The outlook for the European including the target of having renewable renewable energy sector continues energy sources account for at least to be encouraging. Energy security, ### 45% of the EU’s energy mix by 2030. Aquila Capital affordability and decarbonisation ### Europe will thus need to almost double  have become vital considerations for its existing share of renewable energy 25 April 2023 governments and businesses in light by the end of the decade. This trend is  further compounded by decarbonisation leading to increased competition as becoming an increasingly urgent well as public and private investment priority for governments and businesses in renewable infrastructure projects. considering the repercussions of climate The dependence of many countries on change, especially the likelihood of external suppliers of key commodities extreme weather events increasing in has become an irrefutable concern given frequency. the drastic reduction in Russian gas supply into Europe. The resulting supply  stage for renewable infrastructure to play a dominant role in delivering  independence in the coming future. ### 34 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## ENVIRONMENTAL, SOCIAL ##  ##   and education, reducing inequality, spurring economic growth and tackling climate change around the world. These goals are set to stimulate action for people, the planet and prosperity, and aim to transform the world by 2030. ###  In 2018, the EU agreed to a climate and energy framework and set ambitious goals for 2030. The aim is to have a clean, affordable and reliable energy system in Europe, targeting: ## 40.0% 32.0% 32.5%     share of the energy  greenhouse gas emissions system “The war in Ukraine following the global pandemic has created an exceptional environment for renewable technologies in Europe. The announcement by the European Commission of  Zero industry and support a faster transition to climate neutrality provides welcome tailwinds  According to the International Energy Association (“IEA”)’s 2022 market report, renewable   the entire installed power capacity of China today. This is almost 30% higher than what was forecast in the IEA’s 2021 report, making it their largest upward revision ever. In parallel the EU’s efforts to regulate the industry using transparency frameworks such as the Sustainable Finance Disclosure Regulation (“SFDR”) or the EU Taxonomy aims to further facilitate investment into sustainable activities, including the energy transition. While the alignment with these regulatory standards is not straight-forward, Aquila Capital uses  construction and operation of renewable energy projects do not come at the expense of the  support these initiatives.” ### Angela Wiebeck  ### Aquila European Renewables Plc Annual Report 2022 35 (formerly Aquila European Renewables Income Fund plc) ## ENVIRONMENTAL, SOCIAL ##  CONTINUED ## continued ###    of renewable assets, AER is able to deliver on its investment objectives as well as contribute towards the green economy.  ###   UN Sustainable Goal   • AER’s portfolio produces renewable energy which contributes towards Europe’s ### Ensure access to electricity mix. ###  • Renewable energy is a cost-effective source of energy compared to other ###  options. ###  • AER’s investments in renewable assets help to support and encourage further investment in the industry. • AER targets renewable investments which are supported by high quality ###  components and infrastructure in order to optimise the energy yield and ### infrastructure, subsequent return to investors. ###  AER’s investments help to support the construction of shared infrastructure (e.g. • ###  substations) which enables the further expansion of renewable energy sources. ###  • AER’s Investment Adviser, Aquila Capital, is responsible for monitoring and optimising the Company’s day-to-day asset performance. This process also ###  involves actively exploring how new technologies and other forms of innovation can be utilised to enhance asset performance and sustainability (energy yield, O&M, asset life). • The Company’s 463.8 MW portfolio has the potential to power approximately ### Take urgent action 1 240.8 thousand households and avoid approximately 240.8 thousand tonnes ### to combat climate of CO emissions. AER has ambitious goals to expand its portfolio, which will be 2 ###  accretive to further CO reduction over time. 2 ###  • As a signatory to the UN Principles for Responsible Investments (“UN PRI”),  investment process for real assets, which includes considerations of climate change. ### GRESB At portfolio level, the score shows an AER and its Investment Adviser will improvement in performance in the continue to improve their systems and  category of Leadership, Reporting and policy frameworks, leading to potentially real estate and infrastructure which Risk Management whilst the score in the  synthesises Environmental, Social, two remaining categories of Stakeholder performance in the coming years.  Engagement and Policies was maintained.  Meanwhile, at asset level, the rating assessment, with AER achieving an recognises AER’s policy frameworks and overall score of 88 out of 100 (2020: strong performance in resource and  emission management, including water average of 82 points amongst its peer consumption, greenhouse gas emissions group. In addition, AER achieved a 3 out and energy use.  1. Forecast households supplied and avoided CO  2 is assumed from July 2023. ### 36 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ##   Tiza, Spain ##   ## Reforestation in Spain   Company acquired 89.0% interest in December 2020, the integration of a number of sustainability initiatives, the project company has built a wooden house for the including the creation of a barrier of plants around the  perimeter of the solar PV (approximately 711 metres), an entrance of the Parnassos National Park; this will support increase in localised plantations with the addition of 152 the reforestation process of the landscape in the area, the units of retama sphaerocarpa and translocation of over planting of 2,000 plants and the maintenance, fertilisation 150 olive trees between the two projects, whilst pardoning and watering of them for the following three years. over 50 additional trees. Additionally, over 200 sheep have been introduced into the solar PVs in order to control the vegetation to avoid possible shading of the solar  supervised by the O&M provider, thus resulting in a smooth operation that helps the local shepherds while providing a sustainable vegetation control plan for the solar parks. ### Aquila European Renewables Plc Annual Report 2022 37 (formerly Aquila European Renewables Income Fund plc) ## ENVIRONMENTAL, SOCIAL ##  CONTINUED ## continued Tesla, Nor way  ## Tesla Engagement  ##   In March 2022, Midtfjellet Wind Farm (Tesla) was awarded In May 2022, the Investment Adviser’s Asset Management the Norwea’s membership award. This prize is given to a team, Aquila Clean Energy, hosted a training session on member who has excelled in positive engagement with the solar photovoltaic energy for a group of secondary school community, for example through social or environmental students from the Agrupamento de Escolas de Oliveira do | sustainability. | | Hospital school. The event helped to enhance awareness of | | --- | --- | --- | | | 1 | both photovoltaic energy and the operation of the Tapadas | | Norwea writes | : “The prize goes to Midtfjellet Wind Farm | |  for its many years of work for outdoor life and activities in and around the facility. At Midtfjellet, past and future meet The students visited a solar power plant with an installed in a spectacular way. The landscape is wild and beautiful, capacity of more than 15 MW to understand the main at the same time as it houses the production of clean and characteristics of a PV plant, the different phases of a renewable energy. The wind farm is a popular destination: renewable energy project including the development  and operation of a solar plant, and the importance of with the fantastic turbines make the whole experience sustainability for the environment. unique and special. Since the start in 2011, about 17,000 Further training was given at the Tapadas and Azambuja PV visitors have been on a guided tour of the area. There have plants, which are located in Minde, Alcanena Municipality, been people from nursing homes, kindergartens, schools, with the aim of raising awareness of job opportunities universities and other institutions, as well as companies related to solar PV energy and its technology. In Portugal and politicians. Congratulations to Midtfjellet Vindpark, the unemployment rate in youths between 16-24 years all employees in the company and partners who have is 23.5%. These type of initiatives aim to reduce that contributed to the success.” percentage. 1. Translation of text prepared by Norwea in Norwegian. ### 38 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ##  ### The independent Board of Directors has  ###   The Board of Directors is appointed policy and its implementation, with based on expertise and merit, being the daily operations being delegated  to its independent AIFM, FundRock ## by diversity. The Board is comprised 3 1  of members with different skills and ### men woman Limited (“FundRock”). FundRock experiences, whilst endeavouring to monitors environmental, social and comply with the Listing Rules on diversity. governance risks, which are fully The current Board is comprised of three ### integrated across every single stage of  men and one woman, all non-executive its investment process. Aquila Capital   number of years of experience in their the Investment Adviser’s approach to  ## sustainability within the investment 58% 42% non-executive member of the Board is ### process. Aquila Capital regards integrity men women underway to further enhance the Board’s and diversity as key pillars in their independence, diversity and breadth of governance and they have been vital for experience. Additionally, the Investment the growth and success of the Company.  The Investment Adviser is fully regulated  ## and supervised by the Federal Financial 56 of culture (its employees comprise 56 ###  different nationalities different nationalities), and in terms of | Angela Wiebeck has joined the | gender (its gender ratio is 58% men and | | --- | --- | | Investment Adviser as Chief | 42% women). Additionally, 27% of people | |  | in leadership positions are female, of | | from her previous role at UBS, with | which two, Susanne Wermter (CEO Aquila | | responsibility for designing, expanding, | Clean Energy) and Christine Brockwell | | and optimising capabilities in topics | (CPO Aquila Clean Energy), are ranked in | |  |  | | efforts. | List, honouring women working in wind | power worldwide. ### Supply Chain Management    the economic interests of the Investment Adviser to the relevant authorities. The Investment Adviser takes a multi-faceted approach to the mitigation of governance risks, limiting exposure to risks within the supply chain. All EPC and Operations and Maintenance (O&M) contracts are negotiated with contractors operating in a country adhering to the European Union’s labour minimum standards. Any sourcing of raw materials, components, equipment or services from suppliers domiciled in countries linked to the use of forced labour is made with guarantees that such components are not associated with human rights violations. Moreover, an in-house on-boarding and screening process for suppliers is in place to prevent and mitigate any risk of human rights violations, including a pre-screening of counterparties in terms of bad press risk  to internal compliance and procurement policies. Measures include the selection of geographies with strong regulatory frameworks, comprehensive internal due diligence processes that examine counterparties and their governance frameworks, and the use of specialist advisers to conduct technical and legal due diligence analyses at the project level. All governance  ### Aquila European Renewables Plc Annual Report 2022 39 (formerly Aquila European Renewables Income Fund plc) ## INVESTMENT POLICY AND ##  ###   Compliance with the above restrictions will be measured at the time of The Company will seek to achieve The Company aims to achieve investment and non-compliance its investment objective, set out on  resulting from changes in the price or  investing in a range of portfolio assets value of assets following investment will energy infrastructure investments in across a number of distinct geographies not be considered as a breach of the continental Europe and the Republic of and a mix of wind, solar PV and hydro investment restrictions. Ireland comprising (i) wind, photovoltaic technologies involved in renewable and hydropower plants that generate energy generation. The Company The Company will hold its investments electricity through the transformation of will observe the following investment through one or more special purpose the energy of the wind, the sunlight and restrictions when making investments: vehicles (“SPVs”) and the investment running water as naturally replenished restrictions will be applied on a •  resources, and (ii) non-generation look-through basis. Asset Value (including cash) will be renewable energy related infrastructure invested in any single asset; Although not forming part of the associated with the storage (such as investment restrictions or the Investment batteries) and transmission (such as • the Company’s portfolio will Policy, where Renewable Energy distribution grids and transmission comprise no fewer than six  lines) of renewable energy, in each Renewable Energy Infrastructure from a Power Purchase Agreement,  Investments; the Company will take reasonable construction/development (“Renewable • no more than 20 per cent. of its steps to avoid concentration with a Energy Infrastructure Investments”).  single counterparty and intends that The Company will acquire a mix of will be invested in non-generation no more than 25 per cent. of income controlling and non-controlling interests renewable energy related revenue received by Renewable Energy in Renewable Energy Infrastructure infrastructure associated with the Infrastructure Investments will be Investments and may use a range of storage (such as batteries) and derived from a single off-taker. investment instruments in the pursuit of transmission (such as distribution its investment objective, including, but grids and transmission lines) of ###  not limited to, equity, mezzanine or debt renewable energy; ### Policy investments. •  The Directors do not currently intend In circumstances where the Company Asset Value (including cash) shall be to propose any material changes to does not hold a controlling interest in invested in assets under development the Company’s Investment Policy. the relevant investment, the Company and/or construction;  will seek, through contractual and other Investment Policy set out above will • no more than 50 per cent. of the arrangements, to, inter alia, ensure that only be made with the approval of  the Renewable Energy Infrastructure Shareholders. be invested in assets located in any Investment is operated and managed one country; in a manner that is consistent with the • no investments will be made in assets Company’s investment policy, including located in the UK; and any borrowing restrictions. • no investments will be made in fossil fuel assets. ### 40 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ###  be taken of any Renewable Energy The Company will declare dividends in Infrastructure Investments that are made euros and Shareholders will, by default, The Company does not intend to use by the Company by way of a debt or a receive dividend payments in euros. hedging or derivatives for investment mezzanine investment. In addition, the Shareholders may, on completion of a purposes but may from time to time Company may make use of short-term dividend election form, elect to receive use derivative instruments such as debt, such as a Revolving Credit Facility, dividend payments in sterling (at their futures, options, futures contracts and to assist with the acquisition of suitable own exchange rate risk). The date on swaps (collectively “Derivatives”) to opportunities as and when they become which the exchange rate between euro  available. Such short-term debt will be and sterling is set will be announced of interest rates or electricity prices. subject to a separate gearing limit so as at the time the dividend is declared. The Derivatives must be traded on  A further announcement will be made a regulated market or by private Asset Value at the time of entering into once the exchange rate has been set.  (or acquiring) any such short-term debt. Dividend election forms will be available institutions or reputable entities from the Registrar, Computershare specialised in this type of transaction. In circumstances where these Investor Services PLC, The Pavilions, aforementioned limits are exceeded Bridgwater Road, Bristol BS99 6ZY or ###  as a result of gearing of one or more  | The AIFM will ensure that a liquidity | Renewable Energy Infrastructure | | | --- | --- | --- | | management system is employed for | Investments in which the Company | The Company’s target dividend for 2023 | | monitoring the Company’s liquidity | has a non-controlling interest, the | was announced on 3 February 2023 and | | risks. The AIFM will ensure, on behalf | borrowing restrictions will not be | is as set out in point (iv) on page 43. | | of the Company, that the Company’s | deemed to be breached. However, in | | | liquidity position is consistent at all | such circumstances, the matter will be | | | times with its investment policy, liquidity | brought to the attention of the Board | | |  | who will determine the appropriate | | | held pending investment in Renewable | course of action. | | Energy Infrastructure Investments or | for working capital purposes will be |  | | --- | --- | | invested in cash equivalents, near cash | The Company is targeting a progressive | | instruments, bearer bonds and money | dividend over the medium term with | | market instruments. | a minimum dividend of 5 cents per | Ordinary Share, subject to having ### Borrowing Limits  The Company may make use of Dividends are expected to be paid long-term limited recourse debt for quarterly, normally in respect of the Renewable Energy Infrastructure three months to 31 March, 30 June, Investments to provide leverage   are expected to be made by way of Company may also take on long-term interim dividends to be declared in structural debt provided that at the time May, August, November and February. of entering into (or acquiring) any new long-term structural debt (including limited recourse debt), total long-term structural debt will not exceed 50 per  Value. For the avoidance of doubt, in calculating gearing, no account will ### Aquila European Renewables Plc Annual Report 2022 41 (formerly Aquila European Renewables Income Fund plc) # INVESTMENT POLICY AND KEY PERFORMANCE INDICATORS CONTINUED ## Key Performance Indicators (“KPIs”) The Board measures the Company’s success in achieving its investment objective by reference to the following KPIs: ### (i) Achievement of NAV and Share Price Growth since IPO (June 2019) **27.6% 2022** (2021: 14.1%) ![img-5.jpeg](img-5.jpeg) The Board monitors both the NAV and share price performance and compares with other similar investment trusts. A review of performance is undertaken at each quarterly Board meeting and the reasons for relative under and over-performance against various comparators is discussed. The Company’s NAV total return and total Shareholder return since IPO (June 2019) to 31 December 2022 was 27.6% and 6.7% (2021: 14.1% and 11.3%) respectively. The Company’s NAV total return and share price total return for the year to 31 December 2022 was 12.9% and (4.5%) (2021: 7.6% and 0.5%) respectively. On an annualised basis, the NAV total return per Ordinary Share has achieved 7.1% since IPO. The Chairman’s Statement on pages 8 to 11 incorporates a review of the highlights during the year. The Investment Adviser’s Report on pages 12 to 34 highlights investments made and the Company’s performance during the year. ### (ii) Maintenance of a Reasonable Level of Premium or Discount of Share Price to NAV$^{1}$ **(16.6%) 2022** (2021: (0.6%)) ![img-6.jpeg](img-6.jpeg) The Company’s broker monitors the premium or discount on an ongoing basis and keeps the Board updated as and when appropriate. At quarterly Board meetings the Board reviews the premium or discount in the year since the previous meeting in comparison with other investment trusts with a similar mandate. The share price closed at a 16.6% discount to the NAV as at 31 December 2022 (2021: 0.6% discount). On 3 February 2023, the Board announced the details of a Buyback Programme for up to EUR 20 million in response to the widening discount at which the Company’s share price was trading, as compared to its NAV per Ordinary Share, as they believe that the current share price does not accurately reflect the inherent value in the portfolio. This is part of a broader package of initiatives seeking to improve the marketability of the Company’s shares. Since that date, the Company has bought back for Treasury a total of 16,652,452 Ordinary Shares for an aggregate amount of EUR 15.9 million. 1. This disclosure is considered to represent the Company’s alternative performance measures (APMs). Definitions of these APMs and other performance measures used, together with how these measures have been calculated, can be found on pages 112 to 113. All references to cents are in euros, unless stated otherwise. 42 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information ### (iii) Maintenance of a Reasonable Level of Ongoing Charges$^{1}$ 1.1% 2022 (2021: 1.1%) ![img-7.jpeg](img-7.jpeg) The Board receives management accounts containing an analysis of expenditure and which is reviewed at its quarterly Board meetings. The Board reviews the ongoing charges on a quarterly basis and considers these to be reasonable in comparison to peers. Based on the Company's average net assets during the year ended 31 December 2022, the Company's ongoing charges figure was calculated in accordance with the Association of Investment Companies ("AIC") methodology. ### (iv) To Meet its Target Total Dividend in each Financial Year (cents per share) Target: 5.51 Cents 2023 (2022: 5.25 cents) ![img-8.jpeg](img-8.jpeg) On 3 February 2023, the Company announced a target dividend of 5.51 cents per Ordinary Share ('2023 Target Dividend") in relation to the year ending 31 December 2023. The 2023 Target Dividend is in accordance with the Company's dividend policy to pay a progressive dividend over the medium term and is subject to the portfolio performing in line with expectations. The 2023 Target Dividend represents an increase of 5.0% versus the prior year and followed a 5.0% increase in the 2022 target dividend announced in April 2022. The dividend target set for 2022 was for not less than 5.25 cents per Ordinary Share, subject to the performance of the portfolio. These were paid in four equal interim dividends which totalled 5.25 cents. 1. This disclosure is considered to represent the Company's alternative performance measures (APMs). Definitions of these APMs and other performance measures used, together with how these measures have been calculated, can be found on pages 112 to 113. All references to cents are in euros, unless stated otherwise. Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 43 ## SECTION 172 ### Section 172 of the Companies Act 2006 The Company has a range of stakeholders,  requires the Board to act in a way that it and this section maps out who they The Company was listed on the main considers would most likely promote the are, what the Board believes their key market of the London Stock Exchange on  interests to be, how the Company 5 June 2019. The Company’s investments of all stakeholders, taking into account enables engagement with stakeholders are held via its sole subsidiary, Tesseract the interests of stakeholders and the and highlights the key results that have Holdings Limited, which in turn holds environment in its decision-making and to consequently arisen during the year. the investment portfolio via a number share how this duty has been discharged.  ### Company Sustainability The Board’s values – integrity, ### accountability and transparency – mean  that the Board has always worked hard As an externally managed investment to communicate effectively with the company, the Company does not have Company’s stakeholders. This is a two-way any employees. Its main stakeholders are process and the feedback received from as set out in the diagram below, which the Company’s stakeholders is highly explains the relationship between the valued and factored into the Board’s Company and each of its stakeholders. decision-making process. ###  ###       Manager Aquila Capital ### (Company Secretary, The Company FundRock Investment Investmentgesellschaft Lawyers, Brokers, Management Company mbH Administrators,  Registrars) ###   (Portfolio Holding Company) SPVs ###  The Board carried out an annual review  of its key service providers, including the The Board is aware of the need to foster As a public company listed on the London Investment Adviser, to understand the the Company’s business relationships Stock Exchange, the Company is subject culture of its service providers to ensure with suppliers, customers and other key to the Listing Rules and the Disclosure they and the Company can maintain high stakeholders through its stakeholder  standards of business conduct. The annual engagement activities. These activities a regulatory requirement, for the Board review process involves the assessment of include meetings, annual reviews, to act fairly between Shareholders. The the service providers’ policies and control presentations and publications and Board ensures that the Company complies environments to ensure their continued  with the Listing Rules at all times and seeks competitiveness and effectiveness. strategies and discharge its duties under the advice of the Company Secretary, section 172 of the Act. lawyers and corporate broker in its dealings. ### 44 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report | The Chairman and key Board members | The Company’s name was changed | To help the Board in its aim to act fairly | | --- | --- | --- | | met many of the Company’s key investors | from Aquila European Renewables | between the Company’s members, it | | to gauge their views on the Company’s | Income Fund plc to Aquila European | seeks to ensure effective communication | | progress since IPO. Separately, the | Renewables plc to maximise the appeal | is provided to all Shareholders. The | | Investment Adviser has participated in a | of the Company across a broader range | Board encourages Shareholders to | | roadshow to meet with the Company’s key | of investors and other stakeholders. |  | | investors. Additionally, on 29 March 2022, | The name change became effective on |  | | the Company, together with its Investment |  | representatives of the Investment Adviser | | Adviser, held a Capital Markets Day to | | are available to meet Shareholders | At its quarterly Board meetings, the Board provide Shareholders and analysts with in person and answer questions. The reviews and discusses detailed reports further background and information about Annual Report and half-yearly accounts from the Company’s broker and media PR AER and its investments. The outcome are distributed to the Company’s consultants in relation to the Company’s of these meetings was discussed by the Shareholders and made available on share performance, trading and liquidity Board and as a consequence of these the Company’s website. The quarterly as well as the composition of, and meetings, and in order to better align the factsheet is also available on the changes to, the register of Shareholders. Company with its Shareholders, a number Company’s website. Shareholders’ views are also considered of initiatives have been undertaken as by the Board at those meetings to assist The Company’s website – detailed below. | | the Board’s decision-making process and | www.aquila-european-renewables.com | | --- | --- | --- | | In the run-up to year end and following the | to ensure expected returns are achieved |  | | mini budget announced under the Truss |  | channel and information hub for | | administration, stock markets became | invest in appropriate renewable energy | Shareholders. As such, it includes full | | more volatile and the Company’s discount | infrastructure investments and to grow | details of the investment objective, | | to NAV widened. In response, and | the business in line with strategy and | supporting philosophy and investment | | following consultation with the Company’s | expectation. Details of the decisions taken | process and performance along with | |  | by the Board during the year can be found | news, opinions, disclosures, results | | Board announced the details of a share | below under ‘Key Decisions made During | and key information documents. It also | | Buyback Programme for up to EUR 20 | the Year ’. | presents information about the Board, | | million pursuant to the authority granted | | its committees and other governance | The Investment Adviser and Board believe  matters and Shareholders are encouraged that it is important for the Company’s Meeting to purchase up to 14.99% of to view the website in order to better continued success to have the potential to the Company’s issued share capital. understand the Company. access equity capital in order to expand The Board authorised the buyback as it the Company’s portfolio over time, to believes that the current share price does further diversify the investment portfolio,  to create economies of scale and, at times in the Company’s portfolio. Since that when the Company’s shares are trading at date the Company has bought back for a premium against its NAV, as a means to Treasury a total of 16,652,452 Ordinary manage such premium. The Company’s Shares for an aggregate amount of EUR shares traded at a premium early in the 15.9 million. Since the start of the Buyback year and during that time issued shares Programme, the discount to NAV at which to its Investment Adviser in lieu of its the Company’s shares trade has narrowed quarterly management fees as detailed on 1 1 from 16.6% to 14.6% and the liquidity page 75. The Company may issue shares in the Company’s shares has markedly from its Treasury account but will only improved. issue shares at a premium to NAV at the time of issue. 1.  performance measures used, together with how these measures have been calculated, can be found on pages 112 to 113. All references to  ### Aquila European Renewables Plc Annual Report 2022 45 (formerly Aquila European Renewables Income Fund plc) ## SECTION 172 CONTINUED |  |  |  | | --- | --- | --- | | As an externally managed investment | The Investment Adviser is the most | Prior to being presented to the Board of | | trust, the Company conducts all its |  | HoldCo, the Company’s wholly owned | | business through its key service providers. | Company and a description of its role | subsidiary, the Company’s Board is | | The Board believes that maintaining | can be found on pages 74 to 75. The | presented with potential investment | | positive relationships with each of the | performance of the Investment Adviser’s |  | | Company’s service providers is important | is determined by the quality of the | by the Investment Adviser and which | | to support the Company’s long-term | Investment Adviser’s management team | have undergone a process of analysis | | success. | and their ability to source high quality | and challenge by the AIFM, including | | | assets at attractive prices. | considerations relating to environmental, | In order to ensure strong working social and governance issues. The Board relationships, the Company’s key service The Board closely monitors the considers each proposal against the providers (the Investment Adviser, AIFM, Company’s investment performance Company’s investment objective (on Company Secretary, Administrator) in relation to its objectives, investment page 1), investment policy and strategy are invited to attend quarterly Board policy and strategy. To assist the Board, as disclosed on pages 40 to 43 and meetings to present their respective the Investment Adviser provides monthly with consideration for the wider group reports. This enables the Board to exercise reports. Additionally, the Investment of stakeholders. In considering each effective oversight of the Company’s Adviser presents its quarterly production investment opportunity, the Board activities. During the year, the Board and operational update reports at each considers the Company’s long-term spent a considerable amount of time quarterly Board meeting. The Board success, having particular regard to the between Board meetings engaging with maintains constructive dialogue between following aspects of each proposal: the Company’s key service providers meetings with the Investment Adviser. to continue to develop strong working On a periodic basis, the Board visits the • potential revenue forecast to be relationships and to determine good  generated by each asset; working practices to ensure the smooth the site of one of the portfolio assets or the diversity of the Company’s • operational function of the Company.  portfolio; The Board and its advisers seek to are able to gain a better understanding • any community and environmental maintain constructive relationships with of the Investment Adviser, to meet key issues associated with each asset; the Company’s key service providers on members of the team and gain further • geopolitical risk; behalf of the Company through the annual insight into the operation of each asset. review process, regular communications, The Investment Adviser’s remuneration is • the length of tenure of each asset; meetings and the provision of relevant based on the NAV of the Company. From • hedging aspects to limit risk; and information.  • funding aspects, including the use Adviser’s fees will be paid in shares,  ###  which aligns the Investment Adviser’s As at 31 December 2022, the Company interests with those of the Company’s ### Manager (“AIFM”) and the HoldCo had EUR 89.9 million of Shareholders. The AIFM is an important service provider liquidity consisting of EUR 24.7 million for the Company’s long-term success. The in cash on hand plus EUR 65.1 million AIFM has engaged Aquila Capital to act in an undrawn revolving credit facility. as the Company’s the Investment Adviser Remaining commitments via Tesseract for the purpose of providing investment Holdings Limited amounted to EUR advisory services to the Company. The  AIFM is responsible for reviewing each investment opportunity prior to being ###  presented to the Board. In addition The Company is an investor in renewable to the reports the Board receive from energy assets and is acutely aware of the Investment Adviser, it also receives its impact on the environment. The quarterly reports from the AIFM. The  Board maintains regular contact with the risk strategy which ensure that society and AIFM in order to foster a constructive the environment are considered when working relationship. Additionally, the implementing its investment strategy. AIFM is responsible for monitoring the  risks faced by the Company and these from the Company Secretary. Further are regularly discussed at meetings of the   be found on pages 35 to 39 or on its website at https://www.aquila-european- renewables.com. ### 46 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ###  ### Decisions Relating to the Company’s Portfolio of Assets All acquisitions and decisions made during the year in respect of the Company’s portfolio of assets, including new acquisitions, PPA  12 to 34. ###  The Board agreed to purchase or issue shares to the Investment Adviser in relation to fees payable during the year as detailed below: Amount Issue or acquired by Price paid per purchase of the Investment Ordinary Share Date Ordinary Shares Adviser (EUR) 7 February 2022 Issue 731,520 1.0383 1 June 2022 Issue 554,773 1.021075 1 June 2022 Purchase 176,300 1.0376 5 August 2022 Purchase 760,053 1.01657415 9 November 2022 Purchase 852,206 0.947292 Following year end, and as instructed by the Board, the Company’s brokers purchased a further 900,340 Ordinary Shares at   The Board believes issuing shares to the Investment Adviser in lieu of fees further aligns the interests of the Investment Adviser with the Company’s Shareholders. |  |  | Name Change | | --- | --- | --- | | During the year the Board agreed to | During the year the Board authorised |  | | increase the Company’s dividend by 5.0% | the AIFM and Investment Adviser to | the Board agreed to change the | | to 5.25 cents per ordinary share. Since | negotiate an increase in the Company’s | Company’s name from Aquila European | | year end, on 3 February 2023, the Board | Revolving Credit Facility (“RCF”) following | Renewables Income Fund plc to Aquila | | approved a further 5.0% increase to the | which the bank agreed to increase the | European Renewables plc with effect from | | Company’s target dividend to 5.51 cents | Company’s RCF from EUR 40 million to | 3 November 2022, to maximise the appeal | |  | EUR 100 million and to extend the term | of the Company across a broader range of | | | until maturity to April 2024. Since then, | investors and other stakeholders. | the Board has instructed the AIFM and | Investment Adviser to negotiate a further |  | | --- | --- | | twelve month extension of the facility to | On 2 February 2023, Dr Patricia Rodrigues | | April 2025. Approval to this extension was | replaced Kenneth MacRitchie as Chair | | granted on 21 April 2023. | of the Remuneration and Nomination | Committee as part of the Board’s ongoing commitment to ensure that they maintain suitable diversity and representation within the Board structure. The Board has begun the process of recruiting an additional Board member to further expand its skills base and to enhance its diversity. ### Aquila European Renewables Plc Annual Report 2022 47 (formerly Aquila European Renewables Income Fund plc) ## RISK AND RISK MANAGEMENT ###  1.  the Investment 5. AIC: The Company is a member Adviser provides a report to of the Association of Investment During the year the Company has the Board on a quarterly basis Companies, which provides regular carried out a robust assessment of its or periodically as required on technical updates as well as drawing principal and emerging risks and the industry trends and insight to future members’ attention to forthcoming procedures in place to identify any challenges in the renewables sector industry and regulatory issues. emerging risks are described below. including the regulatory, political and ### economic changes likely to impact  ###  the renewables sector; The Audit and Risk Committee ### or Emerging Risks undertakes a review of the Company’s 2.  The Board regularly reviews the risk matrix on a regular basis and a Manager (“AIFM”): following advice Company’s risk matrix, with a focus on formal review of the risk procedures from the Investment Adviser and ensuring that the appropriate controls and controls in place at the AIFM and other service providers, the AIFM are in place to mitigate each risk. The other key service providers to ensure  experience and knowledge of the Board that emerging (as well as known) risks including emerging risks, likely to is important, as is advice received  impact the Company; from the Board’s service providers, practicable, mitigated. 3. Broker: the Broker provides    ### Principal Risks Company on the Company’s sector, responsible for the risk and portfolio The Board considers the following to be competitors and the investment management services and outsources the principal risks faced by the Company company market, whilst working with the portfolio management to the along with the potential impact of these the Board and Investment Adviser to Investment Adviser. risks and the steps taken to mitigate communicate with Shareholders; them. 4. Company Secretary: the Company Secretary briefs the Board on forthcoming legislation/regulatory change that might impact the Company; and ### Risks Potential Impact/Description Mitigation ###  The income and value of the Company’s investments The Company holds a balanced mix of investments that may be affected by future changes in the market price of  ## 1 electricity.   While some of the revenues of the Company’s investments     protecting the Company’s revenue from volatile electricity on the wholesale market price of electricity, which is prices. volatile and is affected by a variety of factors, including: The Investment Adviser retains the services of • market demand; market-leading energy consultants to assist with • generation mix of power plants; determining future power pricing for the respective • government support for various forms of power regions. generation; The underlying SPV companies may use derivative •  instruments such as futures, options, futures contracts • foreign exchange.  prices. There is a risk that the actual prices received vary  The Investment Adviser models and monitors power shortfall in anticipated revenues by the Company. price curves on an ongoing basis and will recommend appropriate action. In addition, the Investment Adviser has Increased EU goals to push green economies will lead to a dedicated team which is responsible for the origination, a ramp up of renewables and capacities with potential negotiation and execution of all PPAs. to lead to grid oversupply issues resulting in pricing pressures. The Investment Adviser reviews the hedging strategy on a deal-by-deal basis, both at time of investment and on an The current energy geopolitical crisis in Europe is driving ongoing basis. Should changes be required to the hedging increasing energy prices and volatility which is likely to strategy, these will be recommended to the AIFM and have an impact on performance. Board. Windfall taxes, regulation and price caps introduced  Company’s revenue. ### 48 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Risks Potential Impact/Description Mitigation ### continued As evidenced with the ongoing war in Ukraine and the The Investment Adviser, utilising its extensive experience, various restrictions imposed, acts of war and resulting is constantly monitoring geopolitical and macro-economic ## 2 sanctions can lead to O&M supply delays, volatile energy developments. Where required, external geopolitical and markets and general uncertainty. risk analysis is undertaken.  This can also lead to short-term price increases and more The Company does not have any direct exposure to  focus on renewable energy infrastructure and increased Ukraine or Russia, there are also no direct business competition for assets. relations with counterparties from these countries. With increasing competition for renewable investments, new geographies may be considered, potentially introducing additional political and regulatory risks. Volatility in equity markets may cause the Company’s The Company’s advisers monitor market conditions and shares to rise or fall and therefore to trade at a premium report regularly to the Board. In the event that the Company ## 3  is unable to raise new capital it could defer making any the shares to trade at a discount this could impact the new investments until the stock market recovers and, in  Company’s ability to raise further equity to allow it to repay extreme circumstances, existing investments could be sold  debt or to support further investments. to reduce debt and raise liquidity.  The Company’s share price recently decreased towards of time, the Company could become vulnerable to a a 20% discount to its net asset value. As a result, the  Board introduced a share buyback programme on may increase the likelihood of attracting votes against the   Board and its advisers continue to monitor the share price. be held in June 2023. A global recession may lead to electricity pricing volatility The Investment Adviser has a dedicated Markets   ##  possible impacts of a global recession include windfall origination, negotiation and execution of PPAs. taxes, reduction in availability of debt, reduced access  Global to capital markets for fund raising and increased risk at a present value basis) will be generated via government  counterparties as balance sheets become stressed.   Company’s revenue from volatile electricity prices. revenue and expenditure of investments. Thus changes Most of the non-contracted revenues and costs of the  Company’s investments are either indexed or correlated individual asset valuations and the resulting net asset value  performance of the Company. A change in political direction or regulation in one of The AIFM, advised by the Investment Adviser with its the countries in which the Company targets investment  ##  could lead to changes, reductions, caps or withdrawals jurisdictions in which the Company invests. of government support arrangements, a windfall tax or  Change in potentially the nationalisation of investments. This could on each investment and reviewed prior to signing off any  have a material impact on the valuation of the investments investment proposal. Sentiment and the Company’s net asset value. Additional due diligence on development and construction Environmental groups may put pressure on the assets is undertaken for new investment opportunities in government in relation to its renewables ambitions and order to avoid or mitigate any potential issues. permits due to environmental concerns and impact on the  projects. assets and performs ongoing monitoring of these risks. Regulatory changes at the SPV level are monitored by the Investment Adviser and reported to the Board/AIFM on an ongoing basis. ### Aquila European Renewables Plc Annual Report 2022 49 (formerly Aquila European Renewables Income Fund plc) ## RISK AND RISK MANAGEMENT CONTINUED ### Risks Potential Impact/Description Mitigation ### Operational There is a risk that the portfolio underperforms and, as a Each quarter the Board reviews a report prepared by result, the target returns are not met over the longer term. the Investment Adviser on the portfolio performance. ## 6 This could lead to the dividend not being covered and an  inability to pay the target dividend. investment is provided to the Board which closely monitors Investment performance of the individual assets. Adverse weather conditions may impact investment  performance through lower-than-expected The Investment Adviser has a substantial team of executives  employed across various disciplines within the renewables  Investments under development or construction have monitor all of the investments. higher risk of performance due to permit and leases potential challenges, construction budget slippage and New investments are reviewed and approved by the Board development performance. in line with the Company’s investment policy of investing  technology. In the case of development/construction assets, the Investment Adviser puts in place legal agreements with the developer to align all parties for a successful outcome and mitigate the risks associated with the initial phase of the investment.  The Investment Adviser performs detailed due diligence could result in the Company being liable for damages  ##  or compensation to the extent that such losses are not  covered by insurance policies. In addition, adverse  Environmental publicity or reputational damage could follow.        Environmental – climate change, biodiversity issues or environmental impairment.  – impact on local communities in which the Company’s assets operate as well as employee welfare including health and safety incidents.  – lack of a strong governance framework within the Company could expose it to, among other things, the negative impact of bribery and corruption. With increasing numbers of investors seeking exposure The track record of the Investment Adviser and its market to renewable assets, it is possible that new competitors position and penetration allow it to access potential ##  will enter the market in which the Company operates. This investments that newer entrants may not have access to. could lead to increased pricing for the Company’s target Through the Investment Adviser, the Company has access Competition investments with corresponding lower returns and slower to a number of assets that are in the development phase, for Assets deployment of uninvested cash. creating a competitive advantage for the Company. The Board is mindful of pricing when it reviews new investment proposals and the need to deliver on the Company’s target objective and strategy. The majority of the operational risk in the Company’s Operation and maintenance (“O&M”) of assets are investments is retained by the counterparty or its subcontracted to a counterparty who is responsible for ## 9 subcontractors. Failure to properly operate and maintain ensuring effective continuing operation and maintenance assets may result in reduction of revenues and value   of assets. However, some risks will remain within the such counterparty has the experience and resources to  investment. comply with its obligations and monitors compliance on an ongoing basis. Poor performance by a subcontractor may lead to the need for a replacement, which could have cost Constant monitoring of the investments and the implications, impacting the performance of the investment counterparties/service providers allows the Investment and potentially distributions to the Company until the  issue is resolved. of counterparties and service providers ensures any impact is limited. The value of the Company’s investments and the income they generate may be affected by the failure of The Investment Adviser assesses the credit risk of counterparties to comply with their obligations under   counterparties to PPAs. ### 50 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Risks Potential Impact/Description Mitigation ### Operational continued The Company may be subject to litigation either directly or Prior to an investment or the engagement of a third party, via its subsidiary or at SPV level. a detailed due diligence exercise is undertaken to identify ## 10 any risks either from subcontractors or any party likely to be impacted by the Company’s actions. Litigation  Local communities and relevant parties are consulted prior to an investment or prior to formal engagement in order to identify any potential grievance. The Company has access to legal advisers who provide advice at each stage of an investment and at each stage in the Company’s life. The Investment Adviser manages over EUR 14.7 billion for The Company and AIFM are made aware of and review   ## 11 potential new investments across various clients including being made. The Investment Adviser procures and the Company. provides the Board with an independent fairness valuation   The Investment Adviser employs experienced executives of the exists. When assets are bought along with other funds to identify, acquire and manage the Company’s Investment managed by the Investment Adviser, the price is externally investments. There is a risk that a key person leaves the Adviser validated. Investment Adviser. In addition, an investment allocation policy has been implemented by the Investment Adviser and has been agreed by the Board. The strength and depth of the Investment Adviser’s resources mitigate the risk of a key person departure. A hacker or third party could obtain access to the Service providers have been carefully selected for their Investment Adviser or any other service provider and expertise and reputation in the sector. Each service ## 12 destroy data or use it for malicious purposes. Data records provider has provided assurances to the AIFM and the could be destroyed, resulting in an inability to make Company on their cyber policies and business continuity  investment decisions and monitor investments. plans along with external audit reviews of their procedures where applicable. The pandemic and more recently the Russian and Ukraine war has increased IT security concerns and threats being The Investment Adviser and key service providers have posed to the Company and operating structure by hackers information security policies in place and have appointed which may lead to loss of information or even a cash loss.  for emergency events and crises, the monitoring of the resumption and repair of the IT security measures after completion of a disturbance or incident, and the ongoing development of improvements to the IT security concept. The Investment Adviser’s in-house Asset Management team has reviewed the protective measures taken by the counterparties and has further increased the vigilance against cyber-attacks that could affect the performance and infrastructure of the investments. Insurance is in place to cover potential losses from direct attacks. For indirect attacks (e.g. against grid operation or transmission system) the various administrators, operation and maintenance  coverage to mitigate possible damages. ### Aquila European Renewables Plc Annual Report 2022 51 (formerly Aquila European Renewables Income Fund plc) ## RISK AND RISK MANAGEMENT CONTINUED ### Risks Potential Impact/Description Mitigation ### Financial There is a risk that the Company’s asset valuations and The principal component of the Company’s balance sheet underlying assumptions such as future electricity prices is its portfolio of renewable investments. Each quarter, the ## 13  AIFM is responsible for preparing a fair market value of the meaning that the investment portfolio could be over or investments, with input and guidance from the Investment Portfolio under-valued. Adviser. These valuations and the key underlying  assumptions are interrogated by the Board before being approved. The Investment Adviser has a strong track record in undertaking valuations of renewable assets built up over the years since it was founded in 2001.  proposed by the Investment Adviser, a fairness valuation opinion from an independent adviser is procured by the Investment Adviser for the AIFM and the Board. The Investment Adviser and broker monitor market competitors and provide feedback on valuation methodologies and assumptions to the valuation team. The use of leverage creates risks including: The Company’s investment policy restricts the use of leverage to: •  ##  covenant breaches; •  •  enhanced loss on underperforming investments; and •  •  •  As at 31 December 2022, the Company’s subsidiary,  Tesseract Holdings Limited, had 4.0% of short-term debt and on SPV level there was 21.6% of long-term structured Fluctuations in interest rates may impact discount rates  which are applied to the portfolio valuations as well as levels against these policy restrictions and reports them to affecting cost of debt in both the underlying SPVs and the the Board on a quarterly basis. Company. The Investment Adviser provides updates of the covenant compliance to the AIFM and to the Board periodically and  Interest rate risk on bank debt at the asset level is mitigated by the use of hedging instruments. The majority of the Company’s long-term structural debt  amortising. ###   The corporate structure of the Company is reviewed rules, substance, withholding tax rules and rates, could periodically by the Company and its advisers. The Board ##  result in tax increases, resulting in a decrease in income has been kept informed of the recent introduction of the received from the Company’s investments. windfall (and other tax arrangements) taxes introduced Changes to Tax   Legislation or timely basis and has carefully considered the impact on government. Rates the Company’s portfolio, which is further discussed in the Investment Adviser’s Report. The Investment Adviser works closely with tax and industry experts prior to providing structuring recommendations to the Company prior to investment and on an ongoing basis. ### 52 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Risks Potential Impact/Description Mitigation ### continued The Company fails to comply with section 1158 of the All service providers including the broker, Company Corporation Tax Act to ensure maintenance of investment Secretary, Administrator, Investment Adviser and AIFM are ## 16 trust status, UK Listing Authority regulations including experienced in these areas and provide comprehensive Listing Rules, Foreign Account Tax Compliance Act and reporting to the Board and on the compliance of these  Alternative Investment Fund Managers Directive (“AIFMD”). regulations. and  The AIFM is experienced in compliance with the AIFMD  regulations and fails to monitor those such as the SFDR, reporting obligations and reports at least quarterly to the Changes changing disclosure requirements and green washing Board. risks. The Investment Adviser actively monitors changes in Failure to comply with the relevant rules and obligations regulation across the markets in which the Company may result in reputational damage to the Company or have operates.  The Company complies with article 8 of the SFDR and as Possible uncertainty remains with post-Brexit negotiations  and eventual trade deals agreed. Unfavourable terms can to mitigate potential risks. impact withholding taxes, double tax treaty limitations and various other trading concerns. Additionally, the Company operates in multiple markets throughout Europe, and some have shown signs of changes or potential in regulation as a response to high power prices. ### Emerging Risks ### Risks Potential Impact/Description Mitigation Climate-related risks can be categorised as physical  or transitional risks. Physical risks are those associated hedging of price risks in the event of unforeseen changes in ##  with the physical effects of climate change. They can regulatory requirements related to climate change. be event-driven (acute), such as cyclones, hurricanes, Insurance is usually in place in the event of acute climate Climate-    or longer term (chronic) shifts in climate patterns, such as resulting in production losses. sustained higher temperatures with melting of glaciers and ice sheets causing sea level rise, permafrost melting, Financial model forecasts are based on P50 production  (the estimated annual amount of electricity generation precipitation, land degradation and changes in air quality. that has a 50% probability of being exceeded – both in any single year and over the long-term – and a 50% probability Transitional risks are those that arise as economies transition of being underachieved) data sourced from energy yield towards less polluting, greener solutions. These include assessments provided by external service providers. externally imposed risks such as the effect of legal and regulatory requirements or policy changes, changes in The Company also mitigates the frequency of both physical societal demands, advancements in technologies, market and transitional risks through extensive geographical changes and the consequent business decisions taken  to respond to such changes. Transitional risks have the potential to crystallise suddenly, for example as a result of policy changes. Physical or transitional climate-related risks could impact the operation of the Company’s assets and hence the production or revenue generated by the  Risk of bank failure. On 10 March 2023, Silicon Valley Bank The Company’s bankers are carefully chosen based on their and Signature Bank came close to collapse, prompting US credit rating. Further due diligence is undertaken on each ##  regulators to take control in an attempt to prevent contagion. bank to ensure they are robust before they are engaged by On 19 March 2023, it was announced that the Swiss the Company.  government had successfully negotiated the acquisition The Company’s funds are held by a number of banks in Crises of Credit Suisse by UBS in order to prevent its collapse and order to diversify counterparty risk. Since the 10 March prevent contagion. If either the US regulators or the Swiss 2023 announcement, the AIFM has undertaken a review  of the Company’s banking arrangements to identify any the Company’s bankers could have been affected, creating exposure to Silicon Valley, Signature and Credit Suisse  Banks. Following this analysis, the AIFM has concluded that the Company’s exposure is minimal and unlikely to negatively impact the Company. ### Aquila European Renewables Plc Annual Report 2022 53 (formerly Aquila European Renewables Income Fund plc) ## OTHER INFORMATION ### Greenhouse Gas Emissions The Company’s AIFM, Investment The Directors have declared any Adviser, Company Secretary,  As the Company has outsourced Administrator and Depositary have Company. These are entered into operations to third parties, there are no  the Company’s register of potential  procedures are in place and that they  to report in relation to the operation of do not tolerate bribery. The Company’s the Board. The Directors are obliged to  policy and the procedures that advise the Company Secretary as soon as a low energy user and is therefore implement it are designed to support as they become aware of any potential exempt from disclosures on greenhouse that commitment.  gas emissions and energy consumption. Investment trusts are currently exempt The Company has established ###  from TCFD disclosure, but the Board will procedures to deal with any potential continue to monitor the situation. As required by law, a Director must  avoid a situation where he or she  In relation to the Company’s  the AIFM (for the Company) and Aquila investments, the level of greenhouse Company’s interests. The Company’s managed funds who are counterparties gas emissions arising from the low Articles of Association provide the to the Company. These procedures may, volume of electricity imports and from Directors authority to authorise potential on a case-by-case basis, include: operation and maintenance activity is  not considered material for disclosure separate teams at the Investment • can impose limits or conditions when purposes. Furthermore, as the assets Adviser being established in relation giving authorisation if they think this is are renewable energy generators, they to any proposed transaction to appropriate. The procedure observed reduce carbon dioxide emissions on a represent the Company and the by the Board in considering dealing with net basis. relevant counterparty;  • a fairness opinion on the value of ###  •  the Renewable Energy Infrastructure excuse themself from the discussion ###  Investments to be obtained from an  It is the Company’s policy to conduct independent expert; • only Directors who have no interest all business in an honest and ethical a due diligence and reporting • in the matter being considered manner. The Company takes a package from relevant professional can debate the matter and take the zero-tolerance approach to bribery advisers on which the Company (or relevant decision; and and corruption and is committed to other applicable vehicles) can place acting professionally, fairly and with • in taking the decision the Directors reliance; integrity in all its business dealings and must act in a way they consider, in • the AIFM operating its own risk relationships wherever it operates. The good faith, will be most likely to management system and internal Company does not tolerate the criminal promote the Company’s success. control system as well as monitoring facilitation of tax evasion. approved systems operated by the Investment Adviser; and  ### 54 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report | •  | | The Board believes that the Period, | As a sector-focused renewable energy | | --- | --- | --- | --- | | | the transaction being resolved in |  | investment company, the Company | | | accordance with procedures agreed | appropriate time horizon over which | aims to produce stable dividends | | | between the Investment Adviser | to assess the viability of the Company, | while preserving the capital value of its | | | and the AIFM, subject to Board | particularly when taking into account | investment portfolio. As part of their | | | agreement. | the long-term nature of the Company’s | analysis, the Board were mindful that | | | | investment strategy, which are modelled | the Company’s portfolio assets, held | | Employees | |  | via HoldCo, are predominantly fully | | As the Company is an investment trust | | outlined on pages 48 to 53. Based | constructed and operating renewable | | it does not have any employees as all | | on this assessment, the Directors | electricity generating facilities with asset | | functions are carried out by third-party | | have a reasonable expectation that |  | | service providers. As at 31 December | | the Company will be able to continue | under consideration. | | 2022, the Company had four Directors | | to operate and to meet its liabilities | | This assessment also included a detailed who are non-executive and receive a as they fall due over the period to review of the issues arising following   the war in Ukraine, high volatility in are male and one is female. The Board’s In considering the prospects of the commodity prices, the windfall revenue policy on diversity is contained in the Company, the Directors looked at the clawback on inframarginal technologies  key risks facing the Company, HoldCo (e.g. solar PV, wind, nuclear, hydro)  | | and the SPVs, focusing on the likelihood | and other taxes that currently face the | | --- | --- | --- | | | and impact of each risk as well as any key | Company’s assets as disclosed in the | | Viability Statement | contracts, future events or timescales | Principal Risk section on pages 48 to 53 | | In accordance with the UK Corporate | that may be assigned to each key risk. | and in the Investment Adviser’s Report | |  |  | on pages 12 to 34. The Board have also | | Rules, the Directors have assessed the | Company would continue to remain | considered the impact of climate related | | prospects of the Company over a longer | viable under downside scenarios, | events on the Company’s assets and | | period than the 12 months required by | including a decline in long term | on its ability to continue to produce | |  | production and power price forecasts, | electricity. For example, based on the | | | taking into account tax implications | guidance provided in the Company’s | In reviewing the Company’s viability, and regulatory changes imposed February 2023 investor presentation, the Directors have assessed the viability on renewables and on those in the the Company expects its 2023 target of the Company for the period to electricity generation market in certain dividend to be fully covered even if  jurisdictions across Europe. These risks, forecast power prices decline by 30%. together with the mitigating factors of each, are shown in the Principal Risk section on pages 48 to 53. Tiza, Spain ### Aquila European Renewables Plc Annual Report 2022 55 (formerly Aquila European Renewables Income Fund plc) ## OTHER INFORMATION CONTINUED ### Viability Statement continued The internal control framework of the Outlook Company is subject to a formal review The Company has a low gearing level The outlook for the Company, on at least an annual basis. On a regular representing 25.6% as at 31 December including the future development basis, the Board reviews the risk report  and performance of the Company, is prepared by the AIFM. | of a RCF (which has an undrawn limit of | | discussed in the Chairman’s Statement | | --- | --- | --- | | EUR 65 million) and non-recourse debt | The Directors do not expect there to be | on pages 8 to 11 and the Investment | | at the asset level. The Company (via | any material increase in the expenses | Adviser’s Report on pages 12 to 34. | | its subsidiaries, where applicable) is in | of the Company over the Period. The | | | compliance with its covenants related | Company’s income from investments | Strategic Report | | to the RCF and non-recourse debt. The | provides substantial cover to the | The Strategic Report set out on pages | | Company has recently negotiated an | Company’s operating expenses and | 1 to 56 of this Annual Report was | | extension to its RCF which now expires in | buyback programme, and any other | approved by the Board of Directors | | April 2025. The Board and advisers have | costs likely to be faced by the Company |  | | analysed the covenants of the RCF and | over the Period of the assessment. | | For and on behalf of the Board based on stress testing the Company’s The Company is subject to a   exists in relation to both the Interest to be held on 14 June 2023. Following Coverage Ratio (“ICR”) and Loan to discussions with the Company’s broker, Value Ratios. For example, based on the Investment Adviser and a number of  existing shareholders, the Directors  are of the view that the continuation ### have to reduce by over 65% in order to Ian Nolan vote will be passed at the forthcoming breach the Company’s ICR ratio. Chairman of the Board  | The Board have also considered the |  | 25 April 2023 | | --- | --- | --- | | failure of Silicon Valley Bank and Credit | the Director’s view of a positive vote for | | | Suisse and the Impact of contagion, and | the Company’s continuation as detailed | | | have concluded that the Company’s |  | | | counterparty banking relations are | pages 78 and 79. If the Continuation | | |  | Resolution is not passed, then the | | Directors shall within six months of The Directors believe that the Company such Continuation Resolution not being is well placed to manage its business passed, put proposals to shareholders risks successfully over both the short for the reconstruction, reorganisation or and long term and accordingly, the liquidation of the Company. Board has a reasonable expectation that the Company will be able to continue in operation and to meet its liabilities as they fall due for a Period of at least  ### 56 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## GOVERNANCE ## WHAT’S IN THIS SECTION Board of Directors 58 Investment Adviser 60 Corporate Governance 61 Audit and Risk Committee Report 65 Directors’ Remuneration Report 68 Directors’ Report 73 Statement of Directors’ Responsibilities 81 ### Aquila European Renewables Plc Annual Report 2022 57 (formerly Aquila European Renewables Income Fund plc) ## BOARD OF DIRECTORS ## IAN NOLAN KENNETH MACRITCHIE ### Non-executive Chairman Non-executive Director Appointed on 8 April 2019 Appointed on 8 April 2019 Ian Nolan led the team that was recruited by the UK Kenneth MacRitchie has over 30 years’ experience of advising Government in 2011 to establish the UK Green Investment    Previously, Mr Nolan held the position of Chief Investment   thereafter, at Shearman & Sterling where he served on their currently a Partner and Chairman of the Investment Committee   UK Government on renewable energy policy and led the  establishment of Low Carbon Contracts Company Limited,   Arthur Andersen and graduated with a BA in Economics from    ### Role Role Chairman Mr MacRitchie stepped down as Chair of the Remuneration    ### R A ### Key ### R Remuneration and Nomination Committee ### A Audit and Risk Committee ### 58 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## DAVID MACLELLAN PATRICIA RODRIGUES ### Non-executive Director Non-executive Director Appointed on 8 April 2019 Appointed on 17 April 2019 David MacLellan is the founder and currently Chairman of RJD Dr Patricia Rodrigues has over two decades of leadership  experience in infrastructure and real asset investment and    several companies and funds investing in real assets globally  with a focus on ESG, including Legal & General Assurance of Murray Johnstone, where he was latterly Chief Executive, Society Ltd, and is an Investment Committee member of GLIL   on the boards of a number of companies and is currently a    council member of the British Venture Capital Association  and is a member of the Institute of Chartered Accountants of   before leading the growth strategy of the non-real estate Real  ### Role  Chair of the Audit and Risk Committee and member of the University of Porto and a PhD in Engineering from Cambridge   ### Role ### A R Appointed Chair of the Remuneration and Nomination   ### R A ### Key ### R Remuneration and Nomination Committee ### A Audit and Risk Committee ### Aquila European Renewables Plc Annual Report 2022 59 (formerly Aquila European Renewables Income Fund plc) ## INVESTMENT ADVISER ## CHRISTINE LARS MICHAEL ## BROCKWELL MEISINGER ANDERSON   Senior Manager, Partnerships and Advisory Corporate Development   Energy & Infrastructure EMEA Energy & Infrastructure EMEA ## NICOLE ZIMMERMANN DANIEL METZGER PASCAL HERRMANN Manager, Partnerships and Portfolio Associate, Partnerships and Portfolio Analyst, Partnerships and Portfolio Advisory Advisory Advisory Energy & Infrastructure EMEA Energy & Infrastructure EMEA Energy & Infrastructure EMEA ### 60 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## CORPORATE GOVERNANCE ### Introduction  In line with the AIC Code, the Board  has decided that each Director should  providers is considered by the Board be subject to annual re-election by   Shareholders, although this is not  not to appoint a Senior Independent  considered the principles and Director due to the Board being small  provisions of the AIC Code of Corporate     Copies of the Directors’ appointment  relating to the role of the Chief  the principles and provisions set out in Executive, executive Directors’  the UK Corporate Governance Code remuneration and the need for an the Board, any new Director will receive   an induction, and relevant training is additional provisions on issues that are out in the AIC Code, the Board considers available to Directors on an ongoing  these provisions are not relevant to the   Company as it is an externally managed A policy of insurance against Directors’ against the AIC Code, which has been    the Company’s day-to-day management  Council, provides more relevant and administrative functions are  A procedure has been adopted for  result, the Company has no executive Directors, in the furtherance of their  Directors, employees, or internal duties, to take independent professional      not reported further in respect of these ###  Directors’ Indemnities  | how the AIC Code adapts the principles | | Subject to the provisions of the | | --- | --- | --- | | and provisions set out in the UK Code | The Board | Companies Act 2006 and certain | | to make them relevant for investment | At the date of this report, the | provisions contained in the deed of | |  | Board consists of four independent | indemnity issued by the Company, the | | | non-executive Directors including |  | | Compliance |  | Directors against all liabilities which any | Director may suffer or incur arising out   of or in connection with any claim made  to 31 December 2022 its composition or proceedings taken against them, or complied with the recommendations was appropriate for an investment any application made under sections of the AIC Code except, as explained company of the Company’s nature and  below, where the Company does not  Act 2006 by them, on the grounds of  the Investment Adviser and are able to their negligence, default, breach of   duty or breach of trust, in relation to the composed entirely of independent to discharge their responsibilities  non-executive Directors, has not  appointed a Management Engagement   of relevant experience to meet the  biographies are shown on pages 58  ### Aquila European Renewables Plc Annual Report 2022 61 (formerly Aquila European Renewables Income Fund plc) ## CORPORATE GOVERNANCE  ### Board Committees evaluation of the Board, led by the Each committee has adopted formal  terms of reference, which are reviewed    membership and chairmanship of its was the Chair of the Remuneration and available on the Company’s website or    members of the Remuneration and ### Audit and Risk Committee  Nomination Committee were David  functions of a Management Engagement  of the role, composition and meetings   of the Audit and Risk Committee review and consider the actions and became Chair of the Remuneration and together with a description of the work judgements of management in relation  of the Audit and Risk Committee in  remains a member of the Remuneration  Statements, and the Company’s  MacLellan is the Chair of the Audit and compliance with the UK Code, the Listing Committee’s other responsibilities Risk Committee and the other members Rules, the Disclosure Guidance and  are Kenneth MacRitchie and Patricia    It will review the role of the Investment    ### Remuneration and Nomination effectiveness of the internal control  systems of the Company’s key service ### Committee consider the appropriate composition    Committee will meet at least once   consider the annual Board evaluation principal duties include identifying and  nominating to the Board new Directors,  and undertaking an annual performance ### Meeting Attendance Remuneration Quarterly Audit and Board and Risk Nomination Number of meetings held meetings Committee Committee 1 Ian Nolan                           In addition, a number of ad hoc Board and committee meetings were held during the year to deal with administrative matters and    Ian Nolan is not a member of the Audit and Risk Committee or the Remuneration and Nomination Committee; however, he attended each  ### 62 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Decision Making Division of Responsibilities Role of Committee ###    stewardship of the Company’s affairs responsibilities between the Chair, the ensuring appropriate papers are • and has adopted a schedule of matters  considered at the meeting;  • ensuring Committee members’ ###  Role of the Chair includes: views and opinions are appropriately operational matters of a material nature leadership of the Board; • considered; are considered at its meetings, including • ensuring the Board is provided seeking engagement with • reviewing the Company’s performance   by reference to the Company’s key to ensure it is able to discharge its related to their areas of responsibility;  duties; Strategy Day is also held on at least an • maintaining relationships with • ensuring each Board member’s views advisers; and annual basis, at which key operational are considered and appropriate and marketing matters are discussed • obtaining independent professional action taken;   All Board members attend this meeting, • ensuring that each committee has the together with key representatives of the  ### Board Diversity  • engaging the Board in assessing and   improving its performance; of diversity and supports the  • overseeing the induction and  advice at the Company’s expense where development of Directors; All Board appointments will be made it judges it necessary to discharge its  on merit and have regard to diversity, •  Adviser and other service providers; including factors such as gender, skills,  During the year the Board considered • seeking regular engagement  and recommended for approval to the with major Shareholders in order four Directors, three of whom are male  to understand their views on  prior to investment, including, where governance and performance against  deemed appropriate, the need for the Company’s investment objective that will shortly come into force that gearing, hedging and the overall and investment policy;   • ensuring that the Board as a whole met, the Board has agreed, following the being presented to the Board, each has a clear understanding of the recommendation of the Remuneration  views of Shareholders; and and Nomination Committee, to recruit who reviewed it against an agreed set • ensuring regular engagement with an additional Board member and have criteria of items to ensure it was suitable each service provider and keeping up agreed to consider candidates based on for the Company’s long-term success  merit and against set objective criteria,  whilst being mindful of the new Listing ### Role of the Board includes:  • reviewing the Board pack ahead of  the meeting; organisation that has no links with the Company, to help identify suitable • providing appropriate opinion,  advice and guidance to the Chairman and fellow Board members; • supporting the Board, Chairman and  roles; and • providing appropriate support at the  ### Aquila European Renewables Plc Annual Report 2022 63 (formerly Aquila European Renewables Income Fund plc) ## CORPORATE GOVERNANCE  ### Board Tenure Internal Control     the Board to monitor the Company’s the Company of having longer-serving to review the effectiveness of the progress towards its objectives and Directors together with progressive  encompass an analysis of the risks    does not believe that length of service in responsibility for the Company’s system Company’s risk management and  of internal controls and for monitoring internal controls systems is monitored from seeking re-appointment but, when  regularly and a formal review, utilising making a recommendation, the Board controls is designed to manage rather a detailed risk assessment programme,  than eliminate the risk of failure to    includes a review of the internal controls mindful that they will reach their ninth provide only reasonable assurance  anniversary simultaneously in April     Board has adopted a succession plan the aspects covered by the guidance and ### Principal Risks    in the key areas of business objectives,  a Director with more than nine years’ accounting, compliance, operations, carried out a robust assessment of the service for re-election at the Company’s and secretarial as being matters of principal risks facing the Company,  particular importance upon which it including those that would threaten its  business model, future performance, In line with corporate governance best   practice, all of the Directors will retire that the existing arrangements, represent and how they are being managed are set and offer themselves for re-election at an appropriate framework to meet  the AGM of the Company to be held on    Directors review the effectiveness of  the internal control system throughout  ### Performance Evaluation During the year the Board engaged ### Financial Aspects of Lintstock, a company independent of ###  the Board and Company, to carry out a performance evaluation of the Board,  its committees, the Chairman and the   ###  Other Aspects of ###   of the Board and its committees, the  individual contribution of Directors, meetings each year, plus additional    meetings there is regular contact Committee then met to discuss the  results of the performance evaluation and the Company Secretary and and the Board also considered a list of       reports separately in writing to the considered, amongst other criteria, the Board concerning risks and internal balance of skills of the Board, training control matters within its remit, including   contribution of individual Directors and  the overall effectiveness of the Board Additional ad hoc reports are received   most recent performance evaluation at all times to the advice and services were positive and demonstrated that of the Company Secretary, who is the Directors showed the necessary responsible to the Board for ensuring  that Board procedures are followed and  that applicable rules and regulations are  ### 64 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## AUDIT AND RISK COMMITTEE REPORT ### David MacLellan Audit and Risk Committee Chair ### Audit and Risk Committee Role and Responsibilities Internal Audit ###      need for an internal audit function and the Board should establish an Audit are set out in its terms of reference, considers that this is not appropriate Committee comprising at least three or,  given the nature and circumstances of in the case of smaller companies, two  the Company as an externally managed   investment company with external  activities during the year:  the Audit and Risk Committee has recent the need for an internal audit function • a detailed analysis of the Company’s    has competence relevant to the sector in underlying assumptions used in ###  Financial Aspects of calculating the fair market valuation ###  of each renewable energy asset; ### Composition  • monitored and reviewed the David MacLellan, Kenneth MacRitchie  Company’s emerging and principal and Patricia Rodrigues are members the Company and for reviewing its risks and internal controls; of the Committee, which is chaired by  • considering the ongoing assessment   of the Company as a going concern; written terms of reference and copies the maintenance of proper accounting of these are available on the Company’s • considered the appointment,   independence, objectivity and information upon which business  remuneration of the auditor; decisions are made and which is used at least one of its members has recent • reviewed the audit plan, annual for publication, and that the assets of    competence relevant to the sector in    •  to external agencies the services implications on the independence of  the auditor arising from the provision fully informed of the internal control  framework established by each relevant  assurance on the effectiveness of internal   Responsibilities in respect of the      ### Aquila European Renewables Plc Annual Report 2022 65 (formerly Aquila European Renewables Income Fund plc) ## AUDIT AND RISK COMMITTEE REPORT ##  ### Internal Audit continued  Calculation of the Investment derived from the present value of the ### Financial Statements and Adviser’s Fees  ###   using reasonable assumptions and Adviser’s fees and concluded that  forecasts for revenues and operating  statements and considered the following       the key estimates and assumptions used  for the year ended 31 December 2022: in the valuation model are appropriate ### and that the investments have been Conclusion with Respect to ### Valuation and Existence  ###  ###  assumptions include the useful life of   the assets, the discount rates, the rate the Annual Report for the year to to designate investments at fair value     is fair, balanced and understandable  the amount of electricity the assets are and provides the information necessary   for Shareholders to assess the investments are fairly valued due to the Company’s business model, strategy uncertainty involved in determining the ### Recognition of Income   Income may not be accrued in the  reviewed the procedures in place for   ensuring the accurate valuation and  through a process of review of the existence of investments, and approved Committee reviewed the Administrator’s  the valuation of the Company’s procedures for recognition of income parties involved in the production of the investments and their existence at the and reviewed the treatment of income  year end with the Investment Adviser,   ### Audit Arrangements ###  Tax Status  Policy which sets out the valuation  was selected as the Company’s auditor  on the realisation of investments at the time of the Company’s launch valuation by the Investment Adviser if investment trust status is not following a competitive process and using fair market valuations of the SPV   companies that hold the Renewable the compliance of the Company during  Energy Infrastructure Investments on the period with the eligibility conditions  an annual basis as at 31 December in order for investment trust status to be audit partner, Richard McGuire, was     appointment of the auditor is reviewed ###  Going Concern annually by the Committee and the principles used to calculate the fair value  Board and is subject to approval by of the assets are based on International going concern assessment and   concluded that it is appropriate for the    out to tender within ten years of the prepared on a going concern basis as  described in the Directors’ Report on the audit partner must be rotated     Committee at its November 2022 Committee meeting, ahead of the commencement of the Company’s  the audit process, materiality scope and  ### 66 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Internal Control and Risk Effectiveness of External Audit During 2021, the Company also engaged with PwC to perform reporting During the year the Committee,  accountant services in relation to  reviewing the effectiveness of the admission of new shares to trading service providers, carefully considered   the Company’s matrix of risks and received a presentation of the audit assessed that this non-audit service is a  plan from the external auditor prior permissible service in accordance with  to the commencement of the audit,   and a presentation of the results of   the audit following completion of the  Company’s principal risks can be found   Committee received feedback from PwC was not engaged to undertake the Company Secretary, Administrator non-audit services for the year ended       ### the above review, the Committee has Committee Evaluation Committee reviewed these reports and agreed that the re-appointment of the   auditor should be recommended to control weaknesses or other issues that considered as part of the annual the Board and the Shareholders of the needed to be brought to the Board’s performance evaluation which was     ### Provision of Non-Audit Services ### Auditors’ Independence   the Committee was operating effectively  Guidance on Audit Committees and has and had the appropriate balance of skills independence of the auditor and the formulated a policy on the provision of  objectivity of the audit process and non-audit services by the Company’s   obligations to Shareholders and as that the Company’s appointed auditor independent auditor to the Company will not be considered for the provision  of certain non-audit services, such as the Committee recommends the accounting and preparation of the re-appointment of PwC and their  ### re-appointment will be put forward David MacLellan  to the Company’s Shareholders at the Audit and Risk Committee Chair provide other non-audit services which  are not restricted by the policy, and this 25 April 2023   there are no issues in respect of the  ### Aquila European Renewables Plc Annual Report 2022 67 (formerly Aquila European Renewables Income Fund plc) ## DIRECTORS’ REMUNERATION REPORT ### Dr Patricia Rodrigues Remuneration and Nomination Committee Chair ### Remuneration and Annual Chair’s Statement During the year, the Remuneration and Nomination Committee reviewed the ###  I am pleased to present the Directors’ remuneration, and it was  Remuneration Report for the year to agreed that the Board’s remuneration, Committee is responsible for 31 December 2022, which has been other than the Chairman’s, be increased reviewing the remuneration payable prepared in accordance with sections  to the Directors, taking into account  In carrying out its review, the Committee the relevant circumstances of the  considered the remuneration of Company, the time commitment and auditor to audit certain sections of the each Board member, taking into relevant experience and skills of the Remuneration Report; where this is consideration their individual role, Board and the average fees paid to the the case the relevant section has been expected time commitment, experience   and skills, and the market expectation of  the remuneration paid to the Company’s ### Kenneth MacRitchie was the Chair of Directors’ Remuneration Board and the remuneration paid to the Remuneration and Nomination During the year under review, each of  |  | the Directors were entitled to receive a | | | --- | --- | --- | | the Remuneration and Nomination |  | No commissions or performance-related | | Committee are David MacLellan and | the Chairman of the Board who receives | payments were awarded or would | |  | EUR 75,000 and the Chair of the Audit | be awarded to the Directors by the | | 2023, Dr Rodrigues became Chair of | and Risk Committee who receives a fee |  | | the Remuneration and Nomination |  |  | | Committee and Mr MacRitchie remains | Directors’ fees are in respect of their | respect of the Company’s accounting | |  | appointment as a non-executive Director | period ended 31 December 2022 will | | Nomination Committee has formal | of the Company and their appointment | be payable out of the assets of the | | written terms of reference and copies |  |  | | of these are available on the Company’s |  | |    do not receive bonuses or other   performance-related remuneration,  share options, pension contributions Committee met once during the year    No Director has waived or agreed to waive any emoluments from the  ### 68 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Remuneration Consideration  Annual fee Annual Annual from 8 April fee from fee from 2019 to 1 January 1 April 31 March 2023 2021 2021 Role EUR EUR EUR Chairman 75,000 75,000 75,000                 ### AGM Approval of the Remuneration Policy and Remuneration Implementation Report    material variation to the Remuneration Policy is proposed and in which case Shareholder approval will be sought to amend the   ### Remuneration Consultants Remuneration consultants were not engaged by the Company during the year under review and in respect of the  ###   ### Remuneration Policy  package for non-executive Directors, which are contained in the Remuneration Policy, are as detailed below: ### Current and Future Policy ### Component Director Purpose of Reward Operation Annual fee Chairman of the Board  Determined by the Company and its subsidiary, Remuneration and   Annual fee Other Directors  Determined by the Directors of the Company and its Remuneration and   Limited Additional fee Chair of each committee  Determined by the time commitment, if deemed Remuneration and appropriate  Expenses All Directors Reimbursement of expenses Submission of appropriate incurred in the performance of supporting documentation to their duties the Chairman or a fellow Board  In accordance with the Company’s Articles of Association, Board fees in aggregate cannot exceed EUR 500,000 per annum,  ### Aquila European Renewables Plc Annual Report 2022 69 (formerly Aquila European Renewables Income Fund plc) # DIRECTORS' REMUNERATION REPORT ## CONTINUED ### Directors' Service Contracts The Directors do not have service contracts with the Company. The Directors have appointment letters which provide for an initial term of three years. In accordance with the AIC Code, the Board will seek annual re-election. ### Conflicts of Interest In accordance with section 439A of the Companies Act 2006, details of the decision-making process for the Board's determination, review and implementation and measures to avoid or manage conflicts of interest, including in considering Board fees, is set out on page 54. ### Statement of Consultations The Company has no employees. Therefore, the process of consulting with employees on the setting of the Remuneration Policy is not applicable. ### Fees Payable on Recruitment The Board will not pay any incentive fees to any person to encourage them to become a Director of the Company. The Board may, however, pay fees to external agencies to assist the Board in the search and selection of Directors. No such external agency was engaged during the year under review. Since year end, the Board engaged Longwater on 23 February 2023 to assist in the search for an additional Board member as part of the Board's succession plan. Longwater have been instructed to consider candidates based on merit and against set objective criteria, whilst being mindful of the new Listing Rule requirements that require certain diversity targets to be met. Longwater has no links to the Company or to the Board. Fees payable to Longwater are GBP 16,000 on engagement and a further GBP 16,000 once a suitable candidate has been engaged. ### Effective Date The Remuneration Policy was effective from 8 June 2020, when it was last approved by Shareholders at the Company's AGM. The Remuneration Policy is once again scheduled to be put to Shareholders at the forthcoming Annual General Meeting to be held on 14 June 2023. If approved, the Remuneration Policy will become effective from that date. ### Remuneration Implementation Report (Table only is Audited) The table below provides a single figure for the total remuneration of each Director for the year ended 31 December 2022, including percentage increase. | Director | Year ended 31 December 2022 | | | Year ended 31 December 2021 | | | Percentage increase^{1} | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Fees EUR | Taxable benefits EUR | Total EUR | Fees EUR | Taxable benefits EUR | Total EUR | 2022 | 2021 | 2020 | | Ian Nolan | 75,000 | – | 75,000 | 75,000 | – | 75,000 | 0.0% | 0.0% | 0.0% | | David MacLellan | 50,000 | – | 50,000 | 49,000 | – | 49,000 | 2.0% | 6.5% | 0.0% | | Kenneth MacRitchie | 43,000 | – | 43,000 | 42,500 | – | 42,500 | 1.2% | 3.7% | 0.0% | | Patricia Rodrigues | 43,000 | – | 43,000 | 42,500 | – | 42,500 | 1.2% | 3.7% | 0.0% | | **Total** | **211,000** | **–** | **211,000** | 209,000 | – | 209,000 | 1.0% | 3.0% | 0.0% | In addition to the above, the Company paid a total of EUR 12,080 in expenses to the Directors (2021: nil). None of the above was paid to third parties. There were no taxable benefits claimed during the years ended 31 December 2022 or 31 December 2021. 1. In accordance with The Companies (Directors' Remuneration Policy and Directors' Remuneration Report) Regulations 2019, these columns have been included to show the annual percentage change over the preceding financial years in respect of each Director. The Board will publish this annual percentage change cumulatively each year until there is an annual percentage change over the five financial years preceding the relevant financial year, in accordance with the new regulation. 70 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information ## Performance The following chart shows the performance of the Company's NAV and share price total return (with a starting NAV and share price of 98 cents and 100 cents respectively) by comparison to the FTSE 250 index over the period since the Company was listed to the current year end. The Company does not have a specific benchmark but has deemed the FTSE 250 index to be the most appropriate comparator for its performance. ![img-9.jpeg](img-9.jpeg) ## Relative Importance of Spend on Pay The following table sets out the total level of Directors' remuneration compared to the distributions to Shareholders by way of dividends and share buybacks, and the operating expenses and investment advisory fees incurred by the Company. | | Year ended 31 December 2022 (EUR '000) | Year ended 31 December 2021 (EUR '000) | | --- | --- | --- | | Spend on Directors' fees | **169** | 146 | | Company's operating expenses and advisory fees | **4,715** | 4,070 | | Dividends paid and payable to Shareholders | **21,165** | 18,146 | The disclosure of the information in the table above is required under The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 with the exception of investment advisory fees and operating expenses, which have been included to show the total expenses of the Company. Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 71 # DIRECTORS' REMUNERATION REPORT ## CONTINUED ### Directors' Holdings (Audited) At 31 December 2022 and at the date of this report the Directors had the following holdings in the Company. There is no requirement for Directors to hold shares in the Company. All holdings were beneficially owned. | | Ordinary Shares as at 31 December 2022 | Ordinary Shares as at 31 December 2021 | | --- | --- | --- | | Ian Nolan | **100,000** | 100,000 | | David MacLellan | **75,000** | 75,000 | | Kenneth MacRitchie | **50,000** | 50,000 | | Patricia Rodrigues | **50,000** | 50,000 | In the period from 1 January 2023 to the date of this report Mr Nolan and Mr MacLellan purchased the following shares: | | Date of transaction | Price paid per share | Shares purchased | Subsequent holding in the Company | | --- | --- | --- | --- | --- | | David MacLellan | 3 February 2023 | EUR 0.90708 | 50,000 | 125,000 | | Ian Nolan | 3 February 2023 | EUR 0.9060 | 1,210 | 150,000 | | | | EUR 0.9075 | 48,790 | | ### Voting on Remuneration Matters at the 2022 AGM and in Respect of Remuneration Policy Shareholders have not expressed any views on the Company's Remuneration Policy or Remuneration Report. ### Other Disclosures At the last AGM, held on 9 June 2022, the following resolution, including Directors' remuneration, was approved: Ordinary Resolution 2: To approve the Directors' Remuneration Policy Report included in the Annual Report. | | Shares voted | Percentage | | --- | --- | --- | | In Favour | 267,314,045 | 100% | | Against | 261 | 0% | | Withheld | 0 | 0% | ### Statement On behalf of the Board, and in accordance with Part 2 of Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, I confirm that the above Remuneration Policy and Remuneration Implementation Report summarises, as applicable, for the year to 31 December 2022: - (a) the major decisions on Directors' remuneration; - (b) any substantial changes relating to Directors' remuneration made during the year; and - (c) the context in which the changes occurred and decisions have been taken. ### Dr Patricia Rodrigues Remuneration and Nomination Committee Chair 25 April 2023 72 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## DIRECTORS’ REPORT ##  ## statements for the year ended 31 December 2022. ### Strategic Report Market Information Management ###   The Board conjunction with the Strategic Report on listed on the London Stock Exchange    to Shareholders for the overall Share is published through a regulatory  ### Corporate Governance  Board has adopted a Schedule of  Matters Reserved for the Board which ###  Retail Distribution of Investment sets out the division of responsibilities ###  Company Shares via Financial between the Board and its various ### Advisers and Other Third-Party committees, the Chairman and the ### Risk and Risk Management Chairs of the various committees, ### Promoters        which investment products can be  promoted to retail investors, certain of external independent advisers, the ### Viability Statement  Board manages risk and governance of      ###  Appointment and ### Legal and Taxation Status ###    distribution of its shares, being shares in  within the meaning of section 833 an investment trust, is not restricted as a and replacement of Directors are   contained in the Company’s Articles of Company conducts its affairs to meet     investment trust under section 1158 affairs so that the shares issued by the   Company can be recommended by appointment and re-election at least Company received initial approval as an   investment trust and the Company must intends to continue to do so for the in accordance with the UK Code of meet eligibility conditions and ongoing  Corporate Governance, the Board has  resolved that all Directors shall stand for ###  Articles of Association  the Directors, the Company has met Amendments to the Company’s   ### Alternative Investment approval as an investment trust for the Ordinary Resolution to be passed by ###           ### Aquila European Renewables Plc Annual Report 2022 73 (formerly Aquila European Renewables Income Fund plc) ## DIRECTORS’ REPORT  ### Management continued   continue in force for an initial period of ### Alternative Investment    per annum plus an additional ### continued   During the year, Apex Group will continue thereafter on a rolling basis annum of the NAV of the Company  and may be terminated following the that exceeds EUR 300 million;  initial period of twelve months’ notice      per annum in respect of each   jurisdiction in which a marketing the Investment Adviser for losses that   the Investment Adviser may incur in the   performance of its duties pursuant to and management of the Company, including the Investment Advisory Agreement the following services:   that are not attributable to the fraud, Investment Adviser fee payable by gross negligence, or wilful default of,    the Investment Adviser determined by Infrastructure Investments in   accordance with the investment policy; An additional fee will be agreed Under the Investment Advisory  Agreement, the following fee is payable    to the Investment Adviser: Renewable Energy Infrastructure on behalf of, the Company to undertake   • additional risk and duties outside the approval and as recommended by the Company up to EUR 300 million;   •     of the Company between EUR 300 either party on not less than six months’  million and EUR 500 million; and  Adviser and making relevant •  may be terminated earlier by the recommendations to the Board; and       Board, and executing transactions appointment, the Investment Adviser    from the Company in relation to      discharge of its duties other than those risk management services to the as announced on 6 August 2021, this arising by reason of gross negligence, Company, including: arrangement was extended by an     If the Ordinary Shares are trading at ### establishment of a risk reporting Investment Adviser a premium to the prevailing NAV, the framework;  Company will issue new Ordinary Shares     compliance with the investment as the Investment Adviser to provide the Ordinary Shares are trading at a policy and the investment  discount to the prevailing NAV at the restrictions in accordance with in respect of the Company, pursuant to relevant time, no new Ordinary Shares   will be issued by the Company and policies and procedures, and  instead the Company will instruct its providing regular updates to the for certain investment advisory services  Board; to the Company, including sourcing the value of the fee due in the relevant   potential opportunities in which the  Company’s exposures, leverage, Company may invest, as well as ongoing Agreement is terminable by either the counterparty and concentration monitoring of the Renewable Energy Investment Adviser or the Company risk; and  giving to the other not less than six     would not expire earlier than the third  advisory services provided to the     executed transactions, carry out its Renewable Energy Infrastructure     assist the Board in establishing, maintaining and reviewing valuation policies for calculating  ### 74 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report In accordance with the Investment Advisory Agreement, the Board agreed to purchase or issue shares to the Investment Adviser     ### Company Secretary and Administrator    ### Alternative Investment Fund Managers Directive     ### Continuing Appointment of Service Providers    and concluded that each offered a satisfactory service and that their continued appointment was in the best long-term interests  ### Share Capital ### Shares issued during the year Number Price paid Date of shares per share        Issue of Ordinary Shares to the Investment Adviser pursuant to the        Issue of Ordinary Shares to the Investment Adviser pursuant to the        ### Purchase of shares to satisfy the Investment Advisory Agreement During the year under review the following shares were purchased on behalf of the Investment Adviser in full satisfaction of the Investment Advisory Agreement: Number Price paid of shares for shares                              ### Aquila European Renewables Plc Annual Report 2022 75 (formerly Aquila European Renewables Income Fund plc) ## DIRECTORS’ REPORT  ### Management continued ### Share Capital continued ### Buyback of shares   Number of Price paid                                                                                                                                                                                                                                                                                ### Voting rights       ### 76 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Restrictions   restrictions on the distribution of dividends and the repayment of capital, and no agreements to which the Company is a party  ### Power to issue shares    At the 2022 AGM the Company’s Shareholders approved a renewal of the authority previously granted at the 2021 AGM to allot   the forthcoming AGM, where authority will be sought to renew this authority up to a maximum of 20% of the Ordinary Shares in      ### Results and Dividend    Dividend amount In respect of the per Ordinary Ex-dividend period to Shares in cents Pay date Record date date                         ###   comprising 3% or more of the issued share capital of the Company: Percentage       1                                                  Percentage       1                               ### Aquila European Renewables Plc Annual Report 2022 77 (formerly Aquila European Renewables Income Fund plc) ## DIRECTORS’ REPORT  ### Settlement of Ordinary Share    that the Company would continue ### Transactions 2022 of its Gross Asset Value, comprised to remain viable under downside Ordinary Share transactions in the  scenarios, including a decline in long   term production and power price     guidance provided in the Company’s ### Shareholder Engagement compliance with its covenants related    the Company expects its 2023 target importance of engaging with the Company has recently negotiated an dividend to be fully covered even if Company’s Shareholders to gauge   their views on topics affecting the    have analysed the covenants of the derived from the sale of electricity,    to attend the Company’s AGM on  Purchase Agreements which cover the  headroom exists in relation to both the      how to do this can be found in the  Continuation Resolution at this Notes to the Notice of AGM which       65% in order to breach the Company’s Company’s broker, Investment Adviser available shortly after the AGM on  and a number of existing shareholders,  year ended 31 December 2022 were the Directors are of the view that the   Continuation Resolution will be passed         factors that support the Director’s view dividend information and other document, based on the aggregate of a positive vote for the Company’s  of investments and cash held, the continuation as detailed below: ### Appointment of Auditors Company has substantial operating •   |  | | is one of the largest participants in | | --- | --- | --- | |  |  | the European renewables market | | having expressed their willingness to | are the payment of dividends, costs | and provides the Company with | |  |  | access to a 10 GW development and | | put forward for re-appointment at the | investments and payment due in respect | construction pipeline, providing | | Company’s AGM and the Board will seek | of the settlement of shares purchased |  | | authority to determine their remuneration | in respect of the Company’s buyback | term growth; | |  |  |  | • | |  | | Company’s portfolio has resulted in | | --- | --- | --- | --- | | Going Concern | balances to fund its commitments to | | high level of earnings visibility and | |  | Guillena, which as at 31 December 2022 | |  | |  | was the Company’s only remaining | | Board to recently announce a 5% | |  | commitment which is intended to be | | increase to its dividend target for | | of the Directors’ assessment of the going |  | | 2023; | |  | | |  | | |  | • | | |  | review of the issues arising following | | dividend yield which compares | |  | the war in Ukraine; high volatility in | | favourably to other renewable funds | |  | commodity prices; the windfall revenue | | providing exposure to European | | this conclusion, the Directors have | clawback on inframarginal technologies | | assets; | | considered its cash position, income, |  | • |  | |  |  | | positioned, with all of its construction | | programme and compliance with the | face the Company’s assets, as discussed | | projects completed, relatively low | |  | in the Chairman’s Statement and | |  | | assets as at 31 December 2022 was | Investment Adviser’s Report on pages 8 | |  | |  |  | | In addition, the Investment Adviser | |  |  | | is also undertaking due diligence in | |  | | | relation to asset life extensions which | |  | | | could realise further upside within the | portfolio; ### 78 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### •  Annual General Meeting Resolution 4 Continuation Vote a proactive approach to capital The following information is  allocation following the EUR 20 important and requires your that the Directors propose an ordinary million share buyback programme resolution at the AGM to be held in 2023, immediate attention. If you are in any  and every fourth AGM thereafter, that doubt about the action you should •  take, you should seek advice from the Company continue its business as a Investment Adviser have your stockbroker, bank manager, closed-ended investment company for a demonstrated strong shareholder   alignment through the commitment adviser authorised under the Financial  of the Investment Adviser to take its Services and Markets Act 2000. the Company continue its business as management fee in shares since IPO,   as well as recent share purchases by  In the event that such a resolution is not select members of the Board and  Company’s lawyers, CMS Cameron employees of the Investment Adviser; draw up proposals for the reconstruction,  and  details of the AGM, the resolutions •  the Company for consideration by proposed and how to vote by proxy are structure, which is up to 30% less than Shareholders at a General Meeting to be described in the Notice of Meeting on peers based on its Ongoing Charges convened for a date not more than six pages 116 to 117 of this Annual Report  months after the date of the meeting at and the explanatory notes on pages 118 which such ordinary resolution was not If the Continuation Resolution is   | not passed, then according to the |  | | | --- | --- | --- | | Company’s articles, the Directors |  |  | | shall within six months of such | | Statement at page 8 to page 11, the | Resolutions relating to the following Continuation Resolution not being Board strongly recommends that items of special business will be passed, put proposals to shareholders Shareholders vote in favour of the proposed at the forthcoming AGM to for the reconstruction, reorganisation     Accordingly, the Directors expect that ### Resolution 3 Remuneration Policy if the Continuation Resolution is not  passed, an event which the Directors  consider to be unlikely, formulating Shareholders will be asked to receive and implementing any such proposals and approve the Remuneration Policy  of the Company set out in full on page operations for a period of at least 12 69 by way of an ordinary resolution at months from the date of approval of the   successfully passed, the Remuneration Policy will apply immediately following ### Auditor Information  Each of the Directors, at the date of the of any proposed material variation to  the Remuneration Policy or should the   resolutions to approve the Remuneration no relevant audit information of which Policy, or the Remuneration the Company’s auditors are unaware; Implementation Report, fail to be passed and at the forthcoming AGM, Shareholder approval will be sought for a proposed     aware of any relevant information and to establish that the Company’s auditors are aware of that   be interpreted in accordance with   ### Aquila European Renewables Plc Annual Report 2022 79 (formerly Aquila European Renewables Income Fund plc) ## DIRECTORS’ REPORT  | Resolutions 12, 13 and 14 | Resolution 15 Renewal of | Resolution 16 Notice of | | --- | --- | --- | | Authority to Issue Ordinary | Authority to Purchase own |  | | Shares and to Dis-apply | Shares |  | | |  | best interests of Shareholders of the | ### Pre-emption Rights the AGM held on 9 June 2022 to make Company to have the ability to call At the forthcoming AGM the Board is   seeking to renew the authority granted Ordinary Shares in issue as at the date  to them at the AGM held on 9 June 2022  will therefore propose resolution 16 at   the AGM to approve the reduction in the Company’s shares in issue as at the  the minimum notice period from 21 to  31 December 2022, the Company did  130,511,365 Ordinary Shares, excluding not utilise its authority to purchase   pre-emption rights when allotting up to  Once approval is granted, the approval  Company purchased for treasury a total would be effective until the Company’s   next AGM, when it is intended that a    will expire at the conclusion of the In accordance with the Shareholders’   Rights Directive, the Company will offer aggregate authority is in keeping recommend that a new authority to the Shareholders the ability to vote by with recent revised guidance from the purchase up to 58,696,830 Ordinary  Investment Association in relation to  accessible to all Shareholders, should a UK investment company and the UK   Pre-Emption Group adapted for the in issue, excluding treasury shares, at the  context of an investment company and  be used by the Board under appropriate  be granted and a resolution to that   in guidance, the Directors are aware  ### Ordinary Shares purchased will either Regulatory Disclosures – that the combined authority to dis-apply ### pre-emption rights in respect of up to be held in treasury or, if the Directors so Information to be Disclosed in 20% of the Company’s issued Ordinary  ### Accordance with Listing Rule Share capital sought under Resolutions expire at the Company’s AGM to be held ### 9.8.4.    offering shareholders the opportunity to  companies to report certain information       10% authority creating an aggregate 20% by way of market purchase as treasury   shares, rather than having to cancel  believe that a higher 20% authority is    the ability to re-issue Ordinary Shares information can be found on page 75 on to grow and further expand its assets, as  the issue of shares undertaken by the well as to lower the Company’s ongoing     Shares will only be issued at a price more By order of the Board in the management of its capital   Ordinary Share at the time of issue, after from treasury at a price less than the   discretion of the Board when it is deemed at the time of their sale unless they to be in the best interests of Shareholders    ### Company did not hold any shares in Jenny Thompson  resolutions will expire at the conclusion      renewed prior to this date via a General  Limited  Company Secretary Ordinary Shares are purchased at the  discretion of the Board and when it 25 April 2023  is deemed to be in the best interests  will be purchased for cancellation or for treasury only when the shares are trading at a discount to the net  ### 80 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN ##     preparing the Annual Report and the  the maintenance and integrity of the   • select suitable accounting policies  the United Kingdom governing the and then apply them consistently; preparation and dissemination of  state whether they have been •   prepared in accordance with UK   adopted international accounting the Directors have prepared the standards, subject to any material ###   departures disclosed and explained Each of the Directors, whose names international accounting standards  and functions are listed in Corporate in conformity with UK adopted • make judgements and accounting  international accounting standards and estimates that are reasonable and best of their knowledge:  prudent; and Act 2006 as applicable to companies  • •   which have been properly prepared the going concern basis unless it is Under Company law, Directors must not in accordance with UK adopted inappropriate to presume that the  international accounting standards,   give a true and fair view of the assets, and fair view of the state of affairs of the    safeguarding the assets of the Company of the Company; and  and hence for taking reasonable steps • the Directors’ Report includes a for the prevention and detection of fraud fair review of the development and  performance of the business and the  position of the Company, together  with a description of the principal   the Company’s transactions and disclose  with reasonable accuracy at any time  and enable them to ensure that the  Remuneration Report comply with the   ### Ian Nolan Chairman 25 April 2023 ### Aquila European Renewables Plc Annual Report 2022 81 (formerly Aquila European Renewables Income Fund plc) ## INDEPENDENT AUDITORS’ REPORT ##  ###  ### Opinion Independence Materiality In our opinion, Aquila European  •  Renewables Plc’s (formerly Aquila   European Renewables Income Fund     •    •     ###  The Scope of Our Audit         •       ###   Key Audit Matters  •            ### Our Audit Approach   ###  Overview   ### Audit Scope   •                 •                ### Basis for Opinion •                      ### Key Audit Matters  •     •   ### 82 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Key audit matter How our audit addressed the key audit matter ### Valuation of investments held at fair value ###   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     ### Ability to continue as a going concern ### (Continuation Resolution)               •    •      •    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       ###        ### Materiality                            ### 84 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### Conclusions Relating to  Strategic Report and  ###  Directors’ Report               •                    •   ### Reporting on Other   ### Information scenarios, including assessing    ###  Directors’ Remuneration       •   been properly prepared in accordance underlying formulae and       ### Corporate Governance •   ###  Statement                     • Performed procedures over                                                  •             •             ### Aquila European Renewables Plc Annual Report 2022 85 (formerly Aquila European Renewables Income Fund plc) ## INDEPENDENT AUDITORS’ REPORT  ##  ### Corporate Governance     ### Statement  •   •                                   ### •  Responsibilities for the ###  Financial Statements and    ###    ### Responsibilities of the   ### Directors for the Financial  •  ###  Statements                                                    going concern, disclosing, as applicable,                    ### Auditors’ Responsibilities  ###  for the Audit of the Financial ###  Statements       •                •     ### 86 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ###   Appointment       •                     •        ### Other Matter                     •  ### Use of This Report     •             •                •  ### Richard McGuire (Senior ###  Other Required Reporting ### Statutory Auditor)  ### Companies Act 2006  •  ### Exception Reporting          •         •           •       •           ### Aquila European Renewables Plc Annual Report 2022 87 (formerly Aquila European Renewables Income Fund plc) ## STATEMENT OF COMPREHENSIVE INCOME | | Notes | For the year ended 31 December 2022 | | | For the year ended 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | | Unrealised gains on investments | 4 | – | 41,778 | 41,778 | – | 19,236 | 19,236 | | Net foreign exchange losses | | – | (13) | (13) | – | (7) | (7) | | Interest income from shareholder loans | 5 | 15,929 | – | 15,929 | 11,783 | – | 11,783 | | Dividend income | 5 | 1,200 | – | 1,200 | – | – | – | | Investment advisory fees | 6 | (3,150) | – | (3,150) | (2,682) | – | (2,682) | | Other expenses | 7 | (1,565) | – | (1,565) | (1,388) | – | (1,388) | | **Profit on ordinary activities before finance costs and taxation** | | **12,414** | **41,765** | **54,179** | 7,713 | 19,229 | 26,942 | | Finance costs | 8 | (75) | – | (75) | (318) | – | (318) | | **Profit on ordinary activities before taxation** | | **12,339** | **41,765** | **54,104** | 7,395 | 19,229 | 26,624 | | Taxation | 9 | – | – | – | – | – | – | | **Profit on ordinary activities after taxation** | | **12,339** | **41,765** | **54,104** | 7,395 | 19,229 | 26,624 | | Return per Ordinary Share - undiluted (cents) | 10 | 3.02 | 10.24 | 13.26 | 2.15 | 5.59 | 7.74 | | Return per Ordinary Share - diluted (cents) | 10 | 3.02 | 10.24 | 13.26 | 2.14 | 5.58 | 7.72 | The notes on pages 92 to 111 are an integral part of these financial statements. The total column of the Statement of Comprehensive Income is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. Return on ordinary activities after taxation is also the "Total comprehensive income for the year". 88 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information ## STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022 | | Notes | As at 31 December 2022 (EUR '000) | As at 31 December 2021 (EUR '000) | | --- | --- | --- | --- | | **Fixed assets** | | | | | Investments at fair value through profit or loss | 4 | **428,641** | 316,953 | | **Current assets** | | | | | Trade and other receivables | 11 | **5,630** | 9,298 | | Cash and cash equivalents | | **19,893** | 94,275 | | | | **25,523** | 103,573 | | **Current liabilities** | | | | | Trade and other payables | 12 | **(2,514)** | (3,083) | | | | **(2,514)** | (3,083) | | **Net current assets** | | **23,009** | 100,490 | | **Net assets** | | **451,650** | 417,443 | | **Capital and reserves: equity** | | | | | Share capital | 13 | **4,082** | 4,069 | | Share premium | | **255,643** | 254,388 | | Special reserve | 14 | **125,082** | 134,393 | | Capital reserve | | **65,618** | 23,853 | | Revenue reserve | | **1,225** | 740 | | **Total Shareholders' funds** | | **451,650** | 417,443 | | **Net assets per Ordinary Share (cents)** | 15 | **110.64c** | 102.58c | The notes on pages 92 to 111 are an integral part of these financial statements. The financial statements were approved by the Board of Directors on 25 April 2023 and signed on its behalf by: **Ian Nolan** Chairman Company number 11932433 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 89 # STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022 | | Notes | Share capital (EUR '000) | Share premium account (EUR '000) | Special reserve (EUR '000) | Capital reserve (EUR '000) | Revenue reserve (EUR '000) | Total (EUR '000) | | --- | --- | --- | --- | --- | --- | --- | --- | | **Opening equity as at 1 January 2022** | | **4,069** | **254,388** | **134,393** | **23,853** | **740** | **417,443** | | Shares issued during the year^{1} | 13 | **13** | **1,313** | – | – | – | **1,326** | | Share issue costs | | – | **(58)** | – | – | – | **(58)** | | Profit for the year | | – | – | – | **41,765** | **12,339** | **54,104** | | Dividend paid | 16 | – | – | **(9,311)** | – | **(11,854)** | **(21,165)** | | **Closing equity as at 31 December 2022** | | **4,082** | **255,643** | **125,082** | **65,618** | **1,225** | **451,650** | | | Notes | Share capital (EUR '000) | Share premium account (EUR '000) | Special reserve (EUR '000) | Capital reserve (EUR '000) | Revenue reserve (EUR '000) | Total (EUR '000) | | **Opening equity as at 1 January 2021** | | 3,170 | 164,351 | 144,450 | 4,624 | 308 | 316,903 | | Shares issued during the year^{1} | 13 | 899 | 91,664 | – | – | – | 92,563 | | Share issue costs | | – | (1,627) | – | – | – | (1,627) | | Profit for the year | | – | – | – | 19,229 | 7,395 | 26,624 | | Dividend paid | 16 | – | – | (10,057) | – | (6,963) | (17,020) | | **Closing equity as at 31 December 2021** | | **4,069** | **254,388** | **134,393** | **23,853** | **740** | **417,443** | The notes on pages 92 to 111 are an integral part of these financial statements. 1. During the year, the Company issued 1,286,293 new Ordinary Shares with gross proceeds of EUR 1.33 million (2021: 89,902,303 shares with gross aggregate proceeds of EUR 92.56 million). 90 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## STATEMENT OF CASH FLOWS ##  Year ended  31 December  2022   (EUR ’000)         54,179          (41,778)       3,668        859                  (71,369)        1,459         —        (1,428) —                 1,326        (58)        (21,165)        (75)                                ### Aquila European Renewables Plc Annual Report 2022 91 (formerly Aquila European Renewables Income Fund plc) ## NOTES TO THE FINANCIAL STATEMENTS ##  | 1. General Information | 2. Basis of Preparation | Characteristics of an | | --- | --- | --- | | Aquila European Renewables Plc |  |  | |  |  |  | |  |  |  | |  |  |  | |  |  | |             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             ###  Accounting for Subsidiary             German Federal Financial Supervisory                                                              ### 92 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report   •                       •               •           ### Going Concern                   •                •                 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               •               ### Aquila European Renewables Plc Annual Report 2022 93 (formerly Aquila European Renewables Income Fund plc) ## NOTES TO THE FINANCIAL STATEMENTS  ##  ### 2. Basis of Preparation Key Estimation and Uncertainty:   ###  Investments at Fair Value  ### Critical Accounting Judgements,   ### Estimates and Assumptions                                ### Key Judgements           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                                          ### 94 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### New Standards, Interpretations    ### and Amendments Adopted from Policies  ###  Financial Instruments   ### Financial Assets                      ### New Standards and Amendments   ###                   ###  Taxation         ### Amendments to IAS 1:   ###    ### Current or Non-current          ###          ###  Deferred Taxation    ###  payable or recoverable on differences  ###    ###  Recognition, Derecognition   ###                 ###    ###    ###                                ### Aquila European Renewables Plc Annual Report 2022 95 (formerly Aquila European Renewables Income Fund plc) ## NOTES TO THE FINANCIAL STATEMENTS  ##  ###  ### Deferred Taxation     ### Segmental Reporting     ### Income       ### Expenses    ###       ### Foreign Currency       ### Cash and Cash Equivalents   ### Share Capital, Special Reserve and Share Premium     ### 96 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information #### 4. Investments at Fair Value Through Profit or Loss | | As at 31 December 2022 | As at 31 December 2021 | | --- | --- | --- | | | Investments at Fair Value Through Profit or Loss (EUR '000) | Investments at Fair Value Through Profit or Loss (EUR '000) | | **(a) Summary of valuation** | | | | Analysis of closing balance: | | | | Investments held at fair value through profit or loss | **428,641** | 316,953 | | **Total investments** | **428,641** | 316,953 | | **(b) Movements during the year:** | | | | Opening balance of investments, at cost | **293,068** | 225,333 | | Purchases at cost | **71,369** | 87,241 | | Repayments during the year | **(1,459)** | (19,506) | | **Cost of investments** | **362,978** | 293,068 | | Revaluation of investments to fair value: | | | | Unrealised movement in fair value of investments | **65,663** | 23,885 | | **Balance of capital reserve - investments held** | **65,663** | 23,885 | | **Fair value of investments** | **428,641** | 316,953 | | **(c) Gains on investments in year (per Statement of Comprehensive Income)** | | | | Movement in unrealised revaluation of investments held | **41,778** | 19,236 | | **Gains on investments** | **41,778** | 19,236 | The fair value of the Company's equity and the Shareholder loans investments in HoldCo are determined by the underlying fair values of the SPV investments, which are not traded and contain unobservable inputs. As explained in note 2, the Company has made a judgement to fair value both the equity and Shareholder loan investments together. As such, the Company's equity and the Shareholder loan investments in HoldCo have been classified as Level 3 in the fair value hierarchy. #### Fair Value Measurements IFRS 13 requires disclosure of fair value measurement by level. The level of fair value hierarchy within the financial assets or financial liabilities is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the following three levels: ##### Level 1 The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date. ##### Level 2 Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly. ##### Level 3 Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability. The classification of the Company's investments held at fair value is detailed in the table below: | | As at 31 December 2022 | | | | As at 31 December 2021 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Level 1 (EUR '000) | Level 2 (EUR '000) | Level 3 (EUR '000) | Total (EUR '000) | Level 1 (EUR '000) | Level 2 (EUR '000) | Level 3 (EUR '000) | Total (EUR '000) | | Investments at fair value through profit and loss | – | – | **428,641** | **428,641** | – | – | 316,953 | 316,953 | | | – | – | **428,641** | **428,641** | – | – | 316,953 | 316,953 | Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 97 ## NOTES TO THE FINANCIAL STATEMENTS  ##  ###  ### Fair Value Measurements  ###     Year ended   31 December  2022  (EUR ’000)  Opening balance 316,953        71,369         (1,459)      41,778    428,641   ### Valuation Methodology         ### Valuation Assumptions As at 31 December 2022                            ### 98 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information | **Taxation rates** | Underlying country-specific tax rates are derived from due diligence reports from leading tax consulting firms. | | --- | --- | | **Capital expenditure** | Based on the contractual position (e.g. EPC agreement), where applicable. | ### Valuation Sensitivities The fair value of the Company's investment in HoldCo is ultimately determined by the underlying fair values of the SPV investments. As such, sensitivity analysis is produced to show the impact of changes in key assumptions adopted to arrive at the SPV valuation. For each of the sensitivities, it is assumed that potential changes occur independently of each other with no effect on any other base case assumption, and that the number of investments in the SPVs remains static throughout the modelled life. The NAV per share impacts from each sensitivity are shown below: #### (i) Discount Rates The DCF valuation of the SPV investments represents the largest component of the NAV of the Company and the key sensitivities are considered to be the discount rate used in the DCF valuation and assumptions. The weighted average valuation discount rate applied to calculate the SPV valuation is 7.2% at 31 December 2022. An increase or decrease in this rate by 0.5% at project level has the following effect on valuation: | Discount rate | NAV per share impact in (EUR cents) | -0.5% change (EUR '000) | Total NAV (EUR '000) | +0.5% change (EUR '000) | NAV per share impact in (EUR cents) | | --- | --- | --- | --- | --- | --- | | Valuation as of 31 December 2022 | **4.8** | **471,283** | **451,650** | **433,174** | **(4.5)** | #### (ii) Power Price Long-term power price forecasts are provided by leading market consultants and are updated quarterly. The sensitivity below assumes a 10% increase or decrease in merchant power prices relative to the base case for every year of the asset life. The sensitivity considers a flat 10% movement in power prices for all years, i.e. the effect of adjusting the forecast electricity price assumptions in each of the jurisdictions applicable to the SPV down by 10% and up by 10% from the base case assumptions for each year throughout the operating life of the SPV. Note the Company intends to renew power price hedges (e.g. in the form of PPAs or other mechanisms) before the existing contracts (PPAs and government regulated tariffs) expire. This rolling hedge strategy is not reflected in the sensitivities illustrated above. When renewing the existing hedges, the Company's power price exposure and, therefore, its sensitivity towards power prices, decreases. A change in the forecast electricity price assumptions by plus or minus 10% has the following effect on valuation: | Power price | NAV per share impact (EUR cents) | -10.0% (EUR '000) | Total NAV value (EUR '000) | +10.0% (EUR '000) | NAV per share impact (EUR cents) | | --- | --- | --- | --- | --- | --- | | Valuation as of 31 December 2022 | **(10.6)** | **408,308** | **451,650** | **495,715** | **10.8** | #### (iii) Energy Yield The base case assumes a "P50' level of output. The P50 output is the estimated annual amount of electricity generation (in MW) that has a 50% probability of being exceeded both in any single year and over the long term and a 50% probability of being under achieved. Hence the P50 is the expected level of generation over the long term. The sensitivity illustrates the effect of assuming "P90 10 years" (a downside case) and "P10 10 years" (an upside case) energy production scenarios. A P90 10 years downside case assumes the average annual level of electricity generation that has a 90% probability of being exceeded over a ten-year period. A P10 10 years upside case assumes the average annual level of electricity generation that has a 10% probability of being exceeded over a ten-year period. This means that the SPV aggregate production outcome for any given ten-year period would be expected to fall somewhere between these P90 and P10 levels with an 80% confidence level, with a 10% probability of it falling below that range of outcomes and a 10% probability of it exceeding that range. The sensitivity does not include the portfolio effect which would reduce the variability because of the geographical diversification. The sensitivity is applied throughout the next ten years. Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 99 # NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2022 ### 4. Investments Held at Fair Value Through Profit or Loss continued #### Valuation Sensitivities continued ##### (iii) Energy Yield continued The table below shows the sensitivity of the SPV value to changes in the energy yield applied to cash flows from project companies in the SPV as per the terms P90, P50 and P10 explained above. | Energy yield | NAV per share impact (EUR cents) | P90 10 years (EUR '000) | Total NAV value (EUR '000) | P10 10 years (EUR '000) | NAV per share impact (EUR cents) | | --- | --- | --- | --- | --- | --- | | Valuation as of 31 December 2022 | **(8.9)** | **415,175** | **451,650** | **488,123** | **9.0** | ##### (iv) Inflation Rates The projects' income streams are principally a mix of government regulated tariffs, fixed-price PPAs and merchant revenues. Government regulated tariffs and fixed-price PPAs tend not to be inflation linked, whilst merchant revenues are generally subject to inflation. The current contractual life of government regulated tariffs and fixed-price PPAs are shorter than their respective asset lives, meaning, from a valuation perspective, the assets are more exposed to merchant revenues in the late asset life. As described earlier, the Company intends to renew power price hedges (e.g. in the form of PPAs or other mechanisms) before the existing contracts (PPAs and government-regulated tariffs) expire. This rolling hedge strategy is not reflected in the sensitivities illustrated above. The projects' management and maintenance expenses typically move with inflation; however, debt payments are fixed. This results in the SPV returns and valuation being positively correlated to inflation. The SPVs valuation assumes long-term inflation of 2.0% p.a. The sensitivity illustrates the effect of a 0.5% decrease and a 0.5% increase from the assumed annual inflation rates in the financial model for each year throughout the operating life of the SPV. | Inflation rates | NAV per share impact (EUR cents) | -0.5% (EUR '000) | Total NAV value (EUR '000) | +0.5% (EUR '000) | NAV per share impact (EUR cents) | | --- | --- | --- | --- | --- | --- | | Valuation as of 31 December 2022 | **(4.3)** | **434,122** | **451,650** | **470,280** | **4.6** | ##### (v) Asset Life In general, an operating life of 25 to 30 years for onshore wind energy and 30 years for solar PV is assumed. In individual cases, a longer operating life is assumed where the contractual set-up (i.e. O&M agreement with availability guarantee) supports such an assumption. The operating lives of hydropower assets are estimated in accordance with their concession term. The sensitivity below shows the valuation impact from a one-year adjustment to the asset life across the portfolio. | Asset life | NAV per share impact (EUR cents) | -1 year (EUR '000) | Total NAV value (EUR '000) | +1 year (EUR '000) | NAV per share impact (EUR cents) | | --- | --- | --- | --- | --- | --- | | Valuation as of 31 December 2022 | **(2.4)** | **441,663** | **451,650** | **458,869** | **1.8** | ##### (vi) Operating Expenses The sensitivity shows the effect of a 10.0% decrease and a 10.0% increase to the base case for annual operating costs for the SPV, in each case assuming that the change to the base case for operating costs occurs with effect from 1 January 2023 and that change is applied for the remaining life of the assets. An increase or decrease in operating expenses by 10% at SPV level has the following effect on valuation: | Operating expenses | NAV per share impact (EUR cents) | -10.0% (EUR '000) | Total NAV value (EUR '000) | +10.0% (EUR '000) | NAV per share impact (EUR cents) | | --- | --- | --- | --- | --- | --- | | Valuation as of 31 December 2022 | **3.6** | **466,393** | **451,650** | **436,281** | **(3.7)** | 100 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information ## 5. Income from Investments | Income from investments | For the year ended 31 December 2022 (EUR '000) | For the year ended 31 December 2021 (EUR '000) | | --- | --- | --- | | Interest income from Shareholder loans | **15,929** | 11,783 | | Dividend income | **1,200** | – | | **Total income** | **17,129** | 11,783 | ## 6. Investment Advisory Fees | | For the year ended 31 December 2022 | | | For the year ended 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | | Investment advisory fees | **3,150** | – | **3,150** | 2,682 | – | 2,682 | Under the Investment Advisory Agreement, the following fee is payable to the Investment Adviser: - a) 0.75% per annum of NAV (plus VAT) of the Company up to EUR 300 million; - b) 0.65% per annum of NAV (plus VAT) of the Company between EUR 300 million and EUR 500 million; and - c) 0.55% per annum of NAV (plus VAT) of the Company above EUR 500 million. During the first two years of its appointment, the Investment Adviser has undertaken to apply its fee (net of any applicable tax) in subscribing for, or acquiring, Ordinary Shares. If the Ordinary Shares are trading at a premium to the prevailing NAV, the Company will issue new Ordinary Shares to the Investment Adviser. If, however, the Ordinary Shares are trading at a discount to the prevailing NAV at the relevant time, no new Ordinary Shares will be issued by the Company and instead the Company will instruct its broker to acquire Ordinary Shares to the value of the fee due in respect of the relevant period. The current Investment Adviser fee arrangement with Aquila Capital Investmentgesellschaft was extended, whereby the Investment Adviser fee is fully paid in the shares of the Company for an additional two years until 30 June 2023. The Investment Adviser is also entitled to be reimbursed for certain expenses under the Investment Advisory Agreement. These include out-of-pocket expenses properly incurred by the Investment Adviser in providing services, including transactional, organisational, operating and/or travel expenses. ### Share-Based Payments The Company settled investment advisory fees by issuing or purchasing Ordinary Shares. The Company has issued and purchased the following shares to settle investment advisory fees in respect of the year under review: | In respect of the year ended 31 December 2022 | Investment advisory fees (EUR) | Fair value of issue/ purchase price (cents) | Number of shares | Date of transaction | Issued/ purchased | | --- | --- | --- | --- | --- | --- | | 31 March 2022 | **566,465** | **102.11** | **554,773** | **1 June 2022** | **Issued** | | 31 March 2022 | **183,233** | **103.76** | **176,300** | **1 June 2022** | **Purchased** | | 30 June 2022 | **772,650** | **101.00** | **760,053** | **8 August 2022** | **Purchased** | | 30 September 2022 | **812,545** | **94.73** | **852,206** | **9 November 2022** | **Purchased** | | 31 December 2022 | **810,308** | **90.00** | **900,340** | **3 February 2023** | **Purchased** | Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 101 ## NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2022 ### 6. Investment Advisory Fees continued #### Share-Based Payments continued | In respect of the year ended 31 December 2021 | Investment advisory fees (EUR) | Fair value of issue/ price (cents) | Number of shares | Date of transaction | Issued/ purchased | | --- | --- | --- | --- | --- | --- | | 31 March 2021 | 587,524 | 102.13 | 575,271 | 17 May 2021 | Issued | | 30 June 2021 | 587,156 | 100.61 | 583,596 | 11 August 2021 | Issued | | 30 September 2021 | 747,975 | 102.28 | 731,301 | 10 November 2021 | Issued | | 31 December 2021 | 759,537 | 103.83 | 731,520 | 9 February 2022 | Issued | ### 7. Other Expenses | | For the year ended 31 December 2022 | | | For the year ended 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | | Secretary and administrator fees | 254 | – | 254 | 227 | – | 227 | | Tax compliance | 132 | – | 132 | 32 | – | 32 | | Directors' fees | 169 | – | 169 | 146 | – | 146 | | Directors' other employment costs | 12 | – | 12 | 16 | – | 16 | | Broker retainer | 87 | – | 87 | 53 | – | 53 | | Audit fees - statutory^{1} | 352 | – | 352 | 237 | – | 237 | | AIFM fees | 147 | – | 147 | 112 | – | 112 | | Registrar's fees | 23 | – | 23 | 18 | – | 18 | | Marketing fees | 67 | – | 67 | 70 | – | 70 | | FCA and listing fees | 61 | – | 61 | 57 | – | 57 | | Legal fees | 162 | – | 162 | 157 | – | 157 | | ESG rating fees | 33 | – | 33 | 107 | – | 107 | | Other expenses | 66 | – | 66 | 156 | – | 156 | | **Total expenses** | **1,565** | **–** | **1,565** | **1,388** | **–** | **1,388** | ### 8. Finance Costs | | For the year ended 31 December 2022 | | | For the year ended 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | | Interest charges | 72 | – | 72 | 317 | – | 317 | | Bank charges | 3 | – | 3 | 1 | – | 1 | | **Total** | **75** | **–** | **75** | **318** | **–** | **318** | 1. The GBP equivalent of the statutory audit fees was GBP 246,000 (2021: GBP 201,300) including VAT of GBP 49,200 (2021: GBP 33,550). In the prior year, the auditors received an additional amount of GBP 18,000 (VAT of GBP 3,000) for non-audit services in relation to reporting accountant services for admission of new shares to trading on the London Stock Exchange, which have been treated as a capital expense and included in "share issue costs" disclosed in the Statement of Changes in Equity. There are no non-audit services in relation to the current year. 102 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information ## 9. Taxation ### (a) Analysis of Tax Charge in the Year | | For the year ended 31 December 2022 | | | For the year ended 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | | Total tax charge for the year (see note 9(b)) | – | – | – | – | – | – | ### (b) Factors Affecting Total Tax Charge for the Year The effective UK corporation tax rate applicable to the Company for the year is 19%. The tax charge differs from the charge resulting from applying the standard rate of UK corporation tax for an investment trust company. The differences are explained below: | | For the year ended 31 December 2022 | | | For the year ended 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | Revenue (EUR '000) | Capital (EUR '000) | Total (EUR '000) | | Profit on ordinary activities before taxation | **12,339** | **41,765** | **54,104** | 7,395 | 19,229 | 26,624 | | Corporation tax at 19% | **2,344** | **7,935** | **10,279** | 1,405 | 3,654 | 5,059 | | Effects of: | | | | | | | | Gain on investments held at fair value not (taxable)/allowable | – | (7,937) | (7,937) | – | (3,655) | (3,655) | | Foreign exchange loss not allowable | – | 2 | 2 | – | 1 | 1 | | Dividend income not taxable | (228) | – | (228) | – | – | – | | Expenditure not deductible for tax purposes | 13 | – | 13 | 10 | – | 10 | | Movement in management expenses not utilised/deferred tax not recognised | 19 | – | 19 | 20 | – | 20 | | Impact of tax-deductible interest distributions | (2,148) | – | (2,148) | (1,435) | – | (1,435) | | **Total tax charge for the year** | – | – | – | – | – | – | Investment companies that have been approved by HM Revenue & Customs under section 1158 of the Corporation Tax Act 2010 are exempt from tax on capital gains. Due to the Company's status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided for deferred tax on any capital gains or losses arising on the revaluation of investments. The Company has unrelieved excess management expenses of EUR 1,273,191 (2021: EUR 1,121,391). It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and therefore no deferred tax asset has been recognised. The unrecognised deferred tax asset calculated using a tax rate of 25% (2021: 25%) amounts to EUR 318,298 (2021: EUR 280,348). The March 2021 Budget announced an increase to the main rate of corporation tax to 25% from 1 April 2023. This increase in the standard rate of corporation tax was substantively enacted on 24 May 2021 and became effective from 2 June 2021. ## 10. Return per Ordinary Share | Income from investments | For the year ended 31 December 2022 | For the year ended 31 December 2021 | | --- | --- | --- | | Revenue return after taxation (EUR '000) | **12,339** | 7,395 | | Capital profit return after taxation (EUR '000) | **41,765** | 19,229 | | Total net return (EUR '000) | **54,104** | 26,624 | | Weighted average number of Ordinary Shares - undiluted | **407,926,535** | 344,137,679 | | Weighted average number of Ordinary Shares - diluted | **407,926,535** | 344,869,199 | Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 103 ## NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2022 ### 10. Return per Ordinary Share continued | Weighted average number of shares used as the denominator | Number of shares | | | --- | --- | --- | | | For the year ended 31 December 2022 | For the year ended 31 December 2021 | | Weighted average number of Ordinary Shares used as the denominator in calculating basic earnings per share | **407,926,535** | 344,137,679 | | Ordinary Shares issued after the year end in settlement of investment advisory fees earned during the year | – | 731,520 | | Weighted average number of Ordinary Shares and potential Ordinary Shares used as the denominator in calculating diluted earnings per share | **407,926,535** | 344,869,199 | ### 11. Trade and Other Receivables | | As at 31 December 2022 (EUR '000) | As at 31 December 2021 (EUR '000) | | --- | --- | --- | | Interest due from Shareholder loans | **5,542** | 7,811 | | Intercompany receivables | – | 1,384 | | Prepaid expenses | **88** | 103 | | **Total** | **5,630** | 9,298 | ### 12. Trade and Other Payables | | As at 31 December 2022 (EUR '000) | As at 31 December 2021 (EUR '000) | | --- | --- | --- | | Accrued expenses | **1,291** | 1,078 | | Intercompany payable | **645** | – | | Deferred consideration payable | **578** | 2,005 | | **Total** | **2,514** | 3,083 | ### 13. Share Capital | | As at 31 December 2022 | | As at 31 December 2021 | | | --- | --- | --- | --- | --- | | | No. of shares | (EUR '000) | No. of shares | (EUR '000) | | Allotted, issued and fully paid: | | | | | | Ordinary Shares of 1 cent each ('Ordinary Shares') | **408,225,705** | **4,082** | 406,939,412 | 4,069 | | **Total** | **408,225,705** | **4,082** | 406,939,412 | 4,069 | The Ordinary Shares shall carry the right to receive the profits of the Company available for distribution and determined to be distributed by way of interim or final dividends at such times as the Directors may determine in accordance with the Articles of the Company. The holders of Ordinary Shares have the right to receive notice of, and to attend and vote at, General Meetings of the Company. During the year, the Company issued 1,286,293 new Ordinary Shares with gross proceeds of EUR 1.33 million (2021: 89,902,303 with gross aggregate proceeds of EUR 92.56 million). The current year's issuance of new Ordinary Shares relates to the settlement of the Investment Adviser's fees of EUR 1.33 million (2021: EUR 2.5 million for 2,477,872 Ordinary Shares). 104 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information | For the year ended 31 December 2022 | Shares in issue at the beginning of the year | Shares subscribed | Shares redeemed | Shares in issue at the end of the year | | --- | --- | --- | --- | --- | | Ordinary Shares | **406,939,412** | **1,286,293** | – | **408,225,705** | | For the year ended 31 December 2021 | Shares in issue at the beginning of the year | Shares subscribed | Shares redeemed | Shares in issue at the end of the year | | Ordinary Shares | 317,037,109 | 89,902,303 | – | 406,939,412 | Since the year end, the Company has not issued further Ordinary Shares (2021: 731,520) to the Company's Investment Adviser, in relation to advisory fees payable for the quarter ended 31 December 2022. #### 14. Special Reserve As indicated in the Company's prospectus dated 10 May 2019, following admission of the Company's Ordinary Shares to trading on the London Stock Exchange, the Directors applied to the Court and obtained a judgement on 30 July 2019 to cancel the amount standing to the credit of the share premium account of the Company. The amount of the share premium account cancelled and credited to a special reserve was EUR 149,675,608. #### 15. Net Assets per Ordinary Share Net assets per Ordinary Share as at 31 December 2022 is based on EUR 451,650,000 (2021: EUR 417,443,000) of net assets of the Company attributable to the 408,225,705 (2021: 406,939,412) Ordinary Shares in issue as at 31 December 2022. #### 16. Dividend Paid The Company has paid the following interim dividends in respect of the year under review: | Total dividends paid in the year | For the year ended 31 December 2022 | | For the year ended 31 December 2021 | | | --- | --- | --- | --- | --- | | | Cents per Ordinary Share | Total (EUR '000) | Cents per Ordinary Share | Total (EUR '000) | | 31 December 2021 interim - paid 11 March 2022 (2021: 12 March 2021) | **1.25c** | **5,096** | 1.25c | 3,970 | | 31 March 2022 interim - paid 17 June 2022 (2021: 18 June 2021) | **1.3125c** | **5,351** | 1.25c | 3,978 | | 30 June 2022 interim - paid 2 September 2022 (2021: 3 September 2021) | **1.3125c** | **5,353** | 1.25c | 3,985 | | 30 September 2022 interim - paid 2 December 2022 (2021: 3 December 2021) | **1.3125c** | **5,365** | 1.25c | 5,087 | | **Total** | **5.1875c** | **21,165** | 5.00c | 17,020 | The dividend relating to the year ended 31 December 2022, which is the basis on which the requirements of section 1159 of the Corporation Tax Act 2010 are considered, is detailed below: | Total dividends declared in the year | For the year ended 31 December 2022 | | For the year ended 31 December 2021 | | | --- | --- | --- | --- | --- | | | Cents per Ordinary Share | Total (EUR '000) | Cents per Ordinary Share | Total (EUR '000) | | 31 March 2022 interim - paid 17 June 2022 (2021: 18 June 2021) | **1.3125c** | **5,351** | 1.25c | 3,978 | | 30 June 2022 interim - paid 2 September 2022 (2021: 3 September 2021) | **1.3125c** | **5,353** | 1.25c | 3,985 | | 30 September 2022 interim - paid 2 December 2022 (2021: 3 December 2021) | **1.3125c** | **5,365** | 1.25c | 5,087 | | 31 December 2022 interim - paid 17 March 2023 (2021: 11 March 2022) | **1.3125c** | **5,334** | 1.25c | 5,096 | | **Total** | **5.2500c** | **21,403** | 5.00c | 18,146 | 1. Not included as a liability in the year ended 31 December 2022 financial statements. Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 105 # NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2022 ## 17. Financial Risk Management The Investment Adviser, AIFM and the Administrator report to the Board on a quarterly basis and provide information to the Board which allows it to monitor and manage financial risks relating to its operations. The Company's activities expose it to a variety of financial risks: market risk (including price risk, interest rate risk and foreign currency risk), credit risk and liquidity risk. These risks are monitored by the AIFM. Each risk and its management is summarised below. ### Market Risk The value of the investments will be a function of the discounted value of their expected future cash flows, and as such will vary with, inter alia, movements in interest rates, market prices and the competition for such assets. The Investment Adviser carries out a full valuation on a quarterly basis, which takes into account market risks. The sensitivity of the investment valuation due to market risk is shown in note 4 on pages 97 to 100. ### (i) Currency Risk Foreign currency risk is defined as the risk that the fair values of future cash flows will fluctuate because of changes in foreign exchange rates. The Company's financial assets and liabilities are denominated in euros and substantially all its revenues and expenses are in euros. The Company is not considered to be materially exposed to foreign currency risk. ### (ii) Interest Rate Risk The Company's interest rate risk on interest bearing financial assets is limited to interest earned on Shareholder loans. The Board considers that, as Shareholder loan investments bear interest at a fixed rate, they do not carry any interest rate risk. The Company's interest and non-interest bearing assets and liabilities as at 31 December 2022 are summarised below: | Assets | Interest bearing (EUR'000) | Non-interest bearing (EUR'000) | Total (EUR'000) | | --- | --- | --- | --- | | Cash and cash equivalents | – | 19,893 | 19,893 | | Trade and other receivables | – | 5,630 | 5,630 | | Investments at fair value through profit or loss | 248,451 | 180,190 | 428,641 | | **Total assets** | **248,451** | **205,713** | **454,164** | | **Liabilities** | | | | | Trade and other payables | – | (2,514) | (2,514) | | **Total liabilities** | **–** | **(2,514)** | **(2,514)** | In the tables above, the interest bearing asset value for investments at fair value through profit or loss relates to the face value of debt investments. The Company's interest and non-interest bearing assets and liabilities as at 31 December 2021 are summarised below: | Assets | Interest bearing (EUR'000) | Non-interest bearing (EUR'000) | Total (EUR'000) | | --- | --- | --- | --- | | Cash and cash equivalents | – | 94,275 | 94,275 | | Trade and other receivables | – | 9,299 | 9,299 | | Investments at fair value through profit or loss | 193,078 | 123,875 | 316,953 | | **Total assets** | **193,078** | **227,449** | **420,527** | | **Liabilities** | | | | | Trade and other payables | – | (3,083) | (3,083) | | **Total liabilities** | **–** | **(3,083)** | **(3,083)** | ### (iii) Price Risk Price risk is defined as the risk that the fair value of a financial instrument held by the Company will fluctuate. Investments are measured at fair value through profit or loss. As of 31 December 2022 the Company held investments with an aggregate fair value of EUR 428,641,000 (2021: EUR 316,953,000). All other things being equal, the effect of a 10% increase or decrease in the share prices of the investments held at the year end would have been an increase or decrease of EUR 42,864,000 (2021: EUR 31,695,000) in the profit after taxation for the year ended 31 December 2022 and the Company's net assets at 31 December 2022. The sensitivity of the investment valuation due to price risk is shown further in note 4 on pages 97 to 100. 106 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information ## Credit Risk Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfil its contractual obligations. The Company is exposed to credit risk in respect of trade and other receivables, cash at bank and Shareholder loan investments. The Company's credit risk exposure is minimised by dealing with financial institutions with investment grade credit ratings and making Shareholder loan investments which are equity in nature. The Company's Shareholder loan investments in HoldCo are secured by underlying renewal investments and as such these Shareholder loans are not exposed to credit risk. No balances are past due or impaired. | | As at 31 December 2022 (EUR '000) | As at 31 December 2021 (EUR '000) | | --- | --- | --- | | Investments at fair value through profit or loss - Shareholder loan investments | **248,451** | 193,078 | | Trade and other receivables | **5,630** | 9,298 | | Cash and cash equivalents | **19,893** | 94,275 | | **Total** | **273,974** | 296,651 | In the table above, the value for investments at fair value through profit or loss relates to the face value of debt investments. The table below shows the cash balances of the Company and the credit rating for each counterparty: | | As at 31 December 2022 (EUR '000) | As at 31 December 2021 (EUR '000) | | --- | --- | --- | | Royal Bank of Scotland | A-2 / BBB-S&P Rating **2,170** | 4,074 | | EFG International AG - Daily liquid fund | A / F1-Fitch Rating **15,183** | 45,203 | | Royal Bank of Scotland International | A- under S&P Rating **2,540** | 44,998 | | **Total** | **19,893** | 94,275 | ## Liquidity Risk Liquidity risk is the risk that the Company may not be able to meet a demand for cash or fund an obligation when due. The Investment Adviser, AIFM and the Board continuously monitor forecast and actual cash flows from operating, financing and investing activities to consider payment of dividends, repayment of the Company's Shareholder loans or further investing activities. Financial liabilities by maturity as at 31 December 2022 are shown below: | | Less than 1 year (EUR'000) | 1-5 years (EUR'000) | 5+ years (EUR'000) | Total (EUR'000) | | --- | --- | --- | --- | --- | | Trade and other payables | **(2,514)** | – | – | **(2,514)** | | **Total** | **(2,514)** | – | – | **(2,514)** | Financial liabilities by maturity as at 31 December 2021 are shown below: | | Less than 1 year (EUR'000) | 1-5 years (EUR'000) | 5+ years (EUR'000) | Total (EUR'000) | | --- | --- | --- | --- | --- | | Trade and other payables | (3,083) | – | – | (3,083) | | **Total** | **(3,083)** | – | – | **(3,083)** | As at 31 December 2022, across the Company's investment portfolio there is approximately EUR 131.2 million (2021: EUR 144.3 million) of non-recourse, project debt (on a proportional basis) at the SPV level. Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 107 ## NOTES TO THE FINANCIAL STATEMENTS  ##  ### 17. Financial Risk Management  ### Capital and Risk Management                ### 18. Transactions with the Investment Adviser and Related Party Transactions           Year ended  31 December  2022   (EUR)   75,000        50,000   43,000        43,000       at 31 December   2022       100,000       75,000   50,000        50,000   ### 108 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ### 19. Distributable Reserves     ### 20. Commitments and Contingencies       ### 21. Unconsolidated Subsidiaries and Associates     for the    year ended period ended       31 December  31 December      2022  2022      (EUR million)  (EUR million)      43.0  180.2                          SPV       for the    year ended period ended       31 December  31 December      2022  2022      (EUR million)  (EUR million)      4.3  27. 2                       (0.0)  53.0                0.1  4.2                0.1  4.2                0.2  2.1            ### Aquila European Renewables Plc Annual Report 2022 109 (formerly Aquila European Renewables Income Fund plc) ## NOTES TO THE FINANCIAL STATEMENTS  ##  ### 21. Unconsolidated Subsidiaries and Associates    for the    year ended period ended       31 December  31 December      2022  2022      (EUR million)  (EUR million)      (1.7)  40.2                2.2  56.7                  0.4  24.1                (0.4)  52.4               2.1  37.5                0.0  0.0                         for the    year ended period ended       31 December  31 December      2022  2022      (EUR million)  (EUR million)      (0.4)  51.3                   132.0 NOK  1,069.7 NOK           in Tesla   ### 110 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report     ### 22. Post Balance Sheet Events ### Share Buyback Programme    ### Revolving Credit Facility (“RCF”)  ### Guillena Completion  ### The Rock: Engineering, Procurement and Construction Management Agreement   ### Dividend Payment  ### Purchase of Shares for the Investment Adviser    ### Aquila European Renewables Plc Annual Report 2022 111 (formerly Aquila European Renewables Income Fund plc) ## ALTERNATIVE PERFORMANCE MEASURES ("APMS") In reporting financial information the Company presents APMs, which are not defined or specified under the requirements of IFRS. The Company believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the Company. The Company's APMs are set out below and are cross-referenced where relevant to the financial inputs used to derive them as contained in other sections of the Annual Report. An additional Dividend Cover calculation has been added which is based on the consolidated cashflow of the Company and its HoldCo. This additional calculation has been included to provide an alternative method to interpret and challenge the Company's dividend. This year's APMs also include annualised NAV return which has been included to provide investors with an indication of the return if they had invested at the time of IPO. ### (Discount)/Premium The amount, expressed as a percentage, by which the share price is more than the NAV per Ordinary Share. | | | Page | As at 31 December 2022 | As at 31 December 2021 | | --- | --- | --- | --- | --- | | NAV per Ordinary Share (cents) | a | 2 | **110.6** | 102.6 | | Share price (cents) | b | 2 | **92.3** | 102.0 | | **Discount** | (b+a)-1 | | **(16.6%)** | (0.6%) | ### Ongoing Charges A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company. | | | Page | Year ended 31 December 2022 | Year ended 31 December 2021 | | --- | --- | --- | --- | --- | | Average NAV (EUR '000) | a | n/a | **438,421** | 366,101 | | Annualised expenses (EUR '000)^{1} | b | n/a | **4,715** | 4,070 | | **Ongoing charges** | (b+a) | | **1.1%** | 1.1% | ### Total Return A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company into the Ordinary Shares of the Company on the ex-dividend date. | As at 31 December 2022 | | Page | Share price | NAV | | --- | --- | --- | --- | --- | | Opening at 1 January 2022 (cents) | a | 2 | **102.00** | **102.58** | | Dividend adjustment (cents) | b | | **5.19** | **5.19** | | Closing at 31 December 2022 (cents) | c | 2 | **92.25** | **110.64** | | **Total return** | ((c+b)+a)-1 | | **(4.5%)** | **12.9%** | | As at 31 December 2021 | | Page | Share price | NAV | | --- | --- | --- | --- | --- | | Opening at 1 January 2021 (cents) | a | n/a | 106.50 | 99.96 | | Dividend adjustment (cents) | b | | 5.00 | 5.00 | | Closing at 31 December 2021 (cents) | c | 2 | 102.00 | 102.58 | | **Total return** | ((c+b)+a)-1 | | 0.5% | 7.6% | | | | Page | As at 31 December 2022 | As at 31 December 2021 | | --- | --- | --- | --- | --- | | NAV per Ordinary Share (cents) at IPO | a | n/a | **98.0** | 98.0 | | NAV per Ordinary Share (cents) at 31 December 2022 | b | 2 | **110.6** | 102.6 | | Cumulative dividend paid | c | n/a | **14.4** | 9.3 | | **Annualised total NAV return since IPO** | ((b+c)/a)^{1}/((years since IPO))^{1} | 3 | **7.1%** | 5.3% | 1. Expenses consist of investment advisory fees of EUR 3,150,000 (2021: EUR 2,682,000) and other recurring expenses of EUR 1,025,000 (2021: EUR 1,388,000) in accordance with the AIC methodology. 2. Years since IPO: 3.5 in 2022 and 2.5 in 2021. 112 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Strategic Report Governance Financials Other Information ## Dividend Cover Dividend cover ratio calculation based on net result generated at the SPVs adjusted for the Company level expenses during the year: | | | Page | Year ended 31 December 2022 | Year ended 31 December 2021 | | --- | --- | --- | --- | --- | | Net result generated at the SPVs (EUR '000) | a | 22 | **29,093** | 19,554 | | Dividend paid (EUR '000) | b | 22 | **21,165** | 17,020 | | **Dividend cover ratio** | a+b | 22 | **1.4** | 1.1 | Dividend cover ratio calculation based on the revenue account of the Company: | | | Page | Year ended 31 December 2022 | Year ended 31 December 2021 | | --- | --- | --- | --- | --- | | Profit on ordinary activities (EUR'000) | a | 88 | **12,339** | 7,395 | | Dividend paid (EUR'000) | b | 90 | **21,165** | 17,020 | | **Dividend cover ratio** | a+b | | **0.6** | 0.4 | Dividend cover ratio calculation based on the consolidated cash flow of the Company and its HoldCo: | | | page | Year Ended 31 December 2022 | Year Ended 31 December 2021 | | --- | --- | --- | --- | --- | | Adjusted net cash flow from operating activities (EUR'000) | a | 23 | **25,320** | 4,223 | | Dividend paid (EUR'000) | b | 23 | **21,165** | 17,020 | | **Dividend cover ratio** | a+b | 23 | **1.2** | 0.3 | ## Gross Asset Value The Company's gross assets comprise the NAV of the Company's Ordinary Shares and the debt at the underlying SPV level, with the breakdown as follows. | | | Page | 31 December 2022 | 31 December 2021 | | --- | --- | --- | --- | --- | | Net Asset Value (EUR '000) | a | 2 | **451,650** | 417,443 | | Debt at the SPV level (EUR '000) | b | 26 | **131,203** | 144,327 | | RCF drawn (EUR '000)^{1} | c | 26 | **24,000** | – | | Gross Asset Value (EUR '000) | a+b+c | | **606,853** | 561,770 | ## Gearing The Company's gearing is calculated as total debt as a percentage of the Gross Asset Value. | | | Page | 31 December 2022 | 31 December 2021 | | --- | --- | --- | --- | --- | | Gross asset value (EUR '000) | a | n/a | **606,853** | 561,770 | | Debt at the SPV level (EUR '000) | b | 26 | **131,203** | 144,327 | | RCF drawn (EUR '000)^{1} | c | 26 | **24,000** | – | | **Gearing ratio** | (b+c)+a | | **25.6%** | 25.7% | 1. Revolving Credit Facility received by the HoldCo excluding bank guarantees. Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) 113 ## GLOSSARY ### AIC Gearing NAV per Ordinary Share     ### Alternative Investment Fund GWh  ###   ### O&M  ###  The HoldCo    ###   Ongoing charges  ### Alternative Investment Fund Index    ###       ### Ordinary Shares  ### Investment company  ### Annual General Meeting  ###   ###    ### Investment trust        ###        ### the Company  ###       ### CREST ###   ###      ### Dividend  ###  Record Date        ###                     ### EU ###        ### Ex-dividend date     ###   Share price   ###  MWh     ###   ### Net assets or net asset value  ### (“NAV”) ### Financial Conduct Authority ###  Total return ###          ### 114 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report ## COMPANY INFORMATION ### Directors (all non-executive) AIFM Administrator and ###  FundRock Management  ###     ###        1 ###         ### Registrar ### Investment Adviser ### Computershare Investor ### Aquila Capital ###  ###        Germany ### Independent Auditors ###  ### Broker  ###     ###   ### CMS Cameron McKenna ###      ### Aquila European Renewables Plc Annual Report 2022 115 (formerly Aquila European Renewables Income Fund plc) ## AQUILA EUROPEAN RENEWABLES PLC ## NOTICE OF ANNUAL GENERAL MEETING ###    Special Resolutions                 on 14 June 2023 at 1.00pm for the                           ### Ordinary Resolutions        (i)  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         (ii)                                                           ### 116 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report                                (i)                        (ii)   (i)        (iii)                      (ii)        (iv)                 (v)                           ### Aquila European Renewables Plc Annual Report 2022 117 (formerly Aquila European Renewables Income Fund plc) ## NOTES TO THE NOTICE OF MEETING               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                                          ### 118 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Other InformationFinancialsGovernanceStrategic Report                                           (i)                (ii)                   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                             ### Aquila European Renewables Plc Annual Report 2022 119 (formerly Aquila European Renewables Income Fund plc) ## NOTES TO THE NOTICE OF MEETING                               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                 (i)           (ii)        (iii)      ### 120 Aquila European Renewables Plc Annual Report 2022 (formerly Aquila European Renewables Income Fund plc) Read more about our commitment to sustainability www.aquila-capital.de/esg/ Important Notice:                AERIF | ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2021   ## INVESTING IN A BRIGHTER FUTURE   ## AQUILA CAPITAL ANNUAL REPORT 2021     For more information please contact: Aquila Group Valentinskamp 70 20355 Hamburg Germany Tel.: +49 (0)40 87 50 50 -100 E-Mail: 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As at 31.12.2021.  AQUILA GROUP Valentinskamp 70 20355 Hamburg Germany    AQUILA EUROPEAN RENEWABLES PLC 6th Floor 125 London Wall London EC2Y 5AS    www.aquila-capital.com/esg/ ### www.aquila-european-renewables.com