Riverstone Energy Limited
The Company seeks to achieve superior risk
adjusted returns through investing in the energy sector with a
recent focus on energy transition and decarbonisation of the global
economy.
The Company's Investment Manager is RIGL
Holdings, LP, which is majority-owned and controlled by affiliates
of Riverstone.
Riverstone is an energy and power-focussed
private investment firm founded in 2000 by David M. Leuschen and
Pierre F. Lapeyre with approximately $45
billion of capital raised. Riverstone conducts buyout and
growth capital investments in the E&P, midstream, oilfield
services, power and renewable sectors of the energy industry. Since
2009, Riverstone has committed over $8 billion to the renewable
energy and decarbonisation sectors, across 47 investments ranging
from wind power development to financial software enabling the
deployment of renewable infrastructure projects.
With offices in New York, London, Mexico City
and Amsterdam, the firm has committed to over 200 investments in
North America, Latin America, Europe, Africa, Asia and
Australia.
The transition to a low emission mix of energy
sources will require unprecedented investment in new technologies
and infrastructure. REL is poised to power that momentum by
supporting its conventional positions and by executing on its
modified investment programme. In 2023, REL invested $22.3 million
in 5 existing portfolio companies in the energy transition value
chain.
The registered office of the Company is PO Box
286, Floor 2, Trafalgar Court, Les Banques, St Peter Port,
Guernsey, GY1 4LY.
Financial and Operational
Highlights(1)(2)
Commitments during the year ended 31 December
2023
|
Commitments increased by a total of $17.8
million(2) pursuant to decarbonisation
strategy:
(i) $10.0
million in Infinitum Electric Inc.
(ii) $4.0
million in FreeWire Technologies, Inc.
(iii) $3.8 million
in T-REX Group, Inc.
|
Commitment reductions during the year ended 31
December 2023
|
(i) $12.2
million from Hammerhead Energy Inc. upon sale
|
Remaining potential unfunded commitments at 31
December 2023
|
(i) $6.0
million(3) in Onyx Power
|
Investments during the year ended 31 December
2023
|
Invested a total of $22.3
million(2) pursuant to decarbonisation
strategy:
(i) $10.0
million in Infinitum Electric Inc.
(ii) $4.0
million in FreeWire Technologies, Inc.
(iii) $3.8 million
in T-REX Group, Inc.
(iv)
$3.5 million in Enviva Inc.
(v)
$1.0 million in Our Next Energy Inc.
|
Realisations during the year ended 31 December
2023
|
Realised a total of $272.2
million(2) ($271.2 million pursuant to legacy
conventional strategy; $1.0 million pursuant to decarbonisation
strategy):
(i) $175.6
million from Hammerhead Energy Inc. sale to Crescent Point Energy
Corp.
(ii) $60.1
million from Onyx Power
(iii) $30.4 million
from Permian Resources Corporation (formerly Centennial Resource
Development, Inc.)
(iv)
$4.8 million from Carrier II Energy
(v)
$1.0 million from Tritium DCFC Limited and Enviva, Inc.
(vi)
$0.4 million from Rock Oil Holdings, LLC.
|
Key Financials
|
2023
|
2022
|
NAV as at 31 December(4)
|
$674 million
/
£529
million(5)
|
$739 million /
£610 million(5)
|
NAV per Share as at 31
December(4)
|
$15.96 /
£12.53(5)
|
$14.52 / £11.99 (5)
|
Per cent. change in NAV per Share (USD) for
the year ended 31 December
|
9.92 per
cent.
|
17.0 per cent.
|
Market capitalisation at 31
December
|
$430 million
/
£338 million
(5)
|
$418 million /
£345 million (5)
|
Share price at 31 December
|
$10.20 /
£8.01
|
$8.21 / £6.78
|
Per cent. change in Share price (Sterling) for
the year ended 31 December
|
18.1 per
cent.
|
45.8 per cent.
|
Number of Shares outstanding at 31
December
|
42,195,789
|
50,891,658
|
Share price discount to NAV
|
36.1 per
cent.
|
43.5 per cent.
|
Cash and cash equivalents at 31
December
|
$291 million
(6) /
£228
million(5)
|
$120 million (6) /
£99 million(5)
|
Marketable securities (unrestricted) at 31
December
|
$150 million
(7) /
£117
million(5)
|
$177 million (7) /
£146 million(5)
|
Marketable securities (restricted) at 31
December
|
$58 million
(8) /
£45
million(5)
|
$4 million (8) /
£3 million(5)
|
Total comprehensive (loss)/income for the year
ended 31 December
|
$(2.3)
million
|
$88.9 million
|
Basic and diluted (loss)/earnings per Share
for the year ended 31 December
|
(4.86) cents / (3.82) pence(5)
|
171.87 cents / 142.0
pence(5)
|
Number of shares repurchased through buyback
and tender offer/average price per Share for the year ended 31
December (9)
|
8,695,869
$7.24
/
£5.75
|
4,045,941
$7.95 /
£6.63
|
(1) Amounts
shown reflect investment-related activity at the Investment
Undertaking level, not the Company.
(2) Amounts may vary
due to rounding.
(3) The expected
funding of the remaining unfunded commitment to Onyx at 31 December
2023 is $nil in 2024 and $nil in 2025. The residual amounts are to
be funded as needed in 2026 and later years.
(4) NAV and NAV per
Share are reflective of the fair value movements in the underlying
investments held by the Partnership, net of income and expenses of
the Partnership and its related Investment Undertakings, including
any performance allocation and applicable taxes which
were both $nil as of 31 December 2023 and 31 December
2022.
(5) Based on exchange
rate of 1.2736 $/£ at 31 December 2023 (1.2103 $/£ at
31 December 2022 and 1.606 $/£ at IPO).
(6) At 31 December
2023 and 2022, respectively, amounts are comprised of
$5.8 million and $15.8
million held at the Company, $283
million and $68.4 million held at
the Partnership and $2 million and $35.3
million held at REL US Corp.
(7) Unrestricted
marketable securities held by the Partnership consist of
publicly-traded shares of Permian Resources (formerly Centennial),
Enviva, Solid Power, Tritium and Hyzon for which the aggregate fair
value was $150 million at 31 December 2023, and $166 million as of
26 February 2024 (31 December 2022: $177 million).
(8) Restricted
marketable securities held by the Partnership consist of
publicly-traded shares of Crescent Point Energy Corp. for which the
aggregate fair value was $58 million at 31 December 2023 and $59
million as of 26 February 2024 (31 December 2022: $4
million).
(9) Inception to date
total number of shares repurchased through buyback and tender
offer, were 42,284,275 at an average price per share of £5.15
($6.59) for a total cost of approximately £217.9 million ($278.8
million).
board Chair's Statement
Dear Shareholder,
Consolidation
and scale support sustainable profitability
Over the last couple of years investors -
alongside governments - have developed a renewed appreciation for
energy security. This has combined with a growing awareness that
the energy transition will take longer to achieve and be more
costly than previously thought. The consequence of this shift in
priorities is that in 2023 we began to see higher values being put
on conventional energy.
Sustained higher oil prices are one part of
what is driving this as well as greater capital discipline and very
low-to-no leverage following the implosion of demand during the
COVID-19 lockdowns. This in turn has helped mitigate the drag
experienced from higher interest rates and helped deliver improved
cash generation.
Higher values in conventional energy have also
begun to drive a new wave of consolidation. We have seen some signs
of this in recent years as private equity-backed Independents
sought to combine their businesses to achieve greater scale,
increased relevance, more drilling inventories with stronger
balance sheets, reduced leverage and higher cash flow generation.
In 2023 REL pursued a similar strategy with two of our portfolio
companies. Permian Resources Inc. acquired Earthstone Energy Inc.
and Hammerhead Energy was sold to Crescent Point Energy. Both
transactions have created significant value for our
shareholders.
The market reaction in the second half of 2023
to ExxonMobil's acquisition of Pioneer Natural Resources and
Chevron's acquisition of Hess further highlights the value of this
approach. We anticipate this trend for consolidation in
conventional energy will continue into 2024.
In contrast, it was unquestionably a difficult
year for the renewable and decarbonisation sector, marked by
substantial valuation compression, even at large listed businesses
in North America and Europe. The dramatic increases in interest
rates and inflationary cost growth have had a knock-on effect on
the ability of companies to generate cash, especially as many
projects ordinarily rely on high levels of leverage to improve
returns.
A period of politically and environmentally
fuelled growth in renewables - backed by what was effectively free
money - has now given way to a more disciplined return-driven
approach with the realisation that, to be truly sustainable,
companies must be sustainably profitable. There is a dawning
realisation in the sector that, at least for early-stage
decarbonisation companies, we will also need a period of
consolidation and rationalisation.
While this shift has undoubtedly presented
headwinds to the performance of our decarbonisation portfolio it
also opens up opportunities for us. Just as REL successfully
invested in and restructured its conventional energy portfolio in
the down-cycle to deliver significant value for our shareholders, I
have every confidence that our efforts to do the same in renewables
and decarbonisation will also bear fruit from present
levels.
Geopolitics
continues to drive oil prices; weaker natural gas and European
power prices
The world is becoming increasingly polarised.
Conflict, both economic and military, is seemingly on the rise. We
have seen the Russian and Ukrainian war continue through 2023. In
Asia there is growing concern over potential flashpoints, notably
around Taiwan. We are also witnessing growing unrest and political
instability across the Middle East with potentially grave
consequences for the world's trade and energy flows.
In short, geopolitics as a significant driver
of commodity prices is back and looks to be here to stay. This has
meant that while oil prices in 2023 were lower on average than in
2022, relative to a few years ago oil prices remain elevated. WTI
crude oil prices averaged US$77.58 per barrel in 2023, down 18 per
cent. against the 2022 average WTI price of US$94.91 per
barrel.
US natural gas was a different story. Henry
Hub prices were impacted by a mixture of oversupply, gas-on-gas
competition, a large backlog of pending LNG export capacity
additions and warmer weather. As a result, Henry Hub gas prices
were significantly down in 2023 versus 2022, averaging US$2.57 per
MMbtu in 2023, a 62 per cent. fall versus 2022.
The other area of disappointment was in
European power prices. At the end of the second quarter, Europe
removed the power price caps introduced in the immediate aftermath
of Russia's invasion of Ukraine in 2022. However, this was more
than offset by a warmer winter, mild summer season, strong
renewable production and record gas storage across the continent.
This would have negatively impacted the performance of Onyx, our
European power producer; had judicious hedges not been in
place.
Inflation and
interest rates
Although being below the highs of 2022
and early 2023, inflation has been more persistent than initially
anticipated across the major developed economies. In response,
central banks continued to raise interest rates into the second
half of the year. While the pace of increase had slowed by year
end, our expectation is that we are now in a structurally higher
interest rate environment and will remain in it for several years
to come.
As I outlined above, while this poses significant challenges in the
near term, I am pleased that despite the steep rise in rates
globally, REL's portfolio has held up well. In particular, our
conventional energy businesses have continued to generate healthy
levels of cash flow through the year even as higher interest rates
have impacted our growth-stage decarbonisation
investments.
This demonstrates the strength of our strategy
to invest both in conventional energy and in our decarbonisation
portfolio, as well as our ability to deliver value for our
shareholders through the cycle. Our share price performance for the
year also reflected this, ending the year at 801p/share on 31
December 2023, which was up from 678p/share on 31 December 2022 -
an 18 per cent. increase in the year and outperforming both the
FTSE 100 and Dow Jones Industrial Average.
Board
changes
The year saw some big changes to our Board.
Following our AGM in May 2023, Richard Hayden retired from the
Board having served for nearly ten years as a REL Non-Executive
Director and as Chair of the Company for almost seven of those. As
I wrote in my interim report, under Richard's stewardship REL
implemented significant adjustments to the Investment Management
Agreement and a pivot into renewable energy and decarbonisation
investments. Peter Barker also retired as a Non-Executive Director
after the AGM having brought significant experience from his
decades-long career in investment banking. We are enormously
grateful for the guidance and leadership provided by Richard and
Peter during their time on the REL Board.
We welcomed Karen McClellan to the Board
as a Non-Executive Director in May. Karen brings with her two
decades of experience in investment banking and deep expertise
working across carbon policy, clean infrastructure finance and
zero-carbon technologies, having raised and deployed more than £700
million in renewable energy projects, carbon funds, technology
investments and other transactions.
After the year-end, John Roche was appointed
as the new Chair of the Audit Committee, effective from 1 January
2024, replacing Patrick Firth who will be retiring before the AGM
in 2024 and will not seek re-election. John was appointed to the
Board in December 2022 and is a former managing partner at
PwC.
Investment
portfolio summary and performance
As of 31 December, REL's portfolio comprised
fourteen active investments, with eleven companies in the
decarbonisation sector and three in conventional assets. This
reflects the sale of Hammerhead Energy in December to Crescent
Point Energy and the ongoing liquidation of Anuvia. Over the course
of the year, NAV per Share increased by 9.9 per cent. to $15.96 per
share (4.5 per cent. to £12.53 per share).
The decarbonisation portfolio continued to be
the most impacted with declines in the total value of $111 million
through changes in fair value and $1 million in realisations. On
the conventional side, we saw an increase of $141 million, which
consisted of $271 million in realisations and changes in fair
value. In addition, REL continued to realise value from its
conventional portfolio as outlined below with Hammerhead
Energy.
In 2023, REL invested an aggregate amount of
$22.3 million in energy transition and decarbonisation investments,
bringing the total invested in this area to over $231.5 million
across eleven investments, which in aggregate were valued at $116.3
million, or 0.50x Gross MOIC, as at 31 December 2023.
In August, REL's portfolio company Permian
Resources announced it was acquiring Earthstone Energy Inc in an
all-stock transaction valued at approximately $4.5 billion,
inclusive of Earthstone's net debt. The transaction will strengthen
Permian Resources' position as a leading Delaware Basin independent
E&P company with over 400,000 Permian net acres and pro forma
production of approximately 300,000 Boe/d. The transaction
completed in November with REL holding a 1.3 per cent. interest in
the combined company.
In November we announced the sale of
Hammerhead Energy Inc., a Canadian energy company with assets in
the Montney shale in Alberta. Crescent Point Energy acquired
Hammerhead Energy for an enterprise value of C$2.55 billion with
each Hammerhead Energy share being exchanged for C$15.50 in cash
and the equivalent of C$5.50 in Crescent Point Energy common
shares. As a result of the transaction, the Partnership realised
total proceeds of US$175 million in cash and received 8.3 million
shares of Crescent Point Energy common equity, which were valued at
$58 million as of 31 December 2023. The transaction represented an
approximate 23 per cent. uplift to the Gross MOIC as of 31 December
2023 as compared to 30 September 2023, which was based on US$11.93
per Hammerhead Energy share on the NASDAQ. The transaction closed
in December 2023.
Also during the year, REL was informed that
Anuvia Plant Nutrients, one of the Company's portfolio companies,
ceased operations. The Company invested US$20 million in Anuvia in
March 2022. Whilst the Series D Investors, including the Company,
are first equity in line to receive proceeds from Anuvia, the
Company's Investment Manager informed the Board in July that no
such proceeds can be reasonably expected given the debt burden on
the business.
Our portfolio, although challenged by the
current market conditions, is well diversified across the major
industrial verticals that are critical to decarbonisation if we are
to deliver a successful energy transition. Our investment in
Infinitum Electric supports the development of advanced electric
motors that will be crucial to the decarbonisation of global
industry. We have built significant exposure to EV charging through
our stake in Tritium and in new battery technology through Solid
Power and Group14. Finally, hydrogen fuel cell technology offers
the potential to electrify heavy transportation, an area REL has
built its exposure to through Hyzon Motors. Taken together, these
companies provide our shareholders with exposure to the
technologies critical to the decarbonisation of vital sectors.
While we are confident that we have backed winning technologies and
companies, we remain cautious on other companies in the portfolio
that face funding challenges in the current environment.
T-REX Group and Our Next Energy are businesses that will need to
raise additional capital in the next twelve months if they are to
continue funding their business plans. As we have seen
already with Anuvia Plant Nutrients, the inability to raise capital
in an adverse environment can be fatal.
Tender offer
and buyback programme
In August we announced an EGM and Tender Offer
to shareholders, reflecting a significant build up in our cash
reserves as a result of strong cash flows and recent asset
disposals. In total the Company determined to use up to £80 million
to provide the opportunity for shareholders to exit part of their
shareholding in the Company. The Tender Offer was for up to
13,840,830 of the Company's ordinary shares, representing
approximately 30.4 per cent of its issued share capital as at 16
August 2023. At the close of the Tender Offer, shareholders chose
to offer only 3,182,196 shares for sale and
cancellation.
Separately to the Tender Offer, REL has
continued to buy back its shares. During the course of 2023, the
Company returned £31.6 million to shareholders through the purchase
of 5,513,673 shares at a weighted average price of £5.74 ($7.35)
per share.
As a result of the sale of Hammerhead Energy
in November, REL and the Partnership now has a substantial cash
balance of $291.4 million. As announced on 8 February 2024,
the Company proposes to return $200 million (equivalent to
approximately £158 million on the basis of the prevailing USD:GBP
exchange rate) of its excess capital to shareholders by means of a
tender offer (the 2024 Tender Offer) at a price of £10.50 per
ordinary share. The Tender Price represents a premium of
approximately 31 per cent. to the closing market price per ordinary
share of £8.00 on 7 February 2024 and represents a 16 per cent.
discount to the net asset value per ordinary share of £12.53 as at
31 December 2023 (on the basis of the prevailing USD:GBP exchange
rate at 31 December 2023 of 1.2736). The Company launched the 2024
Tender Offer on 23 February 2024 for up to 15,047,619 of the
Company's ordinary shares, representing 36 per cent. of the
'existing shares in issue (excluding any ordinary shares held in
treasury, of which there none currently) and the Tender Offer will
close on 25 March 2024. The 2024 Tender Offer will require
shareholder approval at an extraordinary general meeting of the
Company's shareholders, which is due to be held on 26 March 2024,
and will be subject to other legal, regulatory and customary
conditions.
The world
needs it all
The International Energy Agency (IEA)
estimates that oil demand hit 103 million barrels in the summer of
2023 despite the growth in new sales of electric vehicles. Absent a
material global recession, we expect the relentless pressure for
more energy in the developing parts of the world and their
disproportionately larger populations is likely to drive further
demand for conventional energies despite appropriate climate and
renewable goals. Governments are increasingly focused on
controlling energy security and this is playing an increasing role
in greater realism which is extending the likely timing and
increasing the probable costs of the energy transition.
At the same time the IEA is forecasting a
trebling of new renewable energy capacity coming online between
2023 and 2028. This is approximately 3,700 GW of new renewable
production, with solar and wind set to account for 95 per cent. of
this expansion around the world. By the end of 2024 the IEA is
forecasting that wind and solar combined will generate more
electricity than hydropower. By 2025 renewables will become the
largest source of electricity generation around the world - ahead
even of coal.
The continued growth of both highlights the
truth that the world needs it all; renewable and conventional
energy. But we also need to reduce the environmental impact of
carbon emissions when providing it. If diversity and
diversification is good for the population, for the economy, for
companies and for investment allocation, why then should it not
also be good for something as basic to human progress as energy?
Especially at a time when the world is clearly less hospitable and
governments and their economies can no longer run the risk of
relying on the energy of a competitive neighbour.
Thank you for your continued support of REL,
its management and its strategy. I look forward to continuing REL's
work and of course speaking with many of you over the coming
year.
Richard
Horlick
Chair of the
Board
28 February 2024
Environmental, Social and Governance REPORT
The
Investment Strategy of the Company, which was originally focussed
on the traditional oil and gas sector, has transitioned towards
decarbonisation assets since 2020. The Company utilises the
services of Riverstone as the Investment Manager to take
appropriate ESG principles into account in its investment decisions
and in the ongoing management of the portfolio.
This shift is reflective of a larger awareness
and implementation of Environmental, Social and
Governance ("ESG") policies and is reflected in the
Company's focus on this area. The Company's focus on ESG not only
guides its new investments, but also extends to its legacy
portfolio, which has made demonstrable progress in the pursuit of
improvement of ESG policies and performance.
The Company itself, led by its independent
Board, views ESG as a core element in the management of REL. In
order to put ESG principles into practice, the Board relies on its
Investment Manager to design and implement an ESG policy which
applies to their operations and those of the investee companies.
This policy and examples of its application are highlighted
below.
In order to support the robustness of these
principles, the Board engages with the Investment Manager on ESG
matters and monitors compliance of REL's portfolio companies with
Riverstone's ESG policy. John Roche, a member of the REL Board and
Audit Committee Chair, presently leads the ESG efforts for the
Company after succeeding Patrick Firth as Audit Committee Chair
with effect from 1 January 2024. The Board receives periodic
updates from the Investment Manager on the Investment Manager's ESG
programme and on ESG matters related to the REL investment
portfolio. The Board takes its fiduciary responsibility to
Shareholders seriously and engages with Riverstone on corporate
governance matters as evidenced by the changes to the Investment
Management Agreement agreed in January 2020.
Riverstone plans to publish its annual ESG report
for 2023 in February 2024. The sections that follow summarise the
key elements for Shareholders which impact REL's current and future
investments. More detail is included in the full report available
on Riverstone's website: https://www.riverstonellc.com/en/responsible-investing/.
The statement from the Investment Manager below relates to the
Investment Manager's portfolio which includes investments made by
the Company. This report does not include the companies where
Riverstone's ownership is below 10 per cent. and where Riverstone
does not hold one or more board seats. This includes the following
companies: FreeWire, GoodLeap, Group14, Hyzon, Our Next Energy,
Permian Resources, Solid Power and Tritium.
While Riverstone seeks to integrate ESG
matters in its overall investment management processes, including
the standards and strategies described below, there can be no
assurance that Riverstone will be able to successfully apply such
strategies or implement its ESG policies to procure particular ESG
results for any particular portfolio company or other initiative.
The ESG results for any portfolio company or business are no
guarantee as to ESG outcomes for any other portfolio company.
Applying ESG factors to investment decisions involves a mix of
factors, including considerations that are qualitative and
subjective by nature. There can be no assurance that the ESG
criteria utilised by Riverstone, or any judgment exercised by
Riverstone with respect to ESG matters, will reflect the beliefs or
values of any third party.
No representation, warranty, forecast or other
projection Is given with respect to any investment results. This
report contains forward-looking statements and actual results and
outcomes may differ materially and adversely. Numbers and
percentages in this report include estimates, approximations and
assumptions that, if inaccurate, may make results differ from
current disclosures and expectations. We are also reliant in part
on third party data that we have not independently verified or
audited.
RIVERSTONE'S ESG
REPORT
In an increasingly complex, challenging, and
fast-moving world, Riverstone's mission as a steward of our
investors' capital has remained constant: to deploy capital in a
sustainable manner, focusing on delivering the strongest possible
risk-adjusted returns.
The recent politicisation of ESG issues has created
challenges for firms like ours as we navigate an often-polarised
topic. Despite this, we remain committed to our belief that a
consistent and transparent approach to ESG matters of financial
relevance to our business and portfolio, and their integration
across our strategies, funds, and investments, is a key component
to our investment approach.
Since Riverstone was founded nearly 24 years ago, we
have always believed that the success of our business begins but
does not end with financial returns. Since 2000, we have helped the
businesses in which we invest implement and institutionalise top
quartile ESG policies and practices in order to integrate core
pre-financial risks. We endeavor to achieve outcomes that are
positive in a financial sense, but also in terms of personnel and
communities, partner and regulatory relationships, and the general
health of the planet for future generations.
We do not trade financial returns for these outcomes
because we do not need to. Across the companies we have invested in
positive financial outcomes can correspond to positive outcomes for
other stakeholders as well.
Riverstone is proud to share our fifth annual ESG
report which we believe underscores our dedication to managing ESG
risks and capitalising on climate-related opportunities presented
by the energy transition.
In our 2022 ESG report, we described the important
work we undertook to support our portfolio companies in measuring
greenhouse gas (GHG) emissions and undertaking of the
identification of physical and transition climate risks. In our
most recent report, having listened to our investors and with an
eye on incoming ESG regulation, we have focused on the
following:
• Revising our ESG
policy and in so doing recalibrating and redefining how we
integrate ESG into our day-to-day processes
• Revising our
annual ESG questionnaire and stewardship approach to align with
emerging policies, legal frameworks, and industry-recognised best
practices
• Deeper
engagement with our portfolio companies on ESG, including the use
of a technology platform to enable our portfolio companies to
improve collection of accurate ESG data faster, and using that
information to update our portfolio company ESG monitoring
scorecards
• Ongoing
training and accountability of our investment professionals to
enable them to understand the correlation between ESG and value
creation better equip them in a practical sense to advise and
support portfolio companies on their ESG journeys
• Reducing
investor costs on ESG portfolio monitoring and reporting through a
top-down review of our third-party consultants
As a manager of businesses and assets in the energy
sector, our focus on environmental impact is a very important
factor. However, we recognise the importance of a just transition
and the critical social and governance factors needed to achieve
this. Transparency, integrity and trust are the cornerstones of our
governance framework and we hold ourselves and encourage our
portfolio companies to hold themselves accountable to ethical and
responsible practices.
Our firm's success to date is intertwined with the
wellbeing of the communities and people with whom we and our
portfolio companies engage every day. We aim to encourage the
prioritisation of fair labour practices, and a better corporate
culture in all our portfolio companies.
Riverstone encourages its portfolio companies to
support causes that align with its values by actively engaging with
their employees to promote their safety and welfare at all times.
By fostering strong relationships with our stakeholders and
focusing on the areas in which we know we can make a material
impact, we aim to create shared value for our investors and society
at large.
Our commitment to robust ESG principles is not just
a business strategy - it is a fundamental part of our identity.
While we realise there is still much work to be done, we understand
that long-term success depends on our ability to adapt to and
address the ever-evolving needs of society, the environment, and
our stakeholders. We thank our investors, employees, and partners
for sharing this vision with us, and we look forward to the
collective journey ahead guided by these principles of responsible
and sustainable investing.
RIVERSTONE'S
APPROACH TO ESG
Energy is the world's largest industry and
significant capital is required to meet growing demand needs.
Riverstone believes that implementing best-in-class ESG practices
can improve a company's performance and market value over the
long-term. We believe that integrating material ESG factors across
an investment's lifecycle enables us to make well-informed
decisions and is consistent with meeting our fiduciary duty to our
investors.
Riverstone recognises that climate change poses a
systemic risk to the global economy, society and ecosystems, and is
a driver of investment risk and opportunity, as the world
transitions to a lower-carbon economy. We believe that our
investments in the energy sector can and should have a positive
impact on that transition, and that management of climate-related
risk and opportunity is a core part of our approach to investing.
We believe that operating with transparency and adhering to all
applicable laws and regulations is critical to our reputation
within the energy industry as a fair and trustworthy partner.
Riverstone recognises that scarce resources,
changing consumer demands, supply chain issues, geopolitics, social
norms, other ESG factors and ever-tightening regulations also pose
increasing challenges and opportunities to companies around the
world. Riverstone takes these issues into consideration across the
investment lifecycle to help mitigate risks and drive value.
ESG
OBJECTIVES
Riverstone has established institutional ESG
processes that support the high standards that it has set for
itself. These procedures were developed to achieve several key
objectives related to ESG, including:
• Providing
Riverstone personnel and its portfolio companies with training and
the resources to enable those portfolio companies to provide the
necessary ESG support appropriately
• Identifying
potential risks and mitigants before an investment is made
• Immediate
assistance with the identification of any issues that may arise and
tracking ongoing performance through portfolio monitoring
• Evaluating and
tracking portfolio companies' execution of opportunities to
improve current practices at its portfolio companies and
firm
RIVERSTONE'S ESG
POLICY
Riverstone has an ESG policy that sets out its
approach to handling key ESG factors, including inter alia natural resource
management, health and safety, community and stakeholder impact,
climate change, GHG emissions and governance. This policy, which
was updated in 2023, helps inform the ESG considerations that are
relevant to the management of Riverstone's portfolio companies from
initial due diligence all the way through to an exit, and the
operation of Riverstone's own business. Riverstone has continuously
evolved its ESG policy in conjunction with third-party ESG experts
to strive towards best practices across the board. A copy of
Riverstone's ESG policy is available online:
https://www.riverstonellc.com/media/1345/2023_riverstone_esg_policy-final.pdf
ESG RESOURCES AT
RIVERSTONE
Riverstone has an ESG Committee which meets on
a regular basis, provides leadership on a range of ESG matters
within Riverstone and its portfolio companies, ensures consistent
application of Riverstone's ESG policy and associated ESG
initiatives across its activities and operations, and facilitates
communication with its investors and other relevant
stakeholders.
Nominated investment team members serve as ESG
deal leads and engage with their respective portfolio companies on
ESG management and performance. In partnership with Riverstone's
internal legal team, ESG deal leads maintain responsibility for
coordinating the completion of annual compliance reviews and ESG
questionnaires and providing feedback on the ESG monitoring
scorecards.
Riverstone's annual performance reviews assess
the quality of ESG engagement driven by each ESG deal lead, and the
results inform decisions related to compensation and promotion for
ESG deal leads.
ESG
INTEGRATION
Riverstone integrates ESG factors throughout
the investment lifecycle as outlined below. Its investment teams
leverage the templates and processes outlined in its ESG toolkit to
consistently identify and manage material ESG risks and
opportunities for Riverstone's investments. The careful evaluation
of ESG issues is a mandatory component for the underwriting of all
REL investments, both by the Investment Manager's Investment
Committee and the Company's Board.
While there are differences between asset
classes due to the nature of those investments, the below outlines
Riverstone's general approach to diligence and engagement across
the platform.
Due Diligence
& Investment Committee
• Each Investment
Committee memo includes an ESG diligence scorecard, which assesses
pre-investment ESG performance, incorporates Riverstone's climate
change screening questionnaire, describes findings from due
diligence (including key ESG risks, observed good practices and
improvement opportunities) and outlines any ESG actions required
for advanced investments
Initial
Investment
• In
the first 100 days of ownership, Riverstone aims to
collaborate with the portfolio company management teams to execute
actions from the 100-day plans which reflect due diligence
findings, and to help those portfolio companies establish policies,
plans and processes to manage ESG risks and drive value
creation
• Riverstone's ESG
onboarding pack provides our portfolio companies with the criteria
for meeting our ESG minimum expectations and details of our
programme, and highlights to them the likely touchpoints with
Riverstone
Ongoing
Monitoring & Portfolio Management
• Riverstone
collects data from its portfolio companies through annual ESG
questionnaires to assess alignment with its ESG minimum
expectations, measure changes in ESG performance, and gather ESG
key performance indicators
• Based on ESG
questionnaire responses, Riverstone generates annual ESG monitoring
scorecards that summarise each portfolio company's overall ESG
performance against its ESG minimum expectations, frameworks and
material factors; and in subsequent feedback it highlights good ESG
practices reported and recommendations for improvement for
portfolio companies
• Riverstone's
portfolio is provided support to enhance their programmes
o It provides a suite
of ESG support to help companies make progress in ESG integration
and accelerate value on an ongoing basis
o Its goal is to
upskill the portfolio on ESG topics material to them, allow for the
sharing of best practices, and enhancing collaborative
opportunities
o It provides its
portfolio with insights into how they are viewed externally by
regulators, financial market participants, and other key
stakeholders
o In addition to this
overarching support, it also provides targeted assistance to each
company. Following the completion of the annual ESG assessment,
each business receives a tailored report focused on material areas
with recommendations on how to progress and realise its ESG
journey
• Riverstone
periodically evaluates the climate-related risks and opportunities
in our portfolio and collaborates with portfolio companies to
mitigate risks and leverage opportunities
Exit
• Riverstone
deal teams summarise the ESG performance of our investments and,
where appropriate, make relevant ESG disclosures and
evaluate whether potential buyers' ESG standards comply with all
applicable laws
CLIMATE CHANGE AND
DECARBONISATION
Climate
Change
Riverstone acknowledges that
climate change is a critical issue which poses a significant
challenge to business and society. As a long-term
investor in private and illiquid markets with influence over our
portfolio companies, we recognise the impact we are able to have,
and the role we can play in mitigating this risk.
Riverstone supports the goals of the Paris
Agreement and its objective to limit global temperature rise to
well below 2°C above pre-industrial levels in this century. We
recognise the responsibility to manage assets for our investors in
a way that takes account of all material risks, including the
material effects of climate change. To do this, we align ourselves
with the Taskforce on Climate-Related Financial Disclosures (TCFD)
framework. Riverstone's disclosures aligning with TCFD
recommendations can be found in the following sections. We also
align with the Partnership for Carbon Accounting Financial (PCAF)
standards for the financial industry.
While climate change and global warming
represent a significant risk; we also recognise the opportunities
that this transition offers. Our task is to manage these risks
proactively as part of our investment process, enabling us to have
visibility and understanding at the investment stage, and work
effectively alongside our portfolio companies as part of our
stewardship process. As an active investor in low-carbon solutions
and infrastructure, both in our equity and credit portfolios, we
are committed to providing solutions that will achieve a
sustainable transition as well as drive strong financial
returns.
In 2022, Riverstone engaged third-party
experts to assist it with a climate evaluation, the results of
which were translated into our overarching climate strategy and
tangible actions. A description of the past external evaluation
process can be found in Riverstone's 2022 ESG report which was
issued by Riverstone in February 2023.
Our disclosures for both our business and
operations are divided into the key areas below:
Governance
At Riverstone, corporate governance is
embedded throughout our firm and championed by our senior
leadership team. Our Executive Board has overseen our strategic
position, to be implemented by our ESG committee. Riverstone's ESG
Committee has direct links to the Investment Committee of each
fund.
Our ESG Committee monitors the consistent
application of our ESG Policy throughout our firm and the
investment cycle. This includes the principles around which we
assess climate related risks and opportunities for each portfolio
company.
Each of our investment teams has a designated
ESG deal lead who helps to screen, assess, and manage
climate-related risks and opportunities for each portfolio company
throughout the investment lifecycle. We incorporate external
support as needed to enhance our ESG program and disclosures, as
well as working with third-party subject matter specialists such as
Petra Funds Group, which acts as an external ESG and sustainability
consultant to Riverstone and supports our deal leads with
portfolio engagement and stewardship.
Accountability
Nominated investment team members serve as ESG
deal leads and engage their respective portfolio company on ESG
management and performance. In partnership with Riverstone's
internal legal team, ESG deal leads maintain responsibility for
coordinating the completion of annual compliance reviews and ESG
questionnaires, and providing feedback on the ESG monitoring
scorecards. Riverstone's annual performance reviews assess the
quality of ESG engagement driven by each ESG deal lead, and the
results inform decisions related to compensation and promotion for
ESG deal leads.
Awareness
We continually look to enhance our
understanding of climate-related risks and opportunities, to
upgrade our training program, to review our current processes and
to provide guidance on the resources available to our staff. This
in turn helps us to inform our teams about the role they play in
the integration of ESG factors across the portfolio. This includes
material climate change risks and opportunities which are
appropriately considered throughout our investment
processes.
Strategy
We continue to monitor, revise, and implement
a climate strategy based on physical and transition risks within
our portfolio. We work closely with our portfolio companies to
collect key information, improve our understanding of risks, and
drive forward our collective approach to decarbonisation. We use
the following time horizons to assess risk:
· Short term:
Present-2030
· Medium term:
2031-2040
· Long term:
2041-2050
Climate risk assessments allow us to
proactively identify key hazards. Our investment time horizon
focuses on the short-term timeframe. By understanding present and
future risks, we can support portfolio company success throughout
the lifetime of our investment and integrate our findings into
implementation plans and investment strategies to support portfolio
companies throughout the lifecycle of the investments, leveraging
their expertise as well as that of third party advisors.
Climate Risks
and Opportunities
Physical
Risk
Having carried out an evaluation of
Riverstone's physical risks in 2022 for our highest emitting
assets, the study found that, in the short-term, top climate
hazards across select portfolio companies encompass water stress
(including drought), tropical cyclones, wildfires, and flooding
risks. Over medium- and long-term time horizons, the key emerging
risks are extreme heat, water stress, and wildfires.
Company-specific risk profiles, which highlight the key climate
hazards facing respective portfolio companies, were developed and
shared with each company that was included in the
assessment.
The impacts of climate hazards vary by sector
and asset type. Examples of potential impacts to portfolio company
operations include the following:
· Extreme weather events,
such as cyclones, wildfires, and flooding, may damage critical
infrastructure, such as buildings, equipment, and vehicles, as well
as interrupt key transportation routes and supply chain
networks
· Water stress and
extreme heat may reduce productivity levels and lead to higher
costs for cooling systems and other operational needs
· Climate hazards
may pose health and safety risks to site personnel, and may require
delays in operations, which in turn impacts revenue
· If risks are not
managed properly, climate-related events could lead to potential
contamination, waste releases, and water pollution in the local
environment
Transition
Risk
Transition risks can adversely impact the
value, performance, and viability of certain businesses, and assets
in which REL invests. We believe identifying areas at risk and
enables us to we stay ahead of, and in compliance with, market and
regulatory developments is crucial to managing our risks in the
near-, medium-, and long-term. A selection of the
transition risks and opportunities we monitor are outlined
below.
Policy and
Legal
·
Increased carbon taxes, carbon pricing and cap
and trade programmes could add costs to fuel and require companies
to make investments to reduce emissions from operations
· Increased
potential for changes to federal regulations relating to oil and
gas operations, such as drilling or methane flaring
· Greater pressure
to reduce emissions throughout the supply chain, including raw
materials, construction and product manufacturing stages, may
increase operational costs
Technology
and Resource Efficiency
· Decreased fossil
fuel demand due to greater clean resource adoption or advancements
in energy efficiency technology could lead to loss of
revenue
· Additional
emissions-reducing technology may be required to decarbonise
manufacturing processes and operations, which could potentially
lead to increasing capital cost of investments
Markets
· Decreased fossil
fuel demand may result in loss of market share and revenue for
midstream services, exploration and production and power
companies
·
Greater adoption of low- or zero-emitting
power sources and related support services and analytics for these
intermittent resources could present market growth
opportunities
· Increased
transportation electrification resulting in greater build-out of
supportive charging infrastructure could present market growth
opportunities
Reputation
· Further change
in customer perceptions or stakeholder pressures to
decarbonise
· Increased shift
directly away from carbon-intensive industries
Implementation
We work with portfolio companies on an
individual basis leveraging the findings from our materiality
assessments. Each implementation plan developed by those companies
is tailored to the company's individual requirements to mitigate
both their physical and transitional risks.
Going forward, we intend to invest in
businesses that support the low-carbon transition and represent key
growth opportunities.
As we continue to evolve our investment
strategy in alignment with the low-carbon transition, we will also
consider opportunities to integrate climate-related physical and
transition risks into our investment process. We will strive to
capitalise on potential opportunities to increase resilience, drive
value creation, and further encourage the development of reporting
standards across our portfolio.
Throughout the stewardship process we focus on
material factors to each portfolio company, identifying key areas
of risk and opportunity. We look to understand the key areas of
environmental impact depending on the sector and region of
operation. This year we have evaluated additional environmental
factors, taking into account areas such as exposure to biodiversity
risk, water consumption, and recycling.
Risk Management
We actively utilise our ESG toolkit, climate
risk assessments and portfolio engagement processes to support our
portfolio companies in managing climate-related risks and
monitoring GHG emissions.
During pre-investment due diligence, our deal
teams evaluate how a potential investment assesses and manages
climate-related risks and opportunities. As part of scoring
prospective investments' ESG performance, Riverstone's deal teams
utilise our climate change screening questionnaire to analyse
whether a company has sufficiently considered impacts from
climate-related market shifts, regulatory and voluntary frameworks,
and extreme weather events. Each Investment Committee memo includes
the results of this assessment, along with a summary of other key
ESG practices, to appropriately inform investment
decisions.
As part of our stewardship approach, we work
with portfolio companies to develop actions plans to
help portfolio companies meet their overall ESG performance,
including efforts related to climate change.
Climate Risk Assessment
Riverstone utilises risk assessments
throughout the investment lifecycle to identify and assess the
impacts from potential climate-related risks and opportunities. The
analysis allows us to identify risks for, and to better inform our
engagement with, specific portfolio companies. We continue to build
upon our 2022 climate assessment. This assessment formed the basis
of our ongoing implementation plan.
Physical Risk Analysis
To understand physical risk, selected
Riverstone portfolio companies, including certain REL investments,
were evaluated against 2030 and 2050 timeframes. Utilising the IPCC
as a basis for assessment two scenarios were analysed in our
physical risk assessment.
· SSP1-2.6
is a low GHG emissions scenario in which global warming stays
below 2°C by 2100, aligned to current commitments under the Paris
Agreement
· SSP3-7.0
represents a high GHG emissions scenario in which an average
warming greater than 3°C is projected to occur by
2100
The climate risk assessment we undertook in 2022 showed that
approximately 3 per cent. of assets have high risk and 35 per cent.
have moderate risk. While the number of high-risk assets remains
the same by 2030, the proportion of moderate risk assets increases
to 45 per cent.
Details of this assessment can be found in Riverstone's 2022 ESG
report.
Transition Risk Analysis
In 2022 we also carried out climate transition
risk assessment to better understand how climate-related risks and
opportunities might develop under different scenarios, including
how impacts change if policy efforts ramp up over time to help meet
climate targets. Similar to the physical risk analysis, the
transition risk analysis employed two main scenarios to determine
potential trends. For global temperature alignments, the
scenarios incorporated data primarily from the International Energy
Agency (IEA) World Energy Outlook and IEA Energy Technology
Perspectives models:
· The 2°C scenario limits
global temperature rises to less than 2°C by 2100, based on
pathways for sustainable development
· The business-as-usual
(BAU) scenario applies current policies and commitments outlined by
countries to mitigate emissions
Scenario indicators were selected to cover a
broad range of transition risks and opportunities across the
economy and REL's sector-specific model results related to
emissions in various industries and across the value chain, fuel
demand in certain markets, fuel prices and different power
generation resource types. Transition scenario indicators
collectively describe an economy-wide shift from BAU to the low
carbon 2°C scenario path and individually they provide relevance to
the target sector and portfolio company.
The risk assessment provides key information
for Riverstone and the REL Board to consider while evaluating
potential adjustments to risk appetite and strategy. We can also
use the findings to respond to emerging changes in a low carbon
future and to capitalise on potential opportunities for growth.
This evaluation of risks continues to represent an ongoing process
as we strive to determine the extent of financial and risk
management implications.
Metrics and Targets
As we have strengthened our engagement with
portfolio companies, we have a greater understanding of their goals
and progress. For portfolio companies where we have oversight, we
have asked them to share Scope 1 and 2 emissions, and included
partial Scope 3 emissions where possible. Following our engagement
with an external provider in 2022, our portfolio companies where
appropriate have been working independently and with chosen vendors
to improve the scope of their GHG reporting removing reliance on
estimated data where possible.
During 2022,
REL financed emissions were 1.2 million metric tons CO2e (Scope 1
and 2).
This figure includes only those companies
where Riverstone holds material influence as described at the
outset of the report. GHG accounting was performed in alignment
with the PCAF standard to estimate our Scope 3 category 15 financed
emissions across our portfolio. We recognise the increase in
emissions compared to 2022 and this is reflective of the increased
reporting within the portfolio's traditional energy
holdings.
Riverstone continues to try and reduce its
firmwide footprint. We have chosen not to report on this figure
this year as we look to assess the ESG materiality of business
activities going forward.
RIGL
Holdings, LP
28 February 2024
Investment Manager's Report
In many ways 2023 was a year of contrasts.
Interest rates rose at rapid levels across the world as central
banks sought to bring significant global inflationary pressures
under control. This has created concern and uncertainty about the
economic impact this would have on a world which has become used to
persistently low levels of interest rates. In addition, the
geopolitical instability created through Russia's invasion of
Ukraine and tensions between the US and China were exacerbated by a
renewed period of instability in the Middle East. Disruption to
global shipping and supply lines through the Red Sea and increasing
concern about the risk of an expansion and escalation of the
conflict in the Middle East are adding to an already tense global
political situation.
Against this, and despite all these many
causes of concern, the global economy came through 2023 in good
shape, largely avoiding the recession some had feared and
delivering GDP growth of around 3 per cent.. There remain growth
challenges for some major economies but others are seeing an
acceleration as Government spending and hopes for interest rate
cuts support a more optimistic mood amongst consumers and
businesses than was evident earlier in the year. This was reflected
in strong equity market performance with the S&P500 up 24 per
cent. in 2023, driven in particular by the performance of the
'Magnificent Seven', the giant US technology companies which
include Alphabet, Apple and Microsoft.
The macro-backdrop did not prevent a decline
in energy prices in 2023, with other factors including warmer
weather, over-supply in certain parts of the market and an increase
in LNG delivery impacting demand for natural gas in particular. In
2023, WTI crude oil prices were down 18 per cent.
against the 2022 average WTI and Henry Hub gas prices were down 62
per cent. versus 2022 (IEA). This has helped alleviate
some of the inflationary and spending pressure which consumers and
businesses were feeling and removes further the impact
of the price spike which occurred in the wake of Russia's invasion
of Ukraine. Even so, average oil prices remain above where they
have been in the years immediately prior to 2022, providing a more
favourable environment for conventional energy
companies.
The mixed backdrop In the global economy was
reflected in our portfolio with conventional assets performing
well, increasing their value due to their low indebtedness and
strong cash generation. The conventional portfolio, which now
consists of three investments, saw an increase in the values of
Permian and Crescent Point Energy (via disposal of Hammerhead
Energy). In addition, Onyx was marked-up reflecting its strong cash
generation and healthy balance sheet. Overall, the conventional
asset portfolio saw an uptick in valuation with the MOIC of 1.07x
as at 31 December 2022 increasing to 1.30x at 31 December 2023. The
active conventional portfolio had realisations totalling $271
million during the year and the unrealized value of $265 million
accounted for approximately 70 per cent. of the unrealised value in
the portfolio overall as of 31 December 2023.
In contrast, the decarbonisation portfolio,
despite its well diversified investment base, saw a reduction in
valuations across the portfolio as small-cap, high growth assets
responded negatively to higher interest rates and a more cautious
approach from investors. This particularly affected the value of
our investments in GoodLeap, Our Next Energy, T-REX Group and
FreeWire along with the publicly listed stakes in Enviva, Solid
Power and Tritium, which were a key driver of the decrease in the
MOIC from 1.08x at 31 December 2022 to 0.50x at 31 December 2023.
This equates to a reduction in value of $111 million or £88 million
during 2023.
Overall, the NAV per share for the Company has
ended the period 31 December 2023 at $15.96 or £12.53, an increase
of 9.9 per cent. in USD or 4.5 per cent. in GBP vs 31 December
2022.
The Investment Manager has continued to
invest, consistent with its strategy, behind the imperative of
decarbonisation, providing an additional $22.3 million for
investment into decarbonisation assets in 2023. This consisted of
additional investments into Infinitum ($10.0 million), FreeWire
($4.0 million), T-REX Group ($3.8 million) Enviva ($3.5 million)
and Our Next Energy ($1.0 million). The long-term outlook for
energy demand remains resilient as populations and economies grow
and as energy demands increase. The demand for renewables looks
even stronger as companies and consumers seek to meet their own
decarbonisation goals. The macro-shifts towards electric vehicles,
sustainable fuels and energy storage, to name a few are driving
demand for renewable and clean energy which cannot be met by
today's infrastructure, despite the increasing levels of investment
that are being made. In 2023, $622.5 billion was invested into the
energy transition, an 8.1 per cent. increase on the year before.
This provides a sustainable path for investment and returns for
many years to come as the world realises the transition to clean
energy and upgraded infrastructure will take longer and cost more
than originally expected. Our involvement in these trends allows us
to spot and assess areas of interest, to leverage the experience
and expertise we have built up and to participate in the best
opportunities. Our total investment in decarbonisation assets is
now $232 million spread across eleven public and private companies
encompassing a diversified range of technologies, geographies and
energy transition exposures.
In the decarbonisation portfolio, several
companies took important steps forward in the year.
· Infinitum made
substantial progress in increasing manufacturing capacity,
producing more motors in 1Q23 than in all of 2022. Additionally,
the company acquired Circuit Connect, a printed circuit board (PCB)
fabricator based in New Hampshire. The acquisition supports
Infinitum's strategy to become vertically integrated and increase
the production capacity of PCB stators.
· Tritium became
the first fast charger manufacturer in the US to receive an order
funded by the National Electric Vehicle Infrastructure
Program.
· Group14 began
construction of the world's largest commercial factory for advanced
silicon battery materials.
· Hyzon Motors announced
the completion and factory acceptance testing of the first
single-stack 200KW fuel cell system B samples at its production
centre in Illinois, marking an important milestone toward an
on-time commercial launch of its fuel cell
systems.
Counter to this progress, the Company was
forced to write down the value of its investment in Anuvia Plant
Nutrients to zero after that company ceased trading. Anuvia is in
the process of realising its assets and it is not yet certain if or
when equity holders will recover any of their investment. Whilst
Series D equity holders are first in line to receive proceeds from
Anuvia, the Investment Manager has informed the Board that no such
proceeds can now be reasonably expected given the debt burden on
the business. The Investment Manager also wrote down its positions
in FreeWire and T-REX Group, reflecting a truncated growth outlook
as the two companies slow scaling to conserve cash.
Please see Post Year End Update section for further
information on subsequent markdown of the FreeWire
investment. Additionally, ONE will need to raise
additional capital in 2024 to fund its growth plans. These
mark-downs reflect the difficult fund-raising environment for
growth stage companies. Additionally, the decrease in the valuation
of GoodLeap was largely driven by the impact of interest rates on
the profitability of the business.
In our conventional assets portfolio, REL
continued the trend of realisations and distributions with $268.9
million from the realisations of Hammerhead Energy, Permian
Resources, Onyx, Carrier II, and Rock Oil. In November, the sale of
Hammerhead Energy to Crescent Point Energy,
a Calgary based energy company, for an enterprise value
of C$2.55 billion was announced. REL held approximately
15.5 million shares in Hammerhead Energy, representing an
approximate 17 per cent. interest. At the agreed transaction
price, REL's interest in Hammerhead Energy was valued
at US$260 million, or 0.88x Gross MOIC inclusive of prior
distributions. Total proceeds to REL consisted of US$175
million of realised cash and approximately 8.3 million
shares of Crescent Point Energy common equity, which were valued at
US$58 million as of 31 December 2023.
Current Portfolio - Conventional(13)
Investment
(Public/Private)
|
Gross Committed Capital
($mm)
|
Invested
Capital ($mm)
|
Gross Realised
Capital
($mm)(1)
|
Gross Unrealised Value
($mm)(2)
|
Gross Realised Capital & Unrealised
Value ($mm)
|
31 Dec 2023 Gross
MOIC(2)
|
31 Dec 2022
Gross
MOIC(2)
|
Permian
Resources (4) (Public)
|
268
|
268
|
225
|
137
|
362
|
1.35x
|
1.17x
|
Onyx
(Private)
|
66
|
60
|
121
|
70
|
191
|
3.20x
|
3.00x
|
Crescent
Point Energy (Hammerhead Energy) (10)
(Public)
|
296
|
296
|
198
|
58
|
256
|
0.87x
|
0.60x
|
Total Current
Portfolio - Conventional - Public(3)
|
$564
|
$564
|
$423
|
$195
|
$618
|
1.10x
|
1.17x
|
Total Current
Portfolio - Conventional - Private(3)
|
$66
|
$60
|
$121
|
$70
|
$191
|
3.20x
|
1.00x
|
Total Current
Portfolio - Conventional - Public &
Private(3)
|
$630
|
$624
|
$544
|
$265
|
$809
|
1.30x
|
1.07x
|
Current Portfolio - Decarbonisation(13)
Investment
(Public/Private)
|
Gross Committed Capital
($mm)
|
Invested
Capital ($mm)
|
Gross Realised
Capital
($mm)(1)
|
Gross Unrealised Value
($mm)(2)
|
Gross Realised Capital & Unrealised
Value ($mm)
|
31 Dec 2023
Gross
MOIC(2)
|
31 Dec 2022
Gross
MOIC(2)
|
|
|
|
|
|
|
|
|
GoodLeap (formerly
Loanpal)
(Private)
|
25
|
25
|
2
|
29
|
31
|
1.25x
|
2.20x
|
Infinitum
(Private)
|
27
|
27
|
-
|
30
|
30
|
1.10x
|
1.30x
|
T-REX Group
(Private)
|
21
|
21
|
-
|
17
|
17
|
0.82x
|
1.00x
|
Tritium
DCFC(4)(11)
(Public)
|
25
|
25
|
1
|
11
|
12
|
0.46x
|
0.60x
|
Solid
Power(4) (Public)
|
48
|
48
|
-
|
11
|
11
|
0.22x
|
0.39x
|
Our Next
Energy (Private)
|
13
|
13
|
-
|
3
|
3
|
0.25x
|
1.00x
|
Group14
(Private)
|
4
|
4
|
-
|
4
|
4
|
1.00x
|
1.00x
|
FreeWire
(Private)
|
14
|
14
|
-
|
3
|
3
|
0.25x
|
2.00x
|
Ionic I & II
(Samsung
Ventures)
(Private)
|
3
|
3
|
-
|
3
|
3
|
1.00x
|
1.00x
|
Enviva
(Public)(4)
|
22
|
22
|
0
|
1
|
1
|
0.05x
|
1.93x
|
Hyzon
Motors
(Public)
|
10
|
10
|
-
|
1
|
1
|
0.09x
|
0.16x
|
Anuvia Plant
Nutrients
(Private)
|
20
|
20
|
-
|
-
|
-
|
0.00x
|
1.00x
|
Total Current
Portfolio - Decarbonisation -
Public(3)
|
$105
|
$105
|
$1
|
$23
|
$24
|
0.23x
|
0.72x
|
Total Current
Portfolio - Decarbonisation -
Private(3)
|
$127
|
$127
|
$2
|
$90
|
$92
|
0.73x
|
1.42x
|
Total Current
Portfolio - Decarbonisation - Public &
Private(3)
|
$232
|
$232
|
$3
|
$113
|
$116
|
0.50x
|
1.08x
|
Total Current
Portfolio - Conventional & Decarbonisation - Public &
Private(3)
|
$861
|
$855
|
$548
|
$378
|
$926
|
1.08x
|
1.07x
|
Cash and Cash Equivalents(9)
|
|
|
$291
|
|
|
|
|
Total Liquidity(12)
|
|
|
$509
|
|
|
|
|
Total Market Capitalisation
|
|
|
$430
|
|
|
|
|
Realisations
Investment
(Initial Investment Date)
|
Gross Committed Capital
($mm)
|
Invested
Capital ($mm)
|
Gross Realised
Capital ($mm)(1)
|
Gross Unrealised Value
($mm)(2)
|
Gross Realised Capital & Unrealised
Value ($mm)
|
31 Dec 2023
Gross
MOIC(2)
|
31 Dec 2022
Gross MOIC(2)
|
Rock Oil(5)
(12 Mar 2014)
|
114
|
114
|
234
|
4
|
238
|
2.08x
|
2.07x
|
Three Rivers III
(7 Apr 2015)
|
94
|
94
|
204
|
-
|
204
|
2.17x
|
2.17x
|
ILX III
(8 Oct 2015)
|
179
|
179
|
172
|
-
|
172
|
0.96x
|
0.96x
|
Meritage III(6)
(17 Apr 2015)
|
40
|
40
|
88
|
-
|
88
|
2.20x
|
2.20x
|
RCO(7)
(2 Feb 2015)
|
80
|
80
|
80
|
-
|
80
|
0.99x
|
0.99x
|
Carrier II
(22 May 2015)
|
110
|
110
|
67
|
-
|
67
|
0.61x
|
0.60x
|
Pipestone Energy (formerly CNOR)
|
90
|
90
|
58
|
-
|
58
|
0.64x
|
0.64x
|
Sierra
(24 Sept 2014)
|
18
|
18
|
38
|
-
|
38
|
2.06x
|
2.06x
|
Aleph Midstream
(9 Jul 2019)
|
23
|
23
|
23
|
-
|
23
|
1.00x
|
1.00x
|
Ridgebury H3
(19 Feb 2019)
|
18
|
18
|
22
|
-
|
22
|
1.22x
|
1.22x
|
Castex 2014
(3 Sep 2014)
|
52
|
52
|
14
|
-
|
14
|
0.27x
|
0.27x
|
|
|
|
|
|
|
|
|
Total Realisations(3)
|
$819
|
$819
|
$1,000
|
$4
|
$1,004
|
1.23x
|
1.22x
|
Withdrawn Commitments and
Impairments(8)
|
350
|
350
|
9
|
-
|
9
|
0.02x
|
0.02x
|
Total Investments(3)
|
$2,029
|
$2,024
|
$1,557
|
$382
|
$1,939
|
0.96x
|
0.95x
|
Total Investments & Cash and Cash
Equivalents(3),
(9)
|
|
|
|
$674
|
|
|
|
(1) Gross realised capital is total gross proceeds realised on
invested capital. Of the $1,557 million of capital realised to
date, $1,194 million is the return of the cost basis, and the
remainder is profit.
(2) Gross Unrealised Value and Gross MOIC (Gross Multiple of
Invested Capital) are before transaction costs, taxes
(approximately 21 to 27.5 per cent. of U.S. sourced taxable income)
and 20 per cent. carried interest on applicable gross profits in
accordance with the revised terms announced on 3 January 2020, but
effective 30 June 2019. Since there was no netting of losses
against gains before the aforementioned revised terms, the
effective carried interest rate on the portfolio as a whole will be
greater than 20 per cent. No further carried interest will be
payable until the $84.7 million of realised and unrealised losses
to date at 31 December 2023 are made whole with future gains.
Therefore, the earned carried interest of $0.8 million that had
been deferred, has now expired as of October 2023 since the
aforementioned losses were not made whole. Since REL has not yet
met the appropriate Cost Benchmark at 31 December 2023, $32.2
million in performance allocation fees that would have been due
under the prior agreement were not accrued. In addition, there is a
management fee of 1.5 per cent. of net assets (including cash) per
annum and other expenses. Given these costs, fees and expenses are
in aggregate expected to be considerable, Total Net Value and Net
MOIC will be materially less than Gross Unrealised Value and Gross
MOIC. Local taxes, primarily on U.S. assets, may apply at the
jurisdictional level on profits arising in operating entity
investments. Further withholding taxes may apply on distributions
from such operating entity investments. In the normal course of
business, REL may form wholly-owned subsidiaries, to be treated as
C Corporations for US tax purposes. The C Corporations serve to
protect REL's public investors from incurring U.S. effectively
connected income. The C Corporations file U.S. corporate tax
returns with the U.S. Internal Revenue Service and pay U.S.
corporate taxes on its taxable income.
(3) Amounts may vary due to rounding.
(4) Represents closing price per share in USD for publicly traded
shares Permian Resources Corporation (formerly Centennial Resource
Development, Inc.) (NASDAQ:PR - 31-12-2023: $13.60 per share /
30-09-2023: $13.96 per share); Enviva, Inc. (NYSE:EVA - 31-12-2023:
$0.9958 per share / 30-09-2023: $7.47 per share); Solid Power, Inc.
(NASDAQ:SLDP - 31-12-2023: $1.45 per share / 30-09-2023: $2.02 per
share); Hyzon Motors, Inc. (NASDAQ:HYZN - 31-12-2023: $0.90 per
share / 30-09-2023: $1.25 per share); Tritium DCFC Limited
(NASDAQ:DCFC - 31-12-2023: $0.22 per share / 30-09-2023 $0.30 per
share); and Crescent Point Energy (NASDAQ: CPG - 31-12-2023: $6.93
per share / 30-09-2023: n/a).
(5) The unrealised value of the Rock Oil investment consists of
rights to mineral acres.
(6) Midstream investment.
(7) Credit investment.
(8) Withdrawn commitments consist of Origo ($9 million) and
CanEra III ($1 million), and impairments consist of Liberty II
($142 million), Fieldwood ($80 million), Eagle II ($62 million) and
Castex 2005 ($48 million).
(9) This figure is comprised of $5.8 million held at the Company, $283.0 million held at the Partnership and $2.0 million
held at REL US Corp.
(10)
Crescent Point Energy shares were acquired via
realisation of Hammerhead Energy.
(11)
Tritium consists of publicly traded shares
related to original SPAC Sponsor investment and a further backstop
funding ($1 million at 31 December 2023) as well as an additional
private loan investment ($10 million at 31 December
2023).
(12)
Total liquidity comprises remaining fair value of
all public investments and all cash held at REL and within RELIP
structure.
(13)
The investments in the tables are held
within the Partnership.
Investment Portfolio
Summary
As of 31 December 2023, REL's
portfolio comprised fourteen active investments
including two E&P investments, eleven
decarbonisation investments and
one power investment.
Permian Resources (formerly
Centennial)
As of 31 December 2023, REL, through the
Partnership, has invested in full its $268 million commitment to
Permian Resources. Headquartered in Midland, Texas, Permian
Resources is the largest pure-play E&P company in the Delaware
Basin.
Permian Resources completed the previously
announced ~$4.5 billion acquisition of Earthstone Energy, Inc.
(NYSE: ESTE) in November 2023. The transaction bolsters Permian
Resource's leading position in the Delaware Basin and increases
operating size and scale. The transaction further enhances free
cash flow generation and is expected to generate ~$175 million of
annual synergies. The pro-forma company remains committed to
achieving an investment grade rating.
In Q4 2023, Permian Resources announced a
quarterly variable cash dividend of $0.07 per share in addition to
the base dividend of $0.05 per share in November 2023, maintaining
its commitment to returning >50 per cent. of free cash flow to
shareholders.
Since the beginning of 2023, Permian Resources
remained active in high-grading its portfolio through a series of
bolt-on acquisitions (3), acreage swaps (2), grassroots
acquisitions (>140) and non-core divestitures (2). Overall,
Permian Resources' robust portfolio optimisation efforts added
approximately 17,000 Permian net acres, 7,300 Permian net royalty
acres and over 200 high-quality, gross operated locations in the
core of the Delaware Basin. The cumulative effect of these
transactions resulted in the Company replacing over 100 per cent.
of its developed inventory during 2023 on a standalone basis for
less than $100 million net of divestitures.
REL, through the Partnership, owns
approximately 10.1 million shares which are publicly traded (NYSE:
PR).
As of 31 December 2023, REL's interest in
Permian Resources, through the Partnership, was valued at 1.35x
Gross MOIC(1) or $362 million (Realised: $225 million,
Unrealised: $137 million). The Gross MOIC(1), which
reflects the mark-to-market value of REL's shareholding, increased
over the year.
Onyx
As of 31 December 2023, REL, through the
Partnership, has invested $60 million of its $66 million commitment
to Onyx. Onyx is a European-based independent power producer that
was created through the successful acquisition of 2,350MW of gross
installed capacity (1,941MW of net installed capacity) of five
coal- and biomass-fired power plants in Germany and the Netherlands
from Engie SA. Two of the facilities in the current portfolio are
among Europe's most recently constructed thermal plants, which
benefit from high efficiencies, substantial environmental controls,
low emissions profiles and the potential use of sustainable
biomass.
As of 31 December 2023, REL's interest in
Onyx, through the Partnership, was valued at 3.20x Gross
MOIC(1) or $191 million (Realised: $121 million,
Unrealised: $70 million). The Gross MOIC(1) increased
over the year.
Crescent Point Energy (acquired
through the sale of Hammerhead Energy)
As of 31 December 2023, REL, through the
Partnership, had invested its $296 million commitment in full to
Hammerhead Energy, a company focused on liquids-rich unconventional
resources in the Montney and Duvernay resource play in Western
Canada. REL provided an initial equity commitment to Hammerhead
Energy in 1Q14; since the initial commitment, REL had made several
additional investments into Hammerhead Energy. Prior to the
acquisition, Hammerhead Energy had aggregated a position of
~190,000 net acres in the Montney and ~100,000 net acres in the
Duvernay formations and operated 100 per cent. of its asset
base.
On 6 November 2023, Crescent Point Energy
acquired Hammerhead Energy for C$21 per share (C$15.50 cash, C$5.50
stock). Pro forma for the transaction, REL owns ~1.3 per cent. of
Crescent Point Energy. Crescent Point Energy in combination with
Hammerhead Energy is the seventh largest E&P company in Canada
with production of 200,000 Boe/d (65 per cent. liquids) and
attractive drilling opportunities in the Viewfield, Shaunavon, SK
Viking, Flat Lake, Duvernay, and Montney plays. Crescent Point
Energy will have a quarterly dividend of C$0.115 per share,
implying an annualised dividend yield of 5.0 per cent.
On 21 December 2023, Crescent Point Energy
completed the acquisition of Hammerhead Energy for a total value of
approximately C$2.55 billion, inclusive of assumed net debt, or
C$21.00 per Hammerhead Energy share (approximately US$15.26 per
share based on a ~C$1.38 CAD/USD f/x rate). Each Hammerhead Energy
share was exchanged for (i) C$15.50 (approximately US$11.26) per
share in cash consideration and (ii) C$5.50 (approximately US$4.00)
per share in Crescent Point Energy common shares. The purchase
price represented a 4 per cent. premium to the 9 November closing
price per Hammerhead Energy share on the NASDAQ, a 17 per cent.
premium to the five-day volume-weighted average price (''VWAP'')
per Hammerhead Energy share on the NASDAQ, and a 21 per cent.
premium to the 30-day VWAP per Hammerhead Energy share on the
NASDAQ. The transaction represents a gross MOIC for REL of 0.87x,
of which 0.67x, or US$198 million was realised based on the cash
portion of the consideration, and 0.20x, or US$62 million was
received in the form of Crescent Point Energy shares.
As of 31 December 2023, REL's interest in
Crescent Point Energy, was valued at 0.87x Gross MOIC(1)
or $256 million (Realised: $198 million, Unrealised: $58 million).
The Gross MOIC(1) increased over the
year.
Infinitum
As of 31 December 2023, REL, through the
Partnership, has fully invested its $27.5 million commitment to
Infinitum, including $10 million within their recent $185 million
Series E round closed in H2 2023. Infinitum's patented
air-core motors offer superior performance in half the weight and
size, at a fraction of the carbon footprint of traditional motors,
making them pound for pound one of the most efficient in the world.
Infinitum motors open up sustainable design possibilities for the
machines we rely on to be smaller, lighter and quieter, improving
our quality of life while also saving energy.
As of 31 December 2023, REL's interest in
Infinitum, through the Partnership, was valued at 1.10x Gross
MOIC(1) or $30.2 million (Realised: nil, Unrealised:
$30.2 million).The Gross MOIC(1) has decreased slightly
over the year.
GoodLeap (formerly
Loanpal)
As of 31 December 2023, REL,
through the Partnership, has invested in full its $25 million
commitment to GoodLeap. The company is a technology-enabled
sustainable home improvement loan originator, providing a
point-of-sale lending platform used by key residential contractors.
GoodLeap does not take funding risk. The company presells its
originated loans via forward purchase agreements to large asset
managers. The company's attractive unit economics and asset-light
business model allow for rapid growth and the ability to scale
faster than its competitors, while generating free cash flow by
capitalising on upfront net cash payments on the flow of loan
originations and avoiding costly SG&A and capital expenditures
incurred by other portions of the value chain.
Over the course of 2023, the decrease in the
valuation of GoodLeap was largely driven by the impact of interest
rates on the profitability of the business. The company continues
to enforce strategic changes to better navigate market dynamics
such as expanding product partnerships and tightening contractor
payment guidelines.
As of 31 December 2023, REL's interest in
GoodLeap, through the Partnership, was valued at 1.25x Gross
MOIC(1) or $31 million (Realised: $2 million,
Unrealised: $29 million). The Gross MOIC(1) decreased
over the year.
T-REX Group
As of 31 December 2023, REL, through the
Partnership, has fully invested its $21.3 million commitment to
T-REX Group. T-REX Group, a SaaS provider supporting the
asset-backed financing industry, brings together asset class
expertise, critical data management capabilities, and a platform
for deal structuring, cash flow modelling, scenario analysis,
real-time performance tracking, and reporting.
T-REX Group combines sophisticated cloud-based
SaaS technology with big data and asset class expertise to drive
down operating and capital expense, reduce risk exposure, and
enhance performance for complex investments. In November
2023, T-REX successfully executed its contract with Blackstone's
Private Credit group, which is currently in a "Pilot" phase.
As of 31 December 2023, REL's interest in
T-REX Group, through the Partnership, was valued at 0.82x Gross
MOIC(1) or $17.4 million (Realised: nil, Unrealised:
$17.4 million). The Gross MOIC(1) has decreased over the
year.
DCRN/Tritium DCFC
In February 2021, REL, through the
Partnership, invested $0.6 million in the Founder Shares and
Warrants of Decarbonisation Plus Acquisition Corp. II (NASDAQ:
DCRN) at the time of its IPO. In May 2021, DCRN announced it would
combine with Tritium, a Brisbane based pioneer in e-mobility and EV
charging infrastructure. On 4 January 2022, Tritium announced
record breaking Q4'21 and FY'21 financial performance results. The
merger vote to approve the combination of Tritium and DCRN occurred
and closed on 12 January 2022.
In February 2022, REL funded an additional $15
million commitment to Tritium. The funding event occurred three
days after the company met with President Biden to announce the
construction of the company's Lebanon, Tennessee manufacturing
plant. The plant will employ 500 over the next four years, produce
over 10,000 DC fast chargers units annually, and will ultimately
reach peak production capacity of 30,000 units annually.
In September 2023, Tritium secured a financing
commitment of up to $75 million, with an initial funding of $25
million. The company plans to use proceeds to continue its
investment in working capital to meet expected continued strong
customer demand in the 2024 calendar year.
In October 2023, Tritium secured a major order
for more than 200 fast chargers from Driveco, a leading French
charging network operator.
In November 2023, Tritium implemented a new
strategic plan to achieve a path to profitability in 2024. The plan
improves operational efficiency and margins by consolidating
Tritium's global manufacturing operations into its plant in
Tennessee and reduces SG&A expenses via decreased
headcount.
Tritium announced it changed its fiscal
year-end from 30 June to 31 December, effective beginning in the
2024 calendar year. Tritium maintains its expectation to become
EBITDA positive during H1 2024.
As of 31 December 2023, REL's interest in
Tritium, through the Partnership, consisted of the $0.6 million
sponsor investment, which was valued at 0.22x Gross
MOIC(1) or $0.1 million (Realised: nil, Unrealised: $0.1
million), the $15 million equity investment, which was valued at
0.04x Gross MOIC(1) or $0.6 million (Realised: nil,
Unrealised: $0.6 million), and the $9.7 million loan investment,
which was valued at 1.12x Gross MOIC(1) or $10 million
(Realised: $0.8 million, Unrealised: $10.0 million).
Solid Power
As of 31 December 2023, REL, through the
Partnership, has fully invested its $47.8
million commitment to Solid Power. Riverstone sponsored DCRC's $350
million IPO on 23 March 2021. REL made a $0.6 million investment in
DCRC at the time of the IPO, as the blank check company began to
pursue merger candidates. On 15 June 2021, DCRC announced its
business combination agreement with Solid Power, a Louisville,
Colorado based producer of all solid-state batteries for electric
vehicles, to which REL, through the Partnership, committed an
additional $20 million to the $165 million PIPE that was raised. On
17 August 2021, REL announced the purchase of an interest in one of
Samsung Ventures' battery technology focused venture capital
portfolios (the "Samsung Portfolio") for $30.0 million, of which
$27.2 million related to the purchase of 1.66 million shares of
Solid Power.
In addition to the announcement late last year
that Solid Power closed on a $130 million Series B investment raise
led by BMW Group, Ford Motor Company, and Volta Energy
Technologies, earlier this year, the company announced that it
received an award from the U.S. Department of Energy (DOE) to
continue its development of nickel- and cobalt-free solid-state
battery cells. Solid Power expects to receive up to $5.6 million to
develop battery cells containing a lithium metal anode and sulphur
composite cathode to enable improved energy and charging
performance. The DOE announced $42 million in funding for 12
projects to strengthen the domestic supply chain for advanced
batteries that power electric vehicles (EVs), with Solid Power's
award being a portion of this funding. Projects selected aim to
expand US domestic EV adoption by developing batteries that last
longer, charge faster, perform efficiently in freezing temperatures
and have better overall range retention. The company
continues to meet its milestones and has demonstrated a track
record of partnering with leading companies and investors
globally.
The business combination between DCRC and
Solid Power closed on 8 December 2021, with Solid Power beginning
to trade on NASDAQ under the ticker "SLDP".
As of 31 December 2023, REL's interest in
Solid Power, through the Partnership, consisted of the $0.6 million
sponsor investment, which was valued at 1.22x
Gross MOIC(1) or $0.7
million (Realised: nil, Unrealised: $0.7
million), the $20 million PIPE investment, which was valued
at 0.15x Gross MOIC(1) or $2.9 million (Realised: nil,
Unrealised: $2.9 million), and the $27.2 million secondary purchase
from Samsung Ventures, which was valued at 0.26x Gross
MOIC(1) or $7.0 million (Realised: nil, Unrealised: $7.0
million).
Our Next Energy (ONE)
In December 2022, REL invested $11.5 million
of its $12.5 million commitment (remaining $1 million funded
in January 2023) to Our Next Energy's (ONE) $300
million Series B round. ONE is
a Michigan-based energy storage technology company
working to develop batteries for mobility and large-scale storage
applications.
The company had previously agreed to terms
with an outside investor in 2H 2023 to lead a Series C round.
However this transaction did not proceed. Due to the ongoing cash
burn and liquidity position, ONE needed to pivot to an insider-led
round for Q1 2024. As a result, ONE has adjusted its business plan
to better align commercial offtake with factory scale-up and future
financing. ONE continues to demonstrate its compelling technology
through qualification programmes with automotive customers. The
company plans to use the proceeds from the insider led financing to
continue operations. The position was marked down in the portfolio
to reflect the risk that the company runs out of capital before
achieving its larger capital raise.
As of 31 December 2023, REL's interest in ONE,
through the Partnership, was valued at 0.25x Gross
MOIC(1) or $3.1 million (Realised: nil, Unrealised: $3.1
million).
Group14
In April 2022, REL, through the Partnership,
invested $4 million into Group14 Technologies, Inc.'s $400 million
Series C funding round. The Series C round was led by Porsche AG,
with participation from OMERS Capital Markets, Decarbonisation
Partners, Vsquared Ventures, and others. Group14 is a battery
materials technology company founded in 2015. The company has
developed a proprietary silicon-based anode battery material to
replace graphite in conventional lithium-ion batteries.
In 2023, the company continued to build out
its manufacturing capacity through its JV in South Korea and in
Washington, as well as acquired a silane plan (a critical raw
material input) in Germany to further accelerate vertical
integration.
As of 31 December 2023, REL's interest in
Group14, through the Partnership, remained at 1.00x Gross
MOIC(1) or $4.0 million (Realised: nil, Unrealised: $4.0
million).The Gross MOIC remained flat over the year due to
continued strong demand, along with slightly delayed, but ongoing
manufacturing build out.
FreeWire
As of 31 December 2023, REL, through the
Partnership, has fully invested its $14 million commitment to
FreeWire. FreeWire is the leading provider of battery-integrated DC
fast chargers (DCFCs) and their associated software. Riverstone led
the company's $50 million Series C round in January 2021, and
recently participated in the company's Series E
financing.
FreeWire's primary hardware product is the
Boost Charger, which offers charging speeds of up to 200kW with
only a 25kW grid connection by using a 160kWh battery. These
specifications support 15-24 fast charging sessions per day. In
addition to hardware sales, FreeWire's software platform offers
recurring revenues, enabling charger management and third-party
platform integration with plans to offer energy management and grid
services. The position was marked down in the portfolio to
reflect the company's updated growth outlook in order to preserve
liquidity, as well as the challenging EV Charging environment
(public peers traded down 53 per cent. in 2023).
As of 31 December 2023, REL's interest in
FreeWire, through the Partnership, was valued at 0.25x Gross
MOIC(1) or $3.5 million (Realised: nil, Unrealised: $3.5
million). The Gross MOIC(1) decreased by 1.75x over the
year.
On 3 February 2024, a potential acquiror of
FreeWire, who had been under exclusivity, withdrew from the sale
process. Given the accelerating cash constraints and limited
runway in combination with the sale process withdrawal, FreeWire
evaluated all alternatives which culminated in a sale of the
company on 20 February 2024 to a private investor. The
consideration with respect to the sale was 100 per cent. assumption
of all company liabilities. As of 20 February 2024, REL,
through the Partnership, has a realized Gross MOIC of 0.00x in the
FreeWire investment, which is no longer an investment in the
portfolio.
Ionic I & II
On 17 August 2021, REL announced the purchase
of an interest in one of Samsung Ventures' battery technology
focused venture capital portfolios (the "Samsung Portfolio") for
$30.0 million, of which $2.7 million related to shares of Ionic
Materials (Ionic I & II), a material science company
that manufactures transformative polymers for use in solid-state
batteries, healthcare and 5G applications. Ionic Materials'
solid polymer is believed to be the first of its kind to conduct
ions at room temperature, a critical enabler of solid-state
batteries.
As of 31 December 2023, REL's aggregate
investment in Ionic Materials through the Samsung Ventures
portfolio, was marked at 1.00x Gross MOIC(1) or $2.7
million (Realised: nil, Unrealised: $2.7 million). The Gross
MOIC(1) remained flat over the year.
Enviva
As of 31 December 2023, REL, through the
Partnership, has invested $22 million of its $22 million commitment
to Enviva, with the final $3.5 million invested in Q1 2023. Enviva,
based in Bethesda, Maryland, is the world's largest supplier of
wood pellets to major utilities and heat and power generators,
principally in Europe and Japan. Through its subsidiaries, Enviva
owns and operates ten plants with a combined wood pellet production
capacity of approximately 6.2 million metric tons per
year.
On 31 December 2021, Enviva completed its conversion
from a master limited partnership to a corporation following
approval by Enviva unitholders on 17 December 2021. Enviva's
decline in stock price from Q3 2023 to Q4 2023 was driven primarily
by the release of third quarter 2023 results. Subsequent to the
close of the third quarter, on 9 November 2023, Enviva's management
released its third quarter 2023 earnings results, announced a
comprehensive review of its capital structure to improve the
company's financial position, and announced a realignment of
leadership, including the appointment of Glenn Nunziata, Chief
Financial Officer, as Enviva's interim Chief Executive Officer as
the company focuses on executing a multi-faceted transformation
plan. The company reported lower adjusted EBITDA for third-quarter
2023 of $36.6 million as compared to $60.6 million for
third-quarter 2022, primarily due to lower revenue from commercial
activities.
Since 9 November 2023, Enviva's leadership and
advisors have been actively engaged in negotiations with potential
strategic partners, customers, and other stakeholders in connection
with the company's previously announced comprehensive review of
alternatives to strengthen its capital structure, augment
liquidity, address contractual liabilities, and increase long-term
profitability. In January 2024, Enviva elected to utilize its
contractual 30-day grace period and not make the semi-annual
interest payment of approximately $24.4 million, with respect to
the company's outstanding 6.5 per cent. Senior Notes due 2026,
notwithstanding that the company has sufficient cash on hand to
make the interest payment.
As of 31 December 2023, REL's interest in
Enviva, through the Partnership, was valued at 0.05x Gross
MOIC(1) or $1 million (Realised: $0.4 million,
Unrealised: $1.0 million). The Gross MOIC(1) decreased
over the year.
Hyzon
In connection with the closing of the
previously announced merger between DCRB and Hyzon Motors Inc.
(NASDAQ: HYZN), REL purchased $10 million of DCRB common stock in a
private placement transaction at $10 per share in July 2021. Hyzon
is the industry-leading global supplier of zero-emissions hydrogen
fuel cell powered commercial vehicles.
As of 31 December 2023, REL's interest in
Hyzon, through the Partnership, was valued at 0.09x Gross
MOIC(1) or $1 million (Realised: nil, Unrealised: $1
million). The Gross MOIC(1) decreased over the
year.
Anuvia
Anuvia Plant Nutrients, Inc. has
ceased operations and is undergoing liquidation. Anuvia engaged
Evercore to advise on a fundraising or sale process beginning in Q3
2022. The capital raise effort was ultimately
unsuccessful subsequent to the 31 March 2023 valuation. The
investment was marked down from $20 million to $14 million at the
31 March 2023 valuation to reflect uncertainty around the potential
success of the capital raise. As is often the case, the capital
raise had pathways to be successful until the very end, but
ultimately did not materialise and the company ceased operations on
15 May 2023. Anuvia is in the process of
realising its assets. Whilst Series D equity holders are
first equity in line to receive proceeds from Anuvia, the
Investment Manager informed the Board on 10 July 2023 that no such
proceeds can now be reasonably expected given the debt burden on
the business.
Valuation
The Investment Manager is charged with proposing the
valuation of the assets held by REL through the Partnership. The
Partnership has directed that securities and instruments be valued
at their fair value. REL's valuation policy is compliant with IFRS
and IPEV Valuation Guidelines and has been applied consistently
from period to period since inception. As the Company's
investments, through the Partnership, have tended to be generally
not publicly quoted, valuations require meaningful judgement to
establish a range of values, and the ultimate value at which an
investment is realised may differ from its most recent valuation
and the difference may be significant.
The Investment Manager values each underlying
investment in accordance with the Riverstone valuation policy, the
IFRS accounting standards and IPEV Valuation Guidelines. The value
of REL's portion of that investment is derived by multiplying its
ownership percentage by the value of the underlying investment. If
there is any divergence between the Riverstone valuation policy and
REL's valuation policy, the Partnership's proportion of the total
holding will follow REL's valuation policy. Valuations of REL's
investments through the Partnership are determined by the
Investment Manager and disclosed quarterly to investors, subject to
Board approval.
Riverstone values its investments using common
industry valuation techniques, including comparable public market
valuation, comparable merger and acquisition transaction valuation,
and discounted cash flow valuation.
For development-type investments, Riverstone
also considers the recognition of appreciation or depreciation of
subsequent financing rounds, if any. For early stage
private investments, Riverstone's investment due diligence process
includes assumptions about short-term financial results in
determining the appropriate purchase price for the
investment
Riverstone reviews the valuations on a
quarterly basis with the assistance of the Riverstone Performance
Review Team ("PRT") as part of the valuation process. The PRT was
formed to serve as a single structure overseeing the existing
Riverstone portfolio with the goal of improving operational and
financial performance.
The Audit Committee reviews the valuations of
the Company's investments held through the Partnership and makes a
recommendation to the Board for formal consideration and
acceptance.
Uninvested Cash
As of 31 December 2023, REL had a cash balance
of $5.8 million and the Partnership, including its wholly-owned
subsidiaries, REL Cayman Holdings, LP, REL US Corp and REL US
Centennial Holdings, LLC, had uninvested funds of over $285.6
million held as cash, United States Treasury Bills and short-term
money market fixed deposits, gross of the accrued management fee of
$2.2 million. After the accrued management fee, REL's aggregate
cash balance is $289.2 million. As in prior years, in accordance
with the Partnership Agreement, if the Company requires additional
funds for working capital, it is entitled to receive further
distributions from the Partnership. The Partnership maintains
deposit accounts with several leading international banks. In
addition, the Partnership invests a portion of its cash deposits in
short-term money market fixed deposits. REL's treasury policy seeks
to protect the principal value of cash deposits utilising low risk
investments with top-tier counterparts. Uninvested cash earned
approximately 340 basis points during the year ended 31 December
2023. All cash deposits referred to in this paragraph are
denominated in U.S. dollars.
Post-Year End Update
As announced on 8 February 2024, the
Company proposes to return $200 million (equivalent to
approximately £158 million on the basis of the prevailing USD:GBP
exchange rate) of its excess capital to shareholders by means of a
tender offer at a price of £10.50 per ordinary share. The Tender
Price represents a premium of approximately 31 per cent. to the
closing market price per ordinary share of £8.00 on 7 February 2024
and represents a 16 per cent. discount to the net asset value per
ordinary share of £12.53 as at 31 December 2023 (on the basis of
the prevailing USD:GBP exchange rate at 31 December 2023 of
1.2736). The Company launched the 2024 Tender Offer on 23 February
2024 for up to 15,047,619 of the Company's ordinary shares,
representing 36 per cent. of the existing shares in issue
(excluding any ordinary shares held in treasury, of which there are
none currently) and the 2024 Tender Offer will close on 25
March 2024. The 2024 Tender Offer will require shareholder approval
at an extraordinary general meeting of the Company's shareholders,
which is due to be held on 26 March 2024, and will be subject to
other legal, regulatory and customary conditions.
On 3 February 2024, a potential acquiror of
FreeWire, who had been under exclusivity, withdrew from the sale
process. Given the accelerating cash constraints and limited
runway in combination with the sale process withdrawal, FreeWire
evaluated all alternatives which culminated in a sale of the
company on 20 February 2024 to a private investor. The
consideration with respect to the sale was 100 per cent. assumption
of all company liabilities. As of 20 February 2024, REL,
through the Partnership, has a realized Gross MOIC of 0.00x in the
FreeWire investment, which is no longer an investment in the
portfolio.
Outlook
The themes of global macro-economic
uncertainty, geopolitical instability and tension are likely to
remain. On top of this, elections in 64 countries for around half
of the world's total population this year will add to the sense of
uncertainty and the potential for drama. A change in US
administration could see a shift in the rhetoric around the
environmental and energy debate but it will not impact the science
or need for continued investment to address climate change, and to
upgrade, modernise and improve the world's energy
infrastructure.
A stable macro-economic outlook, increasing
geopolitical tensions and further disruption to global supply
routes could provide a favourable environment for energy prices. A
reduction in interest rates is likely to be reflected positively in
the valuations of small-cap, high growth companies which could be
supportive for our renewables portfolio. The timing, scale and
speed of any reduction in interest rates is still unknown but
inflationary pressures across the world have been reduced,
providing optimism that central banks will be able to cut rates
when conditions allow.
RIGL
Holdings, LP
28 February 2024
Investment POLICY
The Company's investment objective is to
generate long term capital growth by making investments in the
global energy sector. For so long as the Investment Manager (or any
of its affiliates) remains the investment manager of the Company,
the Company shall have the option to participate in all Qualifying
Investments in which the Private Riverstone Funds
invest.
Asset Allocation
The Company shall acquire its interests in
each Qualifying Investment at the same time (or as near as
practicable thereto) as, and on substantially the same economic and
financial terms as, the relevant Private Riverstone Fund which may
involve the Private Riverstone Fund acquiring all or some of such
Qualifying Investment and selling it on to the Company on the same
terms on which the Private Riverstone Fund acquired the transferred
interest in the Qualifying Investment.
The Company and either Fund V or Fund VI has
participated in each applicable Qualifying Investment in which Fund
V or Fund VI, respectively, invests in a ratio of one-third to
two-thirds. This investment ratio was subject to adjustment on a
case-by-case basis (a) to take account of the liquid assets
available to each of the Company and Fund V for investment at the
relevant time and any other investment limitations applicable to
either of them or otherwise if (b) both (i) a majority of the
Company's independent directors and (ii) the Investment Manager
agree that the investment ratio should be adjusted for specific
Qualifying Investments.
For each Private Riverstone Fund subsequent to
Fund V which is of a similar target equity size as Fund V (i.e.
US$7.7 billion) and has a similar investment policy to the Company,
Riverstone shall seek to ensure that, subject to the investment
capacity of the Company at the time, the Company and the Private
Riverstone Fund invest in applicable Qualifying Investments in an
investment ratio of one-third to two-thirds or in such other ratio
as the Company's independent directors and the Investment Manager
agree at or prior to the first closing of such Private Riverstone
Fund.
Such investment ratio may be adjusted by
agreement between the Company's independent directors and the
Investment Manager on subsequent closings of a Private Riverstone
Fund having regard to the total capital commitments raised by that
Private Riverstone Fund during its commitment period, the liquid
assets available to the Company at that time and any other
investment limitations applicable to either of them.
The Investment Manager will typically seek to
ensure that the Company and the Private Riverstone Funds dispose of
their interests in Qualifying Investments at the same time and on
substantially the same terms, and in the case of partial disposals,
in the same ratio as the relevant Qualifying Investment was
acquired, but this may not always be the case.
In addition, the Company may at any time make
investments consistent with its investment policy independent from
Private Riverstone Funds, which may include investments alongside
Riverstone employee co-investment vehicles or other
Riverstone-managed co-investment arrangements.
The Company may hold controlling or
non-controlling positions in its investments and may make
investments in the form of equity, equity-related instruments,
derivatives or indebtedness (to the extent that such indebtedness
is a precursor to an ultimate equity investment). The Company may
invest in public or private securities. The Company will not permit
any investments to be the subject of stock lending or sale and
repurchase.
In selecting investments, the Investment
Manager will target investments that are expected to generate long
term capital growth and, in particular, investments that are
expected to generate a Gross IRR of between 20 and 30 per
cent.
Diversification
No one investment made by the Company may (at
the time of the relevant investment) represent more than 25 per
cent. of the Company's gross assets, including cash holdings,
measured at the time the investment is made. The Company shall
utilise the Partnership and its Investment Undertakings or other
similar investment holding structures to make investments and this
limitation shall not apply to its ownership interest in the
Partnership or any such Investment Undertaking.
Gearing
The Company may, but shall not be required to,
incur indebtedness for investment purposes, working capital
requirements and to fund own-share purchases or redemptions up to a
maximum of 30 per cent. of the last published NAV as at the time of
the borrowing, or such greater amount as may be approved by the
Shareholders passing an ordinary resolution. The consent of a
majority of the Company's Directors shall be required for the
Company or the Partnership to enter into any credit or other
borrowing facility. This limitation will not apply to portfolio
level entities in respect of which the Company is invested or is
proposing to invest. The Company currently has not had any
indebtedness during the period of this Annual Report.
Investment Restrictions
The Company is subject to the following
investment restrictions:
· for so long as
required by the Listing Rules, it will at all times seek to ensure
that the Investment Manager invests and manages the Company's and
the Partnership's assets in a way which is consistent with the
Company's objective of spreading risk and in accordance with the
Company's investment policy;
· for so long as
required by the Listing Rules, it must not conduct a trading
activity which is significant in the context of the Company and its
Investment Undertakings;
· for so long as
required by the Listing Rules, not more than 10 per cent. of the
value of its total assets will be invested in other UK-listed
closed-ended investment funds, except for those which themselves
have published investment policies to invest not more than 15 per
cent. of their total assets in other UK-listed closed-ended
investment funds; in addition, the Company will not invest more
than 15 per cent. of the value of its total assets in other
UK-listed closed-ended investment
funds; and
· any investment
restrictions that may be imposed by Guernsey law (although no such
restrictions currently exist).
Currency and interest rate hedging
transactions will only be undertaken for the purpose of efficient
portfolio management and these transactions will not be undertaken
for speculative purposes.
Board of Directors
Richard Horlick (64), Chair of the Board and Non-executive
Independent Director
Appointment:
Appointed to the Board in October 2022 and appointed as Chair
of the Board in March 2023.
Experience: Richard
Horlick serves as a non-executive director and chair of BH Macro
Limited and a non-executive director of VH Global Sustainable
Energy Opportunities PLC, each of which is admitted to trading on
the Main Market of the London Stock Exchange. In addition to his
listed positions, he is currently the non-executive chairman of
CCLA Investment Management which manages assets for over 38,000
charities and church and local authority funds. Richard Horlick is
a UK resident and has served on a number of closed end fund boards
and was previously head of investment and main board director of
Schroders Plc and President, Institutional, of Fidelity
International and subsequently chairman of the Trust Bank for the
Fidelity Mutual funds in the US. He has had a long and
distinguished career in investment management since graduating from
Cambridge University in 1980 with an MA in Modern
History.
Committee
Membership: Audit Committee Member; Nomination
and Remuneration Committee Member; Management Engagement Committee
Member.
Patrick Firth (62), Non-executive Senior Independent
Director
Appointment:
Appointed to the Board in May 2013 and appointed as Senior
Independent Director in May 2016.
Due to retire before the Company's next
AGM.
Experience: Patrick
Firth qualified as a Chartered Accountant with KPMG Guernsey in
1991 and is also a member of the Chartered Institute for Securities
and Investment. He has worked in the fund industry in Guernsey
since joining Rothschild Asset Management (CI) Limited in 1992
before moving to become Managing Director at Butterfield Fund
Services (Guernsey) Limited (subsequently Butterfield Fulcrum Group
(Guernsey) Limited), a company providing third party fund
administration services, where he worked from April 2002 until June
2009. He is a non-executive Director of a number of investment
funds, including India Capital Growth Fund Limited, CT UK Capital
& Income Investment Trust plc and Next Energy Solar Fund
Limited. Patrick Firth is a UK resident.
Committee
Membership: Audit Committee Member (Chair until
31 December 2023); Nomination and Remuneration Committee Member;
Management Engagement Committee Member.
Karen McClellan (63), Non-executive Independent
Director
Appointment:
Appointed to the Board in May 2023.
Experience:
Karen McClellan is an advisory board member of
TT International's Environmental Solutions Fund and serves as an
appointed expert for the UK Accelerated Climate Transitions
programme, on the Global SDG Council for Alternative Fuels, and on
the Climate Tech Council (London). Karen McClellan has gained over
the last two decades hands-on experience in carbon policy, clean
infrastructure finance and zero-carbon technologies, having raised
and deployed more than £700 million in renewable energy and carbon
funds and transactions. During two decades as an investment banker
at Lehman Brothers, Robert Fleming and the EBRD, Karen McClellan
structured investment funds backed by emission reductions and
energy savings and served on their investment committees. Karen
holds degrees from the Stanford Graduate School of Business (MBA)
and Yale University (BA Economics). Karen McClellan is a UK
resident.
Committee
Membership: Audit Committee Member; Nomination
and Remuneration Committee Member, Management Engagement Committee
Member.
John Roche (58), Non-executive Independent
Director
Appointment:
Appointed to the Board in December 2022.
Experience:
John Roche qualified as an Irish Chartered
Accountant in 1988 and moved immediately to Guernsey to join the
PwC predecessor firm, Coopers & Lybrand. He seconded to
the investment management practices at PwC Ireland (1996-1998) and
PwC UK (2003-2008) returning on a full time basis in 2009 to PwC
Channel Islands, Guernsey office. Promoted to partner in
2006, he is now recently retired with a strong background in
auditing as well as IPO and capital markets transactions for
investment companies on the various London markets. He
focussed on delivering audit services to alternative investment
managers, specialising in private equity, secondaries, private
debt, infrastructure and real estate in the listed and private
sectors. John Roche has been the PwC Channel Islands firm's Risk
Management Partner (2008-2015), Partner Responsible for
Independence/Ethics & Business Conduct (2008-2015 &
2018-2022), as well as the Guernsey Office Managing Partner
(2013-2020). He was also President of the Guernsey Society of
Chartered and Certified Accountants (2013-2015). John Roche
is a Guernsey resident.
Committee
Membership: Audit Committee Chair (appointed
with effect from 1 January 2024); Nomination and Remuneration
Committee Member; Management Engagement Committee
Member.
Jeremy Thompson (68), Non-executive Independent
Director
Appointment:
Appointed to the Board in May 2016 and will
become Senior Independent Director following Patrick Firth's
retirement.
Experience: Jeremy
Thompson has sector experience in Finance, Telecoms, Engineering
and Oil & Gas. He acts as an independent non-executive director
for both listed, including DP Aircraft 1 Limited, and PE funds.
Prior to that, he has worked in private equity and was CEO of four
autonomous global businesses within Cable & Wireless Plc
(operating in both regulated and unregulated markets), and earlier
held CEO roles within the Dowty Group. He currently serves as
chairman of the States of Guernsey Renewable Energy Team and is a
commissioner of the Alderney Gambling Control Commission. He is
also an independent member of the Guernsey Tax Tribunal panel. He
is a graduate of Brunel (B.Sc), Cranfield (MBA) and Bournemouth
(M.Sc) Universities and was an invited member to the UK's senior
defence course RCDS (Royal College of Defence Studies). He is a
member of the IoD and holds the IoD's Certificate and Diploma in
Company Direction, is an associate of the Chartered Institute of
Arbitration and a chartered Company Secretary. Jeremy Thompson is a resident of Guernsey
and has previously lived and worked in the UK, USA and
Germany.
Committee
Membership: Audit Committee Member; Nomination
and Remuneration Committee Chair; Management Engagement Committee
Member.
Claire Whittet (68), Non-executive Independent
Director
Appointment:
Appointed to the Board in May 2015.
Experience:
Claire Whittet has over 40 years of experience
in the financial services industry. After obtaining a MA (Hons) in
Geography from the University of Edinburgh, she joined the Bank of
Scotland for 19 years and undertook a wide variety of roles. She
moved to Guernsey in 1996 and was Global Head of Private Client
Credit for Bank of Bermuda before joining the Board of Rothschild
& Co Bank International Limited in 2003, initially as Director
of Lending and latterly as Managing Director and Co-Head until May
2016 when she became a non-executive Director until her retirement
in July 2023. Claire Whittet is an ACIB member of the Chartered
Institute of Bankers in Scotland, a Chartered Banker, a member of
the Chartered Insurance Institute and holds an IoD Diploma in
Company Direction. She is an experienced non-executive Director and
currently sits on the boards of two other listed funds (Eurocastle
Investment Limited and Third Point Offshore Investors Limited) and
various PE funds. Claire Whittet is a Guernsey resident.
Committee
Membership: Audit Committee Member; Nomination
and Remuneration Committee Member; Management Engagement Committee
Chair.
Report of the Directors
The Directors hereby submit the Annual Report
and Audited Financial Statements for the Company for the year ended
31 December 2023. This Report of the Directors should be read
together with the Corporate Governance Report.
General Information
REL is a company limited by shares, which was
incorporated on 23 May 2013 in Guernsey with an unlimited life and
registered with the Commission as a Registered Closed-ended
Collective Investment Scheme pursuant to the POI Law. It has been
listed on the London Stock Exchange since 29 October 2013. The
registered office of the Company is PO Box 286, Floor 2, Trafalgar
Court, Les Banques, St Peter Port, Guernsey, GY1
4LY.
Principal Activities
The principal activity of the Company is to
act as an investment entity through the Partnership and make
investments in the energy sector.
The Company's investment objective is to
generate long-term capital growth by investing in the global energy
sector.
Business Review
A review of the Company's business and its
likely future development is provided in the Board Chair's
Statement and in the Investment Manager's Report.
Listing Requirements
Since being admitted on 29 October 2013 to the
Official List of the UK Listing Authority, maintained by the FCA,
the Company has complied with the applicable Listing
Rules.
Results and Dividend
The results of the Company for the year are
shown in the audited Statement of Comprehensive Income.
The Net Asset Value of the Company as at 31
December 2023 was $674 million (31 December 2022: $739
million).
The Directors do not recommend the payment of
a dividend in respect of the year ended 31 December 2023 (31
December 2022: $nil).
Share Capital
At incorporation on 23 May 2013, the Company
issued one founder Ordinary Share of no par value. On 29 October
2013, the Company issued 71,032,057 Ordinary Shares of no par value
at £10 per Ordinary Share in an initial public offering raising a
total of $1,138 million.
KFI, one of the Cornerstone Investors in the
Company, paid for and acquired 10 million Ordinary Shares in two
equal tranches of £50 million. The first tranche was paid on
Admission and the second tranche of 5,000,000 Ordinary Shares was
paid on 26 September 2014.
On 11 December 2015, the Company raised £67.6
million ($102.3 million) (1) through the issuance of
8,448,006 new Ordinary Shares at £8.00 per Ordinary
Share.
On 15 October 2018, the Company announced a
Tender Offer for £55.0 million ($71 million) in value of the
Company's Ordinary Shares. The Company acquired 4,583,333 Ordinary
Shares at £12.00 ($15.48) per share, which were cancelled on 23
November 2018.
On 1 May 2020, the Company announced a buyback
programme with the intention of returning £50 million to
Shareholders via on market buybacks; which was completed on 9 March
2021. Since the announcement, the Company has purchased 17,214,197
shares, in aggregate, for £50 million ($63 million) at an average
share price of £2.90 ($3.67).
On 11 May 2021, the Company announced a
buyback programme with the intention of returning £20 million to
Shareholders via on market buybacks, which subsequently, on 4
October 2021, was increased to £40 million. Since the announcement,
the Company has purchased 7,744,935 shares, in aggregate, for £36
million ($50 million) at an average share price of £4.65
($6.40).
On 14 February 2022, the Company announced
that the Board and Investment Manager agreed to allocate an
additional £46.0 million ($62.4 million) to the programme, which
subsequently on 15 May 2023, was increased by a further £30 million
($37.4 million).
In addition to the buyback programme, the
Company has acquired 3,182,196 ordinary shares pursuant to the
Tender Offer announced on 17 August 2023 at a total cost of
approximately £18.4 million ($23.4 million). Since the announcement
in February 2022, inclusive of the August 2023 tender offer,
12,741,810 ordinary shares have been bought back at a total cost of
approximately £76.9 million ($95.1 million) at an average share
price of approximately £6.04 ($7.47).
As at 31 December 2023, the share capital of
the Company is 42,195,789 Ordinary Shares in aggregate.
On 8 February 2024, the Company announced that
it proposes to return £158 million ($200 million) of its excess
capital to shareholders by means of a tender offer at a price of
£10.50 per ordinary share. The Company launched
the 2024 Tender Offer on 23 February 2024 and the 2024 Tender Offer
will close on 25 March 2024.
The Company has one class of Ordinary Shares.
The issued value of the Ordinary Shares represents 100 per cent. of
the total issued value of all share capital. Under the Company's
Articles of Incorporation, on a show of hands, each Shareholder
present in person or by proxy has the right to one vote at general
meetings. On a poll, each Shareholder is entitled to one vote for
every share held.
Shareholders are entitled to all dividends
paid by the Company and, on a winding up, provided the Company has
satisfied all of its liabilities, the Shareholders are entitled to
all of the surplus assets of the Company. The Company has not
declared or paid dividends from inception to 31 December 2023, and
has no intention to do so.
The Ordinary Shares have no right to fixed
income.
(1) Gross
of share issuance costs of $3.6 million.
Shareholdings of the Directors
The Directors with beneficial interests in the
shares of the Company as at 31 December 2023 and 2022 are detailed
below:
Director
|
Ordinary
Shares
held
31
December
2023
|
Per cent.
Holding
at
31
December
2023
|
Ordinary
Shares
held
31
December
2022
|
Per cent.
Holding
at
31
December
2022
|
Richard Horlick(1)
|
10,000
|
0.024
|
10,000
|
0.020
|
Patrick Firth(2)
|
8,000
|
0.019
|
8,000
|
0.016
|
Jeremy Thompson(1)
|
3,751
|
0.009
|
3,751
|
0.007
|
Claire Whittet(1)(3)
|
2,250
|
0.005
|
2,250
|
0.004
|
John Roche(1)
|
2,201
|
0.005
|
2,201
|
0.004
|
Karen McClellan(1)
|
-
|
-
|
-
|
-
|
Richard Hayden(4)
|
N/A
|
N/A
|
10,000
|
0.020
|
Peter Barker(4)
|
N/A
|
N/A
|
5,000
|
0.010
|
(1)
Non-executive Independent Director.
(2)
Senior Independent Director.
(3)
Ordinary Shares held indirectly with spouse.
(4)
Retired from Board in May 2023; were no longer Non-Executive
Independent Directors as of 31 December 2023.
In addition, the Company also provides the
same information as at 23 February 2024, being the most current
information available.
Director
|
Ordinary
Shares held
23 February 2024
|
Per cent.
Holding at
23 February 2024
|
Richard Horlick(1)
|
10,000
|
0.024
|
Patrick Firth(2)
|
8,000
|
0.019
|
Jeremy Thompson(1)
|
3,751
|
0.009
|
Claire Whittet(1)(3)
|
2,250
|
0.005
|
John Roche(1)
|
2,201
|
0.005
|
Karen McClellan(1)
|
-
|
-
|
(1)
Non-executive Independent Director
(2) Senior
Independent Director
(3)
Ordinary Shares held indirectly with spouse
Directors' Authority to Buyback
Shares
At the AGM on 23 May 2023 in St Peter Port,
Guernsey, the Company renewed the authority to make market
purchases of up to a maximum of 14.99 per cent. of the issued share
capital of the Company. Any buyback of the Company's Ordinary
Shares will be made subject to Companies Law (''Companies
(Guernsey) Law, 2008, (as amended)'') and within any guidelines
established from time to time by the Board. The making and timing
of any buybacks will be at the absolute discretion of the Board,
with consent of the Investment Manager, and not at the option of
the Shareholders. Purchases of the Company's Ordinary Shares will
only be made through the market for cash at prices below the
prevailing Net Asset Value of the Company's Ordinary Shares (as
last calculated) where the Directors believe such purchases will
enhance Shareholder value. Such purchases will also only be made in
accordance with the Listing Rules.
In accordance with the Company's Articles of
Incorporation and Companies Law, up to 100 per cent. of the
Company's Ordinary Shares may be held as treasury
shares.
Directors' and Officers' Liability
Insurance
The Company maintains insurance in respect of
directors' and officers' liability in relation to their acts on
behalf of the Company.
Substantial Shareholdings
As at 31 December 2023, the Company had been
notified, in accordance with Chapter 5 of the Disclosure Guidance
and Transparency Rules, of the following substantial voting rights
as Shareholders of the Company.
Shareholder
|
Shareholding
|
Per cent.
Holding
|
Nature of
Holding
|
Moore Capital Mgt
|
8,430,490
|
19.96
|
Indirect
|
Quilter Investors
|
4,987,702
|
11.81
|
Indirect
|
AKRC Investments LLC
|
4,777,598
|
11.31
|
Direct
|
SIX Group Ltd.
|
3,658,421
|
8.66
|
Indirect
|
Riverstone Related Holdings
|
3,262,619
|
7.72
|
Direct
|
In addition, the Company also provides the
same information as at 23 February 2024, being the most current
information available.
Shareholder
|
Shareholding
|
Per cent.
Holding
|
Nature of
Holding
|
Moore Capital Mgt
|
8,430,490
|
19.98
|
Indirect
|
AKRC Investments LLC
|
4,777,598
|
11.32
|
Direct
|
Quilter Investors
|
4,757,465
|
11.27
|
Indirect
|
SIX Group Ltd.
|
3,660,421
|
8.67
|
Indirect
|
Riverstone Related Holdings
|
3,262,619
|
7.73
|
Direct
|
The Directors confirm that there are no
securities in issue that carry special rights with regards to the
control of the Company.
Independent External Auditor
Ernst & Young LLP has been the Company's
external auditor since incorporation in 2013. The Audit Committee
reviews the appointment of the external auditor, its effectiveness
and its relationship with the Company, which includes monitoring
the use of the external auditor for non-audit services and the
balance of audit and non-audit fees paid.
Following a review of the independence and
effectiveness of the external auditor, a resolution will be
proposed at the 2024 Annual General Meeting to reappoint Ernst
& Young LLP. Each Director believes that there is no relevant
information of which the external auditor is unaware. Each has
taken all steps necessary, as a Director, to be aware of any
relevant audit information and to establish that Ernst & Young
LLP is made aware of any pertinent information. This confirmation
is given and should be interpreted in accordance with the
provisions of Section 249 of the Companies Law. Further information
on the work of the external auditor is set out in the Report of the
Audit Committee.
Articles of Incorporation
The Company's Articles of Incorporation may
only be amended by special resolution of the Shareholders. At the
AGM on 25 May 2021, the Company adopted Amended and Restated
Articles.
AIFMD
REL is regarded as an externally managed
non-EEA AIF under the AIFM Directive. RIGL is the Investment
Manager of the Company as its non-EEA AIFM. The AIFMD outlines the
required information which has to be made available to investors in
an AIF and directs that material changes to this information be
disclosed in the Annual Report of the AIF. All information required
to be disclosed under the AIFMD is either disclosed in this Annual
Report or is detailed in the Appendix entitled AIFMD Disclosures on
page 178 in REL's latest Prospectus which can be obtained through
the Company's website:
www.riverstonerel.com/investors/reports-and-presentations/ The AIFM
has no remuneration within the current or prior year that falls
within the scope of Article 22 of the Directive.
RIGL provides AIFMD compliant management
services to REL. The AIFM acting on behalf of the AIF, has
appointed Ocorian Depositary Company (UK) Limited to provide
depositary services to the AIF. The appointment of the Depositary
is intended to adhere to, and meet the conditions placed on the
Depositary and the AIFM under Article 21 and other related articles
of the AIFMD. The Depositary shall only provide depositary services
to the AIF should it admit one or more German and/or Danish
investors following marketing activity towards them. At that time,
the Depositary shall observe and comply with the Danish and German
regulations applying to the provision of depositary services to a
non-EEA AIF marketed in Denmark or Germany, as the case may be, by
a non-EEA AIFM.
UCITS Eligibility
The Investment Manager is a relying adviser of
Riverstone Investment Group LLC. Riverstone Investment Group
LLC is registered as an investment adviser with the SEC under the
U.S. Investment Advisers Act. As such, the Investment Manager
is subject to Riverstone Investment Group LLC's supervision and
control, the advisory activities of the Investment Manager are
subject to the U.S. Investment Advisers Act and the rules
thereunder and the Investment Manager is subject to examination by
the SEC. Accordingly the Company has been advised that its Ordinary
Shares should be "transferable securities" and, therefore, should
be eligible for investment by authorised funds in accordance with
the UCITS Directive or NURS on the basis that:
· the Company is a
closed end investment company;
· the Ordinary
Shares are admitted to trading on the Main Market of the London
Stock Exchange; and
· the Ordinary
Shares have equal voting rights.
However, the manager of the relevant UCITS or
NURS should satisfy itself that the Ordinary Shares are eligible
for investment by the relevant UCITS or NURS.
AEOI Rules
Under AEOI Rules the Company continues to
comply with both FATCA and CRS requirements to the extent
applicable to the Company.
General Partner's Performance Allocation and
Management Fees
The General Partner's performance allocation
is equal to 20 per cent. of all applicable realised pre-tax
profits, in accordance with the revised terms
announced on 3 January 2020, but effective 30 June 2019 (see Note 9
for further detail). In particular, taxes on realised gains from
ECI investments, as shown in the Investment Manager's Report, in
excess of existing net operating losses, can be substantial at
rates up to 27.5 per cent. The Company is not an umbrella
collective investment undertaking and therefore has no gross
liability. In the normal course of business, REL may form
wholly-owned subsidiaries, to be treated as C Corporations for U.S.
tax purposes. The C Corporations serve to protect REL's public
investors from incurring U.S. ECI. The C Corporations file U.S.
corporate tax returns with the U.S. IRS and pay U.S. corporate
taxes on its taxable income.
The General Partner's performance allocation
is calculated under the aforementioned revised terms of the
Partnership Agreement announced on 3 January 2020, but effective 30
June 2019, and as described in the Prospectuses.
The accrued performance allocation is
calculated on a quarterly basis, which is taken into account when
calculating the fair value of the Company's investment in the
Partnership, as described in Note 10. The fair value of the
Company's investment in the Partnership is after the calculation of
management fees, as described in Note 9.
The financial effect of the General Partner's
performance allocation, management fees and any taxes on ECI
investments is shown in Note 6. The Investment Management Agreement
continues into perpetuity post the seventh year anniversary as the
Discontinuation Resolution was not passed in 2020, subject to the
termination for cause provisions described in Note 9.
However, either the Board or a 10 per cent.
Shareholder or group can request an EGM to vote on a wind-up of the
Company at any time. If passed, such actions would trigger an exit
fee equal to 20 times the most recent quarterly management fee
totalling $43,858,530.
Going Concern
The Audit Committee has reviewed the
appropriateness of the Company's Financial Statements being
prepared in accordance with Companies Law and IFRS and presented on
a going concern basis, which it has recommended to the Board. As
further disclosed in the Corporate Governance Report, the Company
is a member of the AIC and complies with the AIC Code.
The Financial Statements have been prepared on a going
concern basis for the reasons set out below and as the Directors,
with the recommendation from the Audit Committee, have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future, which is defined
as the period from the date of approval of Financial Statements up
until 31 March 2025. In reaching this conclusion, the Directors,
with the recommendation from the Audit Committee, have considered
the risks that could impact the Company's liquidity over the period
from the date of approval of the Financial Statements up until 31
March 2025.
In reaching this conclusion, that the audited
Financial Statements are prepared on a going concern basis, the
Directors have considered the principal risks faced by the Company,
the substantial level of cash/cash equivalent balances held by the
Company and the Partnership as at 31 December 2023, the liquidity
of certain listed investments held, the cash flow forecasts for the
Company outlining the requirements to settle current and expected
liabilities (including the funding of the Company's share buyback
programme and the 2024 Tender Offer announced post year-end) and
the potential unfunded commitments of the Partnership.
Viability Statement
The Directors, with recommendation
from the Audit Committee, have assessed the prospects of the
Company and relevant stresses (i.e. 2024 Tender Offer, additional
funding requirements to existing portfolio companies, share buyback
programme, management fees and expenses) over a longer period than
required by the going concern provision. With recommendation from
the Audit Committee, the Board chose to conduct a review for a
period of three years to 31 December 2026 as it was determined to
be an appropriate timeframe based on the historical investment
cycle of the Company's investments, through the Partnership, and
its financial planning processes. On a rolling basis the Directors
evaluate the outcome of the investments and the Company's financial
position as a whole. While an unprecedented and long-term decline
in global oil and gas consumption could threaten the Company's
performance, it would not necessarily threaten its viability, not
least as a result of the ample cash/cash equivalents available at
the Company and the Partnership and other liquid assets.
In support of this statement, the
Audit Committee recommended to the Directors to take into account
all of the principal risks and their mitigation as identified in
the Principal Risk and Uncertainties section of the Corporate
Governance Report, the nature of the Company's business; including
the cash reserves, money market deposits and other liquid
investments held at the Partnership, the potential of its portfolio
of investments to generate future income and capital proceeds, and
the ability of the Directors to minimise the level of cash
outflows, if necessary. The most relevant potential impacts of the
identified Principal Risks and Uncertainties on viability were
determined to be:
· An
investment's capital requirements may exceed the Company's ability
to provide capital; and
· The
Company may not have sufficient capital available to participate in
all investment opportunities presented.
Each quarter, the Directors,
through the Audit Committee, review threats to the Company's
viability utilising the risk matrix, which it updates as required
due to recent developments and/or changes in the global market. The
Board relies on periodic reports provided by the Investment Manager
and Administrator regarding risks faced by the Company. When
required, experts are utilised to gather relevant and necessary
information, regarding tax, legal, and other factors.
The Investment Manager considers
the future cash requirements of the Company before funding
portfolio companies. Furthermore, the Board receives regular
updates from the Investment Manager on the Company's cash position,
which allows the Board to maintain their fiduciary responsibility
to the Shareholders and, if required, limit funding for existing
commitments.
Based on the aforementioned
procedures and the existing internal controls of the Company and
Investment Manager, the Board, with recommendation from the Audit
Committee, has concluded there is a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the three-year period of the
assessment.
Directors' Responsibilities
Although the Company is domiciled in Guernsey,
in accordance with the guidance set out in the AIC Code, the
Directors describe in this Annual Report how the matters set out in
Section 172 of the UK Companies Act 2006 have been considered in
their board discussions and decision-making. Section 172 of
the Companies Act requires that the directors of a company act in
the way that they consider, in good faith, is most likely to
promote the success of the company for the benefit of its members
as a whole, and in doing so have regard (amongst other matters) to
the likely consequences of any decision in the long term and the
interests of all the Company's stakeholders.
The Board seeks to encourage
engagement between the Company's Shareholders and the Chair of the
Board, the Chairs of the Audit and Management Engagement Committees
and the Senior Independent Director, which has been facilitated
throughout the year. Up to date quarterly reporting also provides
the Board with accurate, timely information on shareholder
sentiment and direct feedback from service providers, impacted by
the Company's operations, and is canvassed at least annually by the
Chair of the Management Engagement Committee. It is against this
backdrop that key decisions which are either material to the
Company or are significant to any of the Company's key stakeholders
are taken. The below key decisions were made or approved by the
Directors during the year, with the overall aim of promoting the
success of the Company, having regard to the long term, while
considering the impact on its members, stakeholders and the wider
society as outlined in the ESG section.
Engagement
with Shareholders
The Company reports to Shareholders in a
number of formal ways, including its Annual Report, Interim Report
and regulatory news releases, all of which are approved by the
Board. In addition, the Company's website contains comprehensive
information for Shareholders.
On 15 May 2023, the Company announced a share
buyback programme for £30.0 million in the value of the Company's
Ordinary Shares. During 2023, the Company acquired 5,513,673
Ordinary Shares which were subsequently cancelled.
On 17 August 2023, the Company announced a
Tender Offer for £18.4 million in the value of the Company's
Ordinary Shares. The Company acquired 3,182,196 Ordinary Shares
which were cancelled on 29 September 2023.
Following the cancellation of Ordinary Shares
from the Tender Offer and share buyback programme, the share
capital of the Company is 42,195,789 Ordinary Shares in
aggregate.
Financial Risk Management Objectives
Financial Risk Management Objectives are
disclosed in Note 10.
Principal Risk and Uncertainties
Principal Risk and Uncertainties are discussed
in the Corporate Governance Report.
Annual General Meetings
The AGM of the Company will be held at 10:30
BST on 21 May 2024 at the offices of Ocorian Administration
(Guernsey) Limited, Trafalgar Court, Les Banques, St Peter
Port, Guernsey, Channel Islands. Details of the resolutions to be
proposed at the AGM, together with explanations, will appear in the
notices of meetings to be distributed to Shareholders listed on the
register as at 31 December 2023 together with this Annual Report.
As a matter of good practice, all resolutions will be conducted on
a poll and the results will be announced to the market as soon as
possible after the meeting.
Members of the Board, including the Chair of
the Board and the Chair of each Committee, intend to be in
attendance at the AGM, and will be available to answer Shareholder
questions. Additionally, Shareholders can submit questions in
advance to IR@RiverstoneREL.com addressed for the attention of the
Board.
By order of the Board
Richard
Horlick
Chair of the
Board
28 February 2024
Directors' Responsibilities
Statement
The Directors are responsible for preparing
the Annual Report and Financial Statements in accordance with
applicable law and regulations.
The Companies Law requires the Directors to
prepare Financial Statements for each financial year. Under the
Companies Law, the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period. In preparing these Financial
Statements, the Directors are required to:
· select suitable
accounting policies and apply them consistently;
· make judgements
and estimates that are reasonable and prudent;
· present
information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable
information;
· provide
additional disclosures when compliance with the specific
requirements in IFRS are insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the Company's financial position and financial
performance;
· state that the
Company has complied with IFRS, subject to any material departures
disclosed and explained in the Financial Statements; and
· prepare the
Financial Statements on a going concern basis unless it is
inappropriate to presume that the Company will continue in
business.
The Directors confirm that they have complied
with the above requirements in preparing the Financial
Statements.
The Directors are responsible for keeping
proper accounting records, which disclose with reasonable accuracy
at any time, the financial position of the Company and enable them
to ensure that the Financial Statements comply with Companies Law.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud, error and non-compliance with law and
regulations.
The Directors are responsible for the
maintenance and integrity of the corporate and financial
information included on the Company's website
(www.RiverstoneREL.com). The work carried out by the external
auditor does not involve considerations of these matters and,
accordingly, the external auditor accepts no responsibility for any
changes that may have occurred to the Financial Statements since
they were initially presented on the website.
Legislation in Guernsey governing the
preparation and dissemination of the Financial Statements may
differ from legislation in other jurisdictions.
Responsibility Statement of the Directors in
Respect of the Annual Report under the Disclosure GUIDANCE and
Transparency Rules
Each of the Directors confirms to the best of
their knowledge and belief that:
· the Financial
Statements, prepared in accordance with IFRS, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company;
· the Annual
Report includes a fair review of the development and performance of
the business and the position of the Company, together with a
description of the principal risks and uncertainties faced;
and
· the Annual
Report and Financial Statements include information required by the
UK Financial Conduct Authority so that the Company complies with
the provisions of the Listing Rules, Disclosure Guidance and
Transparency Rules of the UK Listing Authority. With regard to
corporate governance, the Company is required to disclose how it
has applied the principles and complied with the provisions of the
corporate governance code applicable to the Company.
The Directors are responsible for preparing
the Annual Report and Financial Statements in accordance with
applicable law and regulations. As part of the preparation of the
Annual Report and Financial Statements, the Directors have received
reports and information from the Company's Administrator and
Investment Manager. The Directors have considered, reviewed and
commented upon the Annual Report and Financial Statements
throughout the drafting process in order to satisfy itself in
respect of the content. In the opinion of the Directors, the Annual
Report and Financial Statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary
for Shareholders to assess the Company's performance, business
model and strategy.
By order of the Board
Richard
Horlick
|
John
Roche
|
Chair of the
Board
|
Director
|
28 February 2024
|
28 February 2024
|
Corporate Governance Report
As a UK listed Company, REL's governance
policies and procedures are based on the principles of the UK Code
as required under the Listing Rules. The UK Code is available on
the Financial Reporting Council's website,
www.frc.org.uk.
The Company is subject to the GFSC Code, which
applies to all companies registered as collective investment
schemes in Guernsey. The GFSC has also confirmed that companies
that report against the UK Code or the AIC Code are deemed to meet
the GFSC Code.
The Board monitors developments in corporate
governance to ensure the Board remains aligned with best practice
especially with respect to the increased desired focus on greater
gender and ethnic diversity on the boards of listed companies. The
Board recognises and supports the Hampton Alexander Review and the
Parker Review and acknowledges the importance of having a variety
of backgrounds and experiences represented in the boardroom for the
effective functioning of the Board. It is the ongoing aspiration of
the Board to have a well-diversified representation. The Board also
values diversity of business skills and experience because
Directors with diverse skills sets, capabilities and experience
gained from different geographical backgrounds enhance the Board by
bringing a wide range of perspectives to the Company. The Board is
satisfied with the current composition and functioning of its
members and notes a 33 per cent. female representation (rising to
40 per cent. with the retirement of Patrick Firth before the
upcoming AGM), meeting the Hampton Alexander target. The Board is
cognisant that it does not currently have an ethic minority
representation, contrary to the FCA diversity guidelines. The
Board's view has been and, continues to be, that all appointments
to the Board should be merit based, assessed against objective
selection criteria. The Board has a Diversity Policy which is
actively implemented as part of the board succession process and
whilst the Board has not become more ethnically diverse as a result
of recruitment in 2023, this continues to be a key focus during
future succession planning. To avoid precluding any deserving
candidate from consideration, executive search consultants will be
asked to provide candidates from a diverse range of
backgrounds.
The AIC Code addresses all the principles set
out in the UK Code, as well as setting out additional principles
and recommendations on issues that are of specific relevance to
investment companies such as the Company. The Board considers that
reporting against the principles and recommendations of the AIC
Code provides better information to Shareholders.
The Company has complied with the
recommendations of the AIC Code and the relevant provisions of the
UK Code, except as set out below.
The UK Code includes provisions relating
to:
· the role of the
chief executive;
· executive
directors' remuneration; and
· the need for an
internal audit function.
As explained in the UK Code, the Board
considers that the above provisions are not currently relevant to
the position of the Company, being an externally managed investment
company, which delegates most day-to-day functions to third
parties.
The Company does not have a chief executive or
any executive directors.
The Company has no employees or internal
operations and has therefore not reported further in respect of
these provisions. The need for an internal audit function is
discussed in the Audit Committee report.
The Board
The Company is led and controlled by a Board
of Directors, which is collectively responsible for the long-term
sustainable success of the Company. It does so by creating and
preserving value and has as its foremost principle acting in the
interests of Shareholders as a whole and the Company's
stakeholders.
The Company believes that the composition of
the Board is a fundamental driver of its success as the Board must
provide strong and effective leadership of the Company. The current
Board was selected, as their biographies illustrate, to bring a
breadth of knowledge, skills and business experience to the
Company. The non-executive Directors provide independent challenge
and review, bringing wide experience, specific expertise and a
fresh objective perspective.
The Board presently consists of six
Non-executive Directors all of whom, including the Chair of the
Board, are independent of the Company's Investment Manager; Richard
Horlick, Patrick Firth, Claire Whittet, John Roche, Jeremy Thompson
and Karen McClellan. All Directors served during the year, with
Richard Horlick being appointed as Chair of the Board on 1 March
2023 and Karen McClellan being appointed to the Board on 25 May
2023. As flagged in the Board Chair's Statement, Richard Hayden and
Peter Barker retired by rotation at the 2023 AGM. Patrick Firth
will be retiring before the Company's next AGM.
The Chair of the Board is independent and is
appointed in accordance with the Company's Articles of
Incorporation. Richard Horlick is considered to be independent
because he:
· has no current
or historical employment with the Investment Manager;
· has no current
directorships or partnerships in any other investment funds managed
by the Investment Manager; and
· is not an
executive of a self-managed company or an ex-employee who has left
the executive team of a self-managed company within the last five
years.
The Board is of the view that no individual or
group of individuals dominates decision making.
New Directors receive an induction from the
Investment Manager and all Directors receive other relevant
training as necessary.
At each subsequent Annual General Meeting of
the Company, each of the Directors at the date of the notice
convening the Annual General Meeting shall retire from office and
may offer themselves for election or re-election by the
Shareholders.
The Board meets at least four times a year for
regular, scheduled meetings and should the nature of the activity
of the Company require it, additional meetings may be held, some at
short notice. At each meeting the Board follows a formal agenda
that covers the business to be discussed. The primary focus at
Board meetings is a review of investment performance and associated
matters such as asset allocation, share price discount/premium
management, investor relations, peer group information, gearing,
industry issues and principal risks and uncertainties in particular
those identified at the end of this report. Additionally, since the
Company's modified investment strategy was implemented in 2020, the
Board is required to regularly hold meetings to consent to all new
investments brought forward by the Investment Manager. During the
year, the total number of ad hoc and regular meetings was
26.
Between meetings the Board visits the
Investment Manager at least annually, and there is regular contact
with the Administrator. The Board requires to be supplied in a
timely manner with information by the Investment Manager, the
Administrator, the Company Secretary and other advisers in a form
and of a sufficient quality to enable it to discharge its
duties.
The Company has adopted a share dealing code
for the Board and will seek to ensure compliance by the Board and
relevant personnel of the Investment Manager and other third-party
service providers with the terms of the share dealing
code.
Board Tenure and Re-election
In accordance with the AIC Code, when and if
any director shall have been in office (or on re-election would at
the end of that term of office) for more than nine years, the
Company will consider further whether there is a risk that such a
director might reasonably be deemed to have lost independence
through such long service. Patrick Firth has served for more than
nine years but the Board considers him to be independent and it has
been agreed that he will retire before the next AGM and will not
stand for re-election. The Board considers its composition
and succession planning on an ongoing basis. All Directors stand
for annual re-election at the AGM.
A Director who retires at an Annual General
Meeting may, if willing to continue to act, be elected or
re-elected at that meeting. If, at a general meeting at which a
Director retires, the Company neither re-elects that Director nor
appoints another person to the Board in the place of that Director,
the retiring Director shall, if willing to act, be deemed to have
been re-elected unless at the general meeting it is resolved not to
fill the vacancy or unless a resolution for the re-election of the
Director is put to the meeting and not passed.
Directors are appointed under letters of
appointment, copies of which are available at the registered office
of the Company. The Board considers its composition and succession
planning on an ongoing basis.
Directors' Remuneration
The level of remuneration of the Directors
reflects the time commitment and responsibilities of their roles.
The remuneration of the Directors does not include any share
options or other performance related elements and there are no
plans to seek any Shareholder waivers to deviate from
this.
With effect from 1 July 2023, a 10 per cent.
increase was applied to the Directors remuneration.
The Chair of the Board is entitled to annual
remuneration of £145,200 (31 December 2022: £132,000). The Chair of
the Audit Committee is entitled to annual remuneration of £90,750
(31 December 2022: £82,500) and the Chair of the Management
Engagement Committee is entitled to annual remuneration of £78,650
(31 December 2022: £71,500). The Chair of the Nomination and
Remuneration Committee is entitled to remuneration of £78,650 (31
December 2022: £71,500). The other independent Directors are
entitled to annual remuneration of £72,600 (31 December 2022:
£66,000).
During the year ended 31 December 2023 and 31
December 2022, the Directors' remuneration was as
follows:
Director
|
2023
($'000)
|
2022
($'000)
|
Richard Horlick(1)(3)
|
159
|
15
|
Patrick Firth(1)(2)
|
108
|
102
|
Jeremy Thompson(1)(5)
|
93
|
89
|
Claire Whittet(1)(4)
|
93
|
89
|
John Roche(1)
|
86
|
4
|
Karen McClellan(1)
|
54
|
-
|
Richard Hayden(6)
|
46
|
164
|
Peter Barker(6)
|
32
|
82
|
(1)
Non-executive Independent Director
(2) Senior
Independent Director and Chair of the Audit Committee to 31
December 2023
(3)
Richard Horlick replaced Richard Hayden as Chair of the Company in
2023
(4) Chair of
the Management Engagement Committee
(5) Chair of
the Nominations and Remuneration Committee
(6) Retired
from the Board in May 2023
The above fees due to the Directors are for
the year ended 31 December 2023 and 31 December 2022, and none were
outstanding at 31 December 2023 (31 December 2022:
$nil).
Duties and Responsibilities
The Board is responsible to Shareholders for
the overall management of the Company. The duties and powers
reserved for the Board include decisions relating to the
determination of investment policy and approval of investments in
certain instances, strategy, capital raising, statutory obligations
and public disclosure, financial reporting and entering into any
material contracts by the Company.
The Board retains direct responsibility for
certain matters, including (but not limited to):
· approving the
Company's long-term objective and any decisions of a strategic
nature including any change in investment objective, policy and
restrictions, including those which may need to be submitted to
Shareholders for approval;
· reviewing the
performance of the Company in light of the Company's strategy
objectives and budgets ensuring that any necessary corrective
action is taken;
· the appointment,
overall supervision and removal of key service providers and any
material amendments to the agreements or contractual arrangements
with any key delegates or service providers;
· approving any
transactions with ''related parties'' for the purposes of the
Company's voluntary compliance with the applicable sections of the
UK Listing Rules;
· the review of
the Company's valuation policy;
· the review of
the Company's corporate governance arrangements; and
· approving any
actual or potential conflicts of interest.
The Directors have access to the advice and
services of the Administrator, who is responsible to the Board for
ensuring that Board procedures are followed and that it complies
with Companies Law and applicable rules and regulations of the GFSC
and the LSE. Where necessary, in carrying out their duties, the
Directors may seek independent professional advice services at the
expense of the Company. The Company maintains directors' and
officers' liability insurance in respect of legal action against
its Directors on an ongoing basis.
The Board's responsibilities for the Annual
Report are set out in the Directors' Responsibility Statement. The
Board is also responsible for issuing appropriate half-yearly
financial reports, quarterly portfolio valuations and other
price-sensitive public reports.
Directors' attendance at Board and Committee
Meetings:
One of the key criteria the Company uses when
selecting Directors is their confirmation prior to their
appointment that they will be able to allocate sufficient time to
the Company to discharge their responsibilities in a timely and
effective manner.
The Board formally met four times during the
year. The Board has held a number of ad hoc meetings, and the sub
committees of the Board have met frequently, during the course of
2023. The Chair of the Board meets privately with the Directors
before each scheduled Board meeting. Directors are encouraged when
they are unable to attend a meeting to give the Chair of the Board
their views and comments on matters to be discussed, in advance. In
addition to their meeting commitments, the Non-executive Directors
also liaise with the Investment Manager whenever required and there
is regular contact outside the Board meeting schedule. In addition
to the Board members, members of the Investment Manager attend
relevant sections of the Board meetings by invitation.
Attendance is further set out
below:
|
Board Meetings
|
Audit
Committee
Meetings
|
Nomination and Remuneration
Committee
Meetings
|
Management
Engagement
Committee
Meetings
|
Tenure as at 31 December
2023
|
Director
|
|
|
|
|
|
Patrick Firth(1)(2)
|
4
|
4
|
4
|
1
|
10 years and 8
months
|
Claire Whittet(1)
|
4
|
4
|
4
|
1
|
8 years and 8
months
|
Jeremy Thompson(1)
|
4
|
4
|
4
|
1
|
7 years and 8
months
|
John Roche(1)
|
3
|
3
|
3
|
1
|
1 year and 1
month
|
Richard Horlick(1)
|
4
|
4
|
4
|
1
|
1 year and 2
months
|
Karen McClellan(1)
|
2
|
2
|
2
|
1
|
8 months
|
(1)
Non-executive
Independent Director
(2)
Non-executive Senior Independent Director
A quorum is comprised of any two or more
members of the Board from time to time, to perform
administrative and other routine functions on
behalf of the Board, subject to such limitations as the Board may
expressly impose on this committee from time to time.
Board members who are not ordinarily resident
in Guernsey were unable to travel and attend certain Board and
committee meetings in person during 2023. In those cases, the
relevant Board members attended those meetings by telephone or
video link (and are shown as being in attendance at the relevant
meeting in the table above).
Conflicts of interest
A Director has a duty to avoid a situation in
which he or she has, or can have, a direct or indirect interest
that conflicts, or possibly may conflict, with the interests of the
Company. The Board requires Directors to declare all appointments
and other situations that could result in a possible conflict of
interest and has adopted appropriate procedures to manage and, if
appropriate, approve any such conflicts. The Board is satisfied
that there is no compromise to the independence of those Directors
who have appointments on the boards of, or relationships with,
companies outside the Company.
Committees of the Board
The Board believes that it and its committees
have an appropriate composition and blend of skills, experience,
independence and diversity of backgrounds to discharge their duties
and responsibilities effectively. The Board keeps its membership,
and that of its committees, under review to ensure that an
acceptable balance is maintained, and that the collective skills
and experience of its members continue to be refreshed. It is
satisfied that all Directors have sufficient time to devote to
their roles and that undue reliance is not placed on any
individual.
Each committee of the Board has written terms
of reference, approved by the Board, summarising its objectives,
remit and powers, which are available on the Company's website
(www.RiverstoneREL.com)
and reviewed on an annual basis. All committee members are provided
with appropriate induction on joining their respective committees,
as well as on-going access to training. Minutes of all meetings of
the committees (save for the private sessions of committee members
at the end of meetings) are made available to all Directors and
feedback from each of the committees is provided to the Board by
the respective committee Chairmen at the next Board meeting. The
Chair of each committee attends the AGM to answer any questions on
their committee's activities.
The Board and its committees are supplied with
regular, comprehensive and timely information in a form and of a
quality that enables them to discharge their duties effectively.
All Directors are able to make further enquiries of management
whenever necessary and have access to the services of the Company
Secretary.
Audit Committee
The Audit Committee was chaired by Patrick
Firth until 31 December 2023, and who remains a member of the Audit
Committee until his retirement before the AGM. John Roche chaired
the Audit Committee from 1 January 2024 which comprises Jeremy
Thompson, Claire Whittet, Richard Horlick and Patrick Firth all who
held office throughout the year, as well as Karen McClellan who was
appointed to the Audit Committee on 25 May 2023. The Chair of the
Audit Committee, the Investment Manager and the external auditor,
Ernst & Young LLP, have held discussions regarding the audit
approach and identified risks. The external auditors attend Audit
Committee meetings and a private meeting is routinely held with the
external auditors to afford them the opportunity of discussions
without the presence of management. The Audit Committee activities
are contained in the Report of the Audit Committee.
Nomination and Remuneration
Committee
The Nomination and Remuneration Committee is
chaired by Jeremy Thompson and comprises, Claire Whittet, John
Roche, Patrick Firth and Richard Horlick, all who held office
throughout the year, as well as Karen McClellan who was appointed
to the Nomination and Remuneration Committee on 25 May 2023.
Patrick Firth remains a member of the Nomination and Remuneration
Committee until his retirement before the AGM.
The Nomination and Remuneration Committee is
convened for the purpose of considering the appointment of
additional Directors as and when considered appropriate. The
Nomination and Remuneration Committee recognises the continuing
importance of planning for the future and ensuring that succession
plans are in place. In considering appointments to the Board, the
Nomination and Remuneration Committee takes into account the
ongoing requirements of the Company and evaluates the balance of
skills, experience, independence, and knowledge of each candidate.
Appointments are therefore made on personal merit and against
objective criteria with the aim of bringing new skills and
different perspectives to the Board whilst taking into account the
existing balance of knowledge, experience and diversity.
In the case of candidates for Directorships,
care is taken to ascertain that they have sufficient time to fulfil
their Board and, where relevant, committee responsibilities. The
Board believes that the terms of reference of the Nomination and
Remuneration Committee ensure that it operates in a rigorous and
transparent manner. The Board also believes that diversity of
experience and approach, including gender diversity, amongst Board
members is of great importance and it is the Company's policy to
give careful consideration to issues of Board balance and diversity
when making new appointments. The Board remains focussed on the
guidelines outlined by the Hampton-Alexander Review and The Parker
Review.
The Nomination Committee changed its name to
the Nomination and Remuneration Committee in May 2023 and
incorporated additional duties in the terms of reference to
determine and make recommendations to the Board regarding the
remuneration of the Directors. The newly appended Remuneration
Committee utilised the work of a local specialist before
recommending a 10 per cent. increase, which reflected no
remuneration increase since 2016 and the relatively high
workload.
The Nomination and Remuneration Committee met
frequently in the first half of the year, and working with a
leading search firm (Fletcher Jones), conducted a rigorous process,
including long and short lists, to identify a successor to Peter
Barker as an Independent Director. Following a process which
included a long list and short list process. The Committee
interviewed five candidates in person and recommended the
appointment of Karen McClellan, who has vast experience in the
energy and investment sectors, across a wide range of applications.
This recommendation was accepted and adopted by the
Board.
In accordance with both Listing Rules and AIC
Guidelines the Board composition is tabulated below. The Board will
continue to take diversity into account as part of its continuing
succession planning and recruitment process.
Board Gender
Identity at 31 December 2023
|
Number of
Board Members
|
Percentage of
the Board
|
Number of
Senior Positions on the Board
|
Men
|
4(1)
|
66.66%
|
2
|
Women
|
2
|
33.33%
|
-
|
(1)It is intended that
Patrick Firth will retire before the 2024 AGM
Board Ethnic
Background at 31 December
2023
|
Number of
Board Members
|
Percentage of
the Board
|
Number of
Senior Positions on the Board
|
White British or other white (including
minority-white groups)
|
6(1)
|
100%
|
2
|
Other ethnic group
|
-
|
-
|
-
|
(1)It is intended that
Patrick Firth will retire before the 2024 AGM
The Nomination and Remuneration Committee has
reviewed the composition, structure and diversity of the Board,
succession planning, the independence of the Directors and whether
each of the Directors has sufficient time available to discharge
their duties effectively. The Nomination and Remuneration
Committee and the Board confirm that they believe that the Board
has an appropriate mix of skills and backgrounds, that all
Directors can be considered as Independent in accordance with the
provisions of the AIC Code and that all Directors have the time
available to discharge their duties effectively.
Accordingly, the Board recommends that
Shareholders vote in favour of the re-election of all Directors at
the forthcoming AGM, as noted in the Board Tenure and Re-election
section of the Corporate Governance Report.
Management Engagement Committee
The Management Engagement Committee is chaired
by Claire Whittet and comprises Jeremy Thompson, John Roche,
Patrick Firth and Richard Horlick, all who held office throughout
the year, as well as Karen McClellan who was appointed to the
Management Engagement Committee on 25 May 2023. Patrick Firth
remains a member of the Management Engagement Committee until his
retirement before the AGM. The Management Engagement Committee
meets at least once a year pursuant to its terms of
reference.
The Management Engagement Committee provides a
formal mechanism for the review of the performance of the
Investment Manager and the Company's other advisors and service
providers. It carries out this review through consideration of a
number of objective and subjective criteria and through a review of
the terms and conditions of the advisors' appointments with the aim
of evaluating performance, identifying any weaknesses and ensuring
value for money for the Shareholders.
As part of the 2023 annual review of service
providers, all service providers were asked to complete
a Cyber Security Review Questionnaire ("CSRQ"), the results of
which the Committee commissioned Newgate Compliance Limited
("Newgate"), an affiliate company of the Company's Administrator,
to review. Newgate's report was discussed by the MEC in February
2024. None of the CSRQs indicated significant cybersecurity
weaknesses. Recommendations mostly related to requests for further
detail or minor improvements and Newgate concluded that the
Company's service providers had sufficiently detailed their
cybersecurity arrangements and have adequate processes in
place.
Board Performance and Evaluation
In accordance with Provision 26 of the AIC
Code which requires a formal and rigorous annual evaluation of its
performance, the Board formally reviews its performance annually
through an internal process. Internal evaluation of the Board, the
Audit Committee, the Nomination and Remuneration Committee, the
Management Engagement Committee and individual Directors has taken
the form of self-appraisal questionnaires and discussions to
determine effectiveness and performance in various areas as well as
the Directors' continued independence.
The Board believes that annual evaluations are
helpful and provide a valuable opportunity for continuous
improvement.
Whilst the Board is not a FTSE 350 company, in
2023, an externally facilitated review of the Board, its committees
and individual Directors (including the Chair) was undertaken
following a review of six potential providers. The Board evaluation
was facilitated by Lintstock Ltd. The 2023 Board effectiveness
review took the form of a structured questionnaire which covered a
range of key topics including composition, skills, knowledge and
experience of the Board, the respective roles and responsibilities
of the Directors, quality of strategic and risk debate, the
effectiveness of decision making and interactions with management
together, including the Chair. All Directors participated in the
evaluation, and the findings were collectively considered by the
Board.
No significant areas of weaknesses were
highlighted during the evaluation. The Lintstock evaluation
concluded that the priorities for the Board are identified as
increased emphasis on shareholder engagements, clarification of the
Company's investment strategy and assurance that Board succession
is fully compliant with best practice within the
industry.
The Board concluded that overall, it had
operated effectively throughout 2023 and is confident in its
ability to continue effectively to lead the Company and oversee its
affairs. The Board believes that the current mix of skills,
experience, knowledge and age of the Directors is appropriate to
the requirements of the Company.
New Directors receive an induction on joining
the Board and regularly meet with the senior management employed by
the Investment Manager both formally and informally to ensure that
the Board remains regularly updated on all issues. All members of
the Board are members of professional bodies and serve on other
Boards, which ensures they are kept abreast of the latest technical
developments in their areas of expertise.
The Board arranges for presentations from the
Investment Manager, the Company's brokers and other advisors on
matters relevant to the Company's business. The Board assesses the
training needs of Directors on an annual basis.
Internal Control and Financial
Reporting
The Directors acknowledge that they are
responsible for establishing and maintaining the Company's system
of internal control and reviewing its effectiveness. Internal
control systems are designed to manage rather than eliminate the
failure to achieve business objectives and can only provide
reasonable but not absolute assurance against material
misstatements or loss. However, the Board's objective is to ensure
that REL has appropriate systems in place for the identification
and management of risks. The Directors carry out a robust
assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity. The key procedures which have been
established to provide internal control are that:
· the Board has
delegated the day-to-day operations of the Company to the
Administrator and Investment Manager; however, it retains
accountability for all functions it delegates;
· the Board
clearly defines the duties and responsibilities of the Company's
agents and advisors and appointments are made by the Board after
due and careful consideration. The Board monitors the ongoing
performance of such agents and advisors and will continue to do so
through the Management Engagement Committee;
· the Board
monitors the actions of the Investment Manager at regular Board
meetings and is given frequent updates on developments arising from
the operations and strategic direction of the underlying investee
companies;
· the
Administrator provides administration and company secretarial
services to the Company. The Administrator maintains a system of
internal control on which they report to the Board; and
· the Board has
reviewed the need for an internal audit function and has decided
that the systems and procedures employed by the Administrator and
Investment Manager, including their own internal controls and
procedures, provide sufficient assurance that an appropriate level
of risk management and internal control, which safeguards
Shareholders' investment and the Company's assets, is maintained.
An internal audit function specific to the Company is therefore
considered unnecessary.
Internal controls over financial reporting are
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of Financial Statements
for external reporting purposes. The Administrator and Investment
Manager both operate risk-controlled frameworks on a continual
ongoing basis within a regulated environment. During 2023 the
Administrator continued to report to the Board on a quarterly basis
with respect to their performance in respect of financial
accounting and financial reporting matters together with other
related matters through a compliance report. However, the
Administrator did not produce a 2023 ISAE 3402: Assurance Reports
on Controls at a Service Organisation report and the Audit
Committee was required to undertake certain additional procedures
to ensure that the appropriate levels of comfort were obtained for
the 2023 financial year. The Report of the Audit Committee
outlines this additional review work undertaken. The Investment
Manager formally reports to the Board quarterly including updates
within Riverstone and also engages with the Board on an ad-hoc
basis as required. No weaknesses or failings within the relevant
operations of the Administrator or Investment Manager have been
identified.
The systems of control referred to above are
designed to ensure the effectiveness and efficient operation of the
relevant internal controls over financial reporting and compliance
with laws and regulations. In establishing the systems of internal
control which the Company relies upon, regard is paid to the
materiality of relevant risks, the likelihood of costs being
incurred and costs of control. It follows therefore that the
systems of internal control can only provide reasonable but not
absolute assurance against the risk of material misstatement in
financial reporting or loss. These processes at the Administrator
and the Investment Manager have been in place for the year under
review and up to the date of approval of this Annual Report and
Financial Statements. These processes are reviewed by the Board,
operating largely via the Audit Committee and are in accordance
with the FRC's internal control publication: Guidance on Risk
Management, Internal Control and Related Financial and Business
Reporting.
Investment Management Agreement
The Investment Manager is the sole Investment
Manager of the Company and the Partnership. Pursuant to the
Investment Management Agreement, the Investment Manager has
responsibility for and discretion over investing and managing the
Company's and the Partnership's direct and indirect assets, subject
to and in accordance with the Company's investment policy. The
Investment Manager is entitled to delegate all or part of its
functions under the Investment Management Agreement to one or more
of its affiliates.
The Company has delegated the provision of all
services to external service providers whose work is overseen by
the Management Engagement Committee at its regular scheduled
meetings. Each year, a detailed review of performance pursuant to
their terms of engagement is undertaken by the Management
Engagement Committee. In particular, during 2019, the Management
Engagement Committee and the Investment Manager discussed fees,
termination provisions, capital structure management, the
performance of the Company, and the basis of the Company's and the
Investment Manager's relationship and alignment of interests at
length, including the benefits to the Company of Riverstone's
extensive participation in the management of all of the Company's
investments and the significant equity commitment of Riverstone to
the Company as one of its major Shareholders.
In accordance with Listing Rule 15.6.2(2)R and
having formally appraised the performance and resources of the
Investment Manager, in the opinion of the Directors the continuing
appointment of the Investment Manager on the terms agreed is in the
interests of the Shareholders as a whole.
On 3 January 2020, the Company announced
amendments to the performance allocation arrangements under the
Investment Management Agreement that were effective from 30 June
2019. The amended terms on which the Company is required to pay a
performance allocation in respect of its investment are as
follows:
· Portfolio level
cost benchmark: A performance allocation will only be
distributed in respect of a realised investment if, at the time of
the realisation of the relevant investment, the aggregate of the
fair market value of all of the Company's then unrealised
investments and the proceeds of all of its realised investments
since inception exceeds the aggregate acquisition price of all of
the Company's unrealised and realised investments. If this
portfolio level cost benchmark is not met at the time of
realisation of the relevant investment, distribution of the
performance allocation is subject to deferment as described further
below. As of 31 December 2023, the portfolio level cost benchmark
was in deficit by $84.7 million.
· 8 per cent.
Hurdle rate: A performance allocation will only be accrued for
payment upon the realisation of an investment if the proceeds from
that investment exceed an amount equal to its acquisition cost plus
an 8 per cent. annual cumulative hurdle rate calculated from the
date of investment to the date of realisation. If the hurdle is
met, the performance allocation will be 20 per cent of all Net
Profits in respect of each such investment. As of 31 December 2023,
five investments exceeded the hurdle rate with $32.2 million not
being accrued in light of the portfolio level cost benchmark being
in material deficit and additionally, the total portfolio's Gross
IRR is approximately (1) per cent.
· Full
realisation: A performance allocation will only be calculated and
accrued on the full realisation of the entire interest in an
investment, unless a partial realisation results in the full return
of all capital invested in such investment. Otherwise, no
performance allocation will be payable on partial disposals and the
ability for the Investment Manager to elect to receive a
performance allocation on an investment that has been held by the
Company for at least seven years (but not sold) has been
removed.
· Deferral: If the
portfolio level cost benchmark is not met at the time of full
realisation of the relevant investment, it will be retested on a
quarterly basis for the following three years. If, at any time
during those three years, the benchmark is satisfied for four
continuous quarters, the relevant performance allocation will then
become distributable without interest. Any accrued but
undistributed performance allocation that has been deferred due to
the portfolio level cost benchmark test will expire after 36
months.
The Investment Manager will continue to be
required to apply each performance allocation (net of taxes) to
acquire ordinary shares of the Company.
During 2021, in compliance with the laws of
the Cayman Islands, the Company and its existing Investment
Manager, Riverstone International Limited, a Cayman Islands
exempted company, assigned its investment advisory rights and
obligations under the Company's Investment Management Agreement to
RIL's immediate parent entity, RIGL Holdings, LP, a Cayman Islands
exempted limited partnership.
Furthermore, on 9 December 2020, the Company's
Investment Management Agreement has been amended to remove the
Investment Manager's ability to nominate directors of the Company
and to replace it with the ability to request that its
representatives attend Board meetings as observers instead, except
in circumstances where matters specifically regarding the
Investment Manager and its affiliates are being
considered.
Distribution
of Investment Proceeds
In addition, the Company and the Investment
Manager have agreed that, going forward, 20 per cent. of the Net
Profits attributable to each fully realised investment, net of
taxes, withholdings or reserves for taxes will, at the discretion
of the Company, be available for distribution to the Company's
Shareholders, whether by dividend or share repurchases.
Our Culture
The Board has determined that the Company's
culture is built around that of the Investment Manager, with a
focus on long lasting relationships with a diverse investor base;
sustainable investment excellence; and a world class team
demonstrating extensive industry knowledge. The Board monitors the
Company's culture on an annual basis through continued engagement
with Shareholders and management.
Relations with Shareholders
The Board welcomes Shareholders' views and
places great importance on communication with its
Shareholders. In addition, Patrick Firth, as the
Senior Independent Director from May 2016, is available to
Shareholders if they have concerns which contact through the normal
channels has failed to resolve or for which such contact would be
inappropriate. Claire Whittet, Management Engagement Committee
Chair, is available to discuss matters regarding the service
providers of REL. The Chair of the Board, Senior Independent
Director and other Directors are also available to meet with
Shareholders at other times, if required. At the request of several
Shareholders, the Chair of the Board, Senior Independent Director
and other Directors arranged meetings and addressed direct
correspondence raised at the quarterly Board meetings during the
year.
The Company reports formally to Shareholders
In a number of ways; regulatory news releases through the London
Stock Exchange's Regulatory News Service, announcements are issued
in response to events or routine reporting obligations. Also, an
Interim Report will be published each year outlining performance to
30 June and the Annual Report will be published each year for the
year ended 31 December, both of which will be made available on the
Company's website. In addition, the Company's website contains
comprehensive information, including company notifications, share
information, financial reports, investment objectives and policy,
investor contacts and information on the Board and corporate
governance. Shareholders and other interested parties can subscribe
to email news updates by registering online on the
website.
The Investment Manager is available for
regular contact with Shareholders, including the Cornerstone
Investors, and any views that they may have are communicated to the
Board and vice versa. No sensitive information is provided to the
Cornerstone Investors that is not provided to the Shareholders as a
whole and at the same time. The Board is also kept fully informed
of all relevant market commentary on the Company by the Investment
Manager and the Corporate Brokers. The Directors and Investment
Manager receive informal feedback from analysts and investors,
which is presented to the Board by the Company's Broker. The
Company Secretary also receives informal feedback via queries
submitted through the Company's website and these are addressed by
the Board, the Investment Manager or the Company Secretary, where
applicable.
Financial results, events, corporate reports,
webcasts and fact books are all stored in the Investor Relations
section of our website: www.riverstonerel.com/investors/
2024 Key Shareholder Engagements
February
Quarterly Portfolio Valuations
Full Year Results Approved
March
Extraordinary Meeting in regards to 2024
Tender Offer
April
Notice of Annual General Meeting
Quarterly Portfolio Valuations
May
Annual General Meeting
July
Quarterly Portfolio Valuations
August
Half Year Results
October
Quarterly Portfolio Valuations
Engagement with Stakeholders
The wider stakeholders of the Company comprise
its service providers, investee companies and suppliers and the
Board recognises and values these stakeholders.
The Company's relationship with its service
providers, including the Investment Manager, is of particular
importance. Service providers have been selected and engaged based
on due diligence and references including consideration of their
internal controls and expertise. The Company has a Management
Engagement Committee, who will review the performance of each
service provider annually and provide feedback as appropriate, to
maintain good working relationships.
Responsible investing principles have been
applied to each of the investments made, which ensures that
appropriate due diligence has been conducted and that the terms of
the investments are clearly set out and agreed with investee
companies in advance.
The Board recognises that relationships with
suppliers are enhanced by prompt payment and the Company's
Administrator, in conjunction with the Investment Manager, ensures
all payments are processed within the contractual terms agreed with
the individual suppliers.
Relations with Other Stakeholders
The Investment Manager meets regularly with
analysts and investors to provide further updates with how the
Company and the investment portfolio are performing.
The Directors and Investment Manager receive
informal feedback from analysts and investors, which is presented
to the Board by the Company's Brokers. The Company Secretary also
receives informal feedback via queries submitted through the
Company's website and these are addressed by the Board, the
Investment Manager or the Company Secretary, where
applicable.
The Directors recognise that the long-term
success of the Company is linked to the success of the communities
in which Riverstone, and its investee companies,
operate.
Whistleblowing
The Board has considered arrangements by which
staff of the Investment Manager or Administrator may, in
confidence, raise concerns within their respective organisations
about possible improprieties in matters of financial reporting or
other matters. It has concluded that adequate arrangements are in
place for the proportionate and independent investigation of such
matters and, where necessary, for appropriate follow-up action to
be taken within their organisation.
Principal Risks and Uncertainties
The Company's assets consist of listed and
private equity investments, held through the Partnership, in the
conventional and decarbonisation portfolios. Initially, there was a
particular focus on opportunities in the global E&P and
midstream energy sub-sectors, but since 2020 REL has been
exclusively focussed on pursuing a global strategy across
decarbonisation sectors presented by Riverstone's investment
platform. Its principal risks are therefore related to market
conditions in the energy and energy transition sectors in general,
but also to the particular circumstances of the businesses in which
it is invested through the Partnership. The Investment Manager,
through the Partnership, seeks to mitigate these risks through
active asset management initiatives and carrying out due diligence
work on potential targets before entering into any
investments.
Each Director is fully aware of the risks
inherent in the Company's business and understands the importance
of identifying, evaluating and monitoring these risks. The Board
has adopted procedures and controls that enable it to carry out a
robust assessment of the risks facing the Company, manage these
risks within acceptable limits and meet all of its legal and
regulatory obligations. The Board is committed to upholding and
maintaining zero tolerance towards the criminal facilitation of tax
evasion.
The Board thoroughly considers the process for
identifying, evaluating and managing any significant risks faced by
the Company on an ongoing basis and these risks are reported and
discussed at Audit Committee and Board meetings. The Board ensures
that effective controls are in place to properly mitigate these
risks to the greatest extent possible and that a satisfactory
compliance regime exists to ensure all applicable local and
international laws and regulations are upheld.
For each material risk, the likelihood and
consequences are identified, management controls and frequency of
monitoring are confirmed, and results reported and discussed at the
quarterly Board meetings.
The Company's principal risk factors are fully
discussed in the Prospectuses, available on the Company's website
(www.RiverstoneREL.com) and should be
reviewed by Shareholders. Please note that not all principal risks
are disclosed on the Company's website, only those established at
the time of the Prospectuses.
The Company's current principal areas of risk
and mitigating actions being taken are summarised below:
1. The Company initially intended
to only invest in the global energy sector, with a particular focus
on oil and gas exploration and production, and midstream
investments, which exposed it to industry and sector concentration
risk.
Under the modified investment strategy, since
2020, the Company has pivoted to focus on energy transition and
decarbonisation and this provides an element of diversification for
the portfolio, albeit with the additional investment risks noted
below. Overall, the valuation risk of the investment portfolio has
also been reduced with an increased portion now being held in
listed investments.
2. The Company's shares have, for
a considerable period of time, been trading at a discount to NAV
per share for reasons, including, but not limited to, general
market conditions in the energy sector, liquidity concerns,
perceived issues with the terms of the Investment Management
Agreement and actual or expected Company performance as the Company
transitions to maximise value from the conventional portfolio
allowing investment into its decarbonisation strategy. This
persistent discount to NAV has the potential to lead to material
shareholder dissatisfaction where any shareholder or shareholder
group which in aggregate totals 10 per cent or more of the shares
outstanding can call an EGM for a shareholder vote.
The Company has seen a marked improvement in
the performance of its share price since 2020, and over this time
it has also been very active in attempting to narrow this
persistent discount with the introduction of a well-funded and
material series of successive buybacks as well as enhanced
shareholder engagement. There is no guarantee that the continued
attempts to mitigate this discount will be successful or that the
continued use of discount control mechanisms will remain possible
over time. There is a risk that through successive buybacks to try
and manage the share price discount to NAV, that the Company may
become too small to be viable or to be able to make new or
follow-on investments.
3. Existing or future shareholders
could use or obtain a material ownership in the Company and exert
influence through voting rights. During 2022 and 2023 there has
been notified shareholder disquiet with the substantial discount to
NAV of the ordinary shares in the market and concern over the pivot
of the investment strategy to decarbonisation investments and
performance to date of that strategy/use of available cash versus
the level of the share buyback programmes.
4. The investment portfolio held
by the Company in both the conventional and decarbonisation
strategies exposes the Company to a number of specific investment
and valuation risks, the most notable ones being:
·
The risks and judgements associated with the fair valuation
of the private equity investments could result in the NAV of the
Company being materially misstated. These private equity
investments expose the Company's valuation models to changes over
time in a number of variables including the price of oil, interest
rates, certain public market trading comparables, transaction
comparables, discounted cash flow rates, taxation etc.
Ultimately the success or otherwise of a private equity investment
will only be determined on eventual realisation.
The Investment Manager has an extensive and consistent valuation
policy which is applied each quarter and fair values all private
equity investments held. All quarterly valuations firstly go
through the valuation processes adopted by the Investment Manager
and when approved by the Investment Manager are released to the
Board for review and challenge. Quarterly meetings are held by the
Board with the Investment Manager to review the draft valuations
ahead of confirmation and release to the market.
·
Potential changes to domestic policy, banking, regulatory
and/or the tax environment of target and existing investments in
the Company's chosen geographies may adversely affect the fair
value/market value or liquidity of those investments, their ability
to borrow and transact business plans or impact the Company's
ability to properly realise those investments at previously
intended valuations or timescales.
The Investment Manager closely monitors the sectors and industries
in which the Company invests or intends to target investment.
All investment opportunities proposed only proceed after thorough
due diligence processes prior to acquisition and ongoing monitoring
processes are employed while investments are held in the
portfolio.
·
The specific investments in the decarbonisation portfolio can
expose the Company to additional investment and operational risks
arising from investment in the build-up and early/development
stages where a company may have little or no operating history, be
more vulnerable to financial failure than more established
companies, have requirements to invest in further funding rounds or
suffer dilution/decrease in value, operating in emerging industries
with technologies that are as yet unproven and investments where
the Company is a minority investor with limited access.
·
Significant global/regional conflict or the imposition of
sanctions or adverse publicity and/or poor ethical practices of the
Company or, more particularly, our portfolio companies, operating
in hazardous industries which are highly regulated by health and
safety laws and where their supply chains could lead to a
significant increase in the risk of disruption to the supply chains
that are key for the Company and our portfolio companies and have
an adverse impact on the reputation of the Company and on the
valuations/realisation prospects of our portfolio
companies.
The Investment Manager maintains dialogue with the portfolio
companies to make sure that they have appropriate plans and
resources in place to prioritise the health and safety of their
employees, as well as to assess their wider operational and macro
environments to include supply chain disruptions and ensure the
normal operations of their businesses and to protect our
valuations. All investments are initially screened and then
monitored against the Investment Manager's ESG policy.
Although this risk is reducing over time,
there may be differences in the investment time horizons and fee
provisions between the Company and the private funds managed by
Riverstone where the Company has coinvested and these may create
conflicts regarding the allocation of investment opportunities and
holding periods between the Company and those funds, in particular
as a result of step-downs in fees payable by a private fund part
way through its duration.
5. The Company is heavily reliant
on the services provided by the Investment Manager under the
Investment Management Agreement, including ongoing investment
opportunities for REL. The Investment Management Agreement
requires the Investment Manager to provide competent, attentive,
and efficient services and personnel to the Company. If the
Investment Manager was not able to do this or if there was an
unacceptable reduction in the service received or investment
competence levels of the personnel employed by the Investment
Manager, then the Company would not be able to terminate the
Investment Management Agreement as it does not expressly provide
for termination on notice without specific cause, and poor
investment performance, the departure of key Riverstone executives
or a change of control of Riverstone do not constitute cause for
these purposes.
Furthermore, it will be costly for the Company
to terminate the Investment Management Agreement as the Company
would be required to make a significant termination payment
presently in the region of $43 million, including if a
Discontinuation Resolution were to be proposed and passed by
Shareholders or if the Company was otherwise wound up. Please refer
to Note 9 for details.
The Board has been engaged over time with the
Investment Manager to effect some changes to the Investment
Management Agreement most notably in the area of performance
fees. The Board continues to monitor the performance of the
Investment Manager and to discuss potential changes in light of the
overall financial performance of the Company.
6. Affiliates of the Investment
Manager and the Company's Cornerstone Investors would be entitled
to vote on any Discontinuation Resolution that may be proposed. As
the Investment Manager and its affiliates (and, indirectly, the
Cornerstone Investors) receive fees from the Company, they will
most probably be incentivised to vote against such resolution. As
at 31 December 2023 and 23 February 2024, respectively, Riverstone
and the Company's Cornerstone Investors, in aggregate, own ~8 per
cent. and ~31 per cent, of outstanding Ordinary Shares, with the
largest Cornerstone Investor owning ~20 per cent. at both
period-ends.
7. The effects of climate change and
the transition to a low carbon economy could possibly reduce demand
for some of the Company's existing investments, as well as impact
their valuations, and may limit future growth opportunities.
General sentiment may affect investor appetite and hence may lead
to a depression of the Company's share price. There is a risk that
the change to ESG investment focus is wrongly perceived by the
market as being without genuine foundation ("greenwashing").
Furthermore, there may be a perceived over reliance on the
Investment Manager's ESG credentials. Riverstone has adopted
what it believes are currently best practices for ESG investing
having adopted the UN Principles for Responsible Investment and
Sustainable Development Goals.
The Company (as with all companies) continues
to be exposed to external cyber-security threats. The Company
recognises the increased incidence of cyber-security threats and
regularly reviews its policies, procedures and defences to mitigate
associated risks, as well as receiving confirmation of the
policies, procedures and defences of the Investment Manager,
Administrator and key service providers, and engages market-leading
specialists where appropriate. This is to ensure that the Company
is resilient to existing and emerging threats.
The above risks are mitigated and managed by
the Board through continual review, policy setting and updating of
the Company's Risk Matrix at each Audit Committee Meeting to ensure
that procedures are in place with the intention of minimising the
impact of the above-mentioned risks. The Board relies on periodic
reports provided by the Investment Manager and Administrator
regarding risks that the Company faces. When required, experts will
be employed to gather information, including tax advisers, legal
advisers, and environmental advisers. As it is not possible to
eliminate risks completely, the purpose of the Company's risk
management policies and procedures is not to eliminate risks, but
to reduce them and to ensure that the Company is adequately
prepared to respond to such risks and to minimise any impact if the
risk develops.
By order of the Board
Richard
Horlick
Chair of the
Board
28 February 2024
Report of the Audit Committee
The Audit Committee operates within clearly
defined terms of reference, which are available from the Company's
website www.RiverstoneREL.com,
and include all matters indicated by Disclosure Guidance and
Transparency Rule 7.1, the AIC Code and the UK Code. John Roche
replaced Patrick Firth as Chair of the Audit Committee with effect
from 1 January 2024. Patrick Firth remains on the Audit Committee
and the Board as a Director, retiring from the Board before the AGM
at which he will not stand for re-election. Its other members
are Richard Horlick, Jeremy Thompson, Karen McClellan and Claire
Whittet. Members of the Audit Committee must be independent of the
Company's external auditor and Investment Manager. The Audit
Committee will meet no less than three times in a year, and at such
other times as the Audit Committee Chair shall require and will
meet the external auditor at least once a year.
The Committee members have considerable
financial and business experience and the Board has determined that
the membership, as a whole, has sufficient recent and relevant
sector and financial experience to discharge its responsibilities
and that at least one member has competence in accounting or
auditing having a background as a chartered accountant.
Responsibilities
The main duties of the Audit Committee
are:
· to monitor the
integrity of the Company's Financial Statements and regulatory
announcements relating to its financial performance and review
significant financial reporting judgements;
· to report to the
Board on the appropriateness of the Company's accounting policies
and practices;
· to review the
valuations of the Company's investments prepared by the Investment
Manager, and provide a recommendation to the Board on the valuation
of the Company's investments;
· to oversee the
relationship with the external auditors, including agreeing their
remuneration and terms of engagement, monitoring their
independence, objectivity and effectiveness, ensuring that policy
surrounding their engagement to provide non-audit services is
appropriately applied, and making recommendations to the Board on
their appointment, reappointment or removal, for it to put to the
Shareholders in general meeting;
· to monitor and
consider annually whether there is a need for the Company to have
its own internal audit function;
· to keep under
review the effectiveness of the Company's internal controls,
including financial controls and risk management
systems;
· to review and
consider the UK Code, the AIC Code, the GFSC Code, the AIC Guidance
on Audit Committees and the Stewardship Code; and
· to report to the
Board on how it has discharged its responsibilities.
The Audit Committee is aware that the Annual
Report is not subject to formal statutory audit, including the
Board Chair's Statement and the Investment Manager's Report.
Financial information in these sections is reviewed by the Audit
Committee.
The Audit Committee is required to report its
findings to the Board, identifying any matters on which it
considers that action or improvement is needed, and make
recommendations on the steps to be taken.
The external auditor is invited to attend the
Audit Committee meetings where audit planning and approach
discussions take place as well as the meetings at which the Annual
Report and Interim Financial Report are considered. These
meetings will at least annually facilitate an opportunity for the
external auditor to meet with the Audit Committee without
representatives of the Investment Manager or Administrator being
present.
Financial Reporting
The primary role of the Audit Committee in
relation to financial reporting is to review with the
Administrator, Investment Manager and the external auditor and
report to the Board on the appropriateness of the Annual Report and
Financial Statements and Interim Financial Report, concentrating
on, amongst other matters:
· the quality and
acceptability of accounting policies and practices;
· the clarity of
the disclosures and compliance with financial reporting standards
and relevant financial and governance reporting
requirements;
· material areas
in which significant judgements have been applied or there has been
discussion with the external auditor including the going concern
status of the Company and the viability statement;
· whether the
Annual Report and Financial Statements, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for Shareholders to assess the Company's performance, business
model and strategy; and
· any
correspondence from regulators in relation to financial
reporting.
To aid its review, the Audit Committee
considers reports from the Administrator and Investment Manager and
also reports from the external auditor on the outcomes of their
half-year review and annual audit. The Audit Committee supports
Ernst & Young LLP in displaying the necessary professional
scepticism their role requires.
Meetings
During the year ended 31 December 2023, the
Audit Committee met formally four times and maintained ongoing
liaison and discussion between the external auditor and the Chair
and other members of the Audit Committee with regards to the audit
approach and the identified risks. Additional ad hoc
meetings or informal discussions have been convened at other times
during the year as the Audit Committee determined
appropriate. The Audit Committee, chaired
by new Audit Committee chair, John Roche, has met on
one occasion since the year-end through to the date of this report
on 26 February 2024. The matters discussed at that and the other
meetings include:
· review of the
terms of reference of the audit committee for approval by the
Board;
· review of the
accounting policies and format of the Financial
Statements;
· review and
approval of the audit plan of the external auditor including the
scope of work for the interim review;
· discussion and
approval of the fees for the external audit and the interim
review;
· detailed review
of the quarterly and year end valuations of the Company's
investment portfolio held by the Partnership and recommendation for
approval by the Board;
· detailed review
of the Annual Report and Financial Statements, Interim Financial
Report and the relevant quarterly portfolio valuations, and
recommendation for approval by the Board;
· assessment of
the independence of the external auditor;
· assessment of
the effectiveness of the external audit process as described
below;
· review of the
Company's key risks and internal controls being relied
upon;
· consideration of
going concern applicability;
· focus on ESG;
and
· application of
any IFRS changes.
Significant Areas of Judgement Considered by
the Audit Committee
The Audit Committee has determined that a key
risk of misstatement of the Company's Financial Statements relates
to the valuation of the investment in the Partnership at fair value
through profit or loss, in the context of the judgements necessary
to evaluate the individual fair values of the underlying
investments held through the Partnership.
The Directors have considered whether any
discount or premium should be applied to the net asset value of the
Partnership, which is based on the fair value of its underlying
investments. In view of the Company's investment in the Partnership
and the nature of the Partnership's assets, no adjustment to the
net asset value of the Partnership has been made, as this is deemed
equivalent to fair value.
The Audit Committee reviews, considers and, if
thought appropriate, recommends for the purposes of the Company's
Financial Statements, valuations prepared by the Investment Manager
in respect of the investments held through the Partnership.
As outlined in Note 6 to the Financial Statements, the total
carrying value of the investment in the Partnership at fair value
through profit or loss at 31 December 2023 was $666
million (31 December 2022: $723 million).
Market quotations are not available for this financial asset such
that the value of the Company's investment is based on the fair
value of the Company's limited partner capital account with the
Partnership, which itself is based on the fair value of the
Partnership's investments as determined by the Investment Manager,
along with the cash, fixed deposits and other short term fixed
interest securities held. The valuation for each individual
portfolio company investment held by the Partnership is determined
by reference to common industry valuation techniques, including
reliance on listed public market prices, comparable public market
valuations, comparable merger and acquisition transaction
valuations, and discounted cash flow valuations, as detailed in the
Investment Manager's Report and Note 5 to the Financial
Statements.
The valuation process, methodology adopted and
conclusions were variously discussed with the Investment Manager
and with the external auditor at the Audit Committee meetings held
on 19 October 2023 and 26 February 2024. The Chair of the Audit
Committee was also actively involved in discussions with the
Investment Manager challenging and reviewing the individual
investment fair values proposed and finally concluding on the fair
values determined for investments as at 31 December
2023.
During the audit planning and completion
phases, members of the Audit Committee also sat in on various of
the valuation meetings between the Investment Manager and external
auditor. During 2023, the Investment Manager continued to carry out
on an investment-by-investment basis, an inhouse quarterly
valuation, providing the overall summary and detailed valuation
papers and models to the Audit Committee and the Company at each
quarter end, including as at 31 December 2023 with all relevant
changes in the valuation processes explained. The Audit Committee
has therefore also been active in reviewing the quarter on quarter
and particularly the year end investment valuations throughout
2023.
The Audit Committee reviewed the Investment
Manager's Report.
The external auditor explained the results of their
audit work on individual investment valuations within the scope of
the year-end audit.
The Audit Committee considers, and if thought
appropriate, recommends that the Board adopts the going concern
basis for preparing the Company's Financial Statements. As outlined
in the Report of the Directors, the Audit Committee has considered
the risks that could impact the Company's liquidity and therefore
its ability to meet its obligations as they fall due over the next
period from the date of approval of the Financial Statements up
until March 2025.
The Audit Committee, based on the reasons set out in
the Report of the Directors, is satisfied, as of today's date, that
it is appropriate to adopt the going concern basis in preparing
these Financial Statements and has recommended this approach is
adopted by the Board.
The Audit Committee considers, and if thought
appropriate, recommends that the Board considers the Company's
viability over a period of three years to 31 December 2026. The
Audit Committee has determined that the period of three years
continues to be deemed to be an appropriate timeframe and that
there is a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due
over this period of assessment, as further outlined in the Report
of the Directors. Accordingly, the Audit Committee has recommended
the three year period of assessment for the Company's longer-term
viability is adopted by the Board.
Risk Management
The Board is accountable for carrying out a robust
assessment of the principal risks facing the Company, including
those threatening its business model, future performance, solvency
and liquidity. On behalf of the Board, the Audit Committee reviews
the effectiveness of the Company's risk management processes, such
processes being largely reliant on the effective functioning of the
key parties where the Company has outsourced functions,
particularly the outsourced functions provided by the Investment
Manager and the Administrator.
The Company's risk assessment process and the way in
which significant business risks are managed is a key area of focus
for the Audit Committee. During 2023 and into 2024, the work of the
Audit Committee was again driven primarily by the Company's
assessment of its principal risks and uncertainties as set out in
the Corporate Governance Report. That Corporate Governance Report
has noted that the Administrator did not produce an independently
assured controls report covering the 2023 financial year and
therefore the Audit Committee was required to undertake additional
procedures during and after the reporting period to gain the
necessary comfort for the purposes of financial reporting. These
additional procedures were undertaken by a member of the Audit
Committee and included:
· meeting with key
accounting and secretarial staff at the Administrator in Guernsey
in Q1 2023 as part of an induction and oversight process to
understand the broad accounting and financial reporting operations
for the Company and the Partnership and the key controls operated
by the Administrator with respect to financial reporting, the
custody/control of cash/assets held by the Company, the oversight
of investment management fees etc;
· meeting with key
finance staff at the Investment Manager in New York in Q4 2023 to
understand and challenge (i) the process and key activities
undertaken to deal with the operations, accounting and financial
reporting for the Partnership, (ii) the structure through which
investments are ultimately held, and (iii) the top down and bottom
up quarterly investment valuation processes adopted by the
Investment Manager prior to releasing investment valuations for
Audit Committee and Board review; and
· detailed
discussions with senior management from the Administrator to
understand and seek assurance as to the normal operations of the
key financial and operating controls that the Company relies
upon.
The above procedures allowed the Audit Committee to
conclude that there were no material matters to note.
The Audit Committee receives reports from the
Investment Manager and Administrator on their and by association
the Company's risk evaluation processes and reviews changes to
significant risks identified.
Internal Audit
The Audit Committee shall consider at least
once a year whether or not there is a need for an internal audit
function. Currently, the Audit Committee does not consider there to
be a need for an internal audit function, given that there are no
employees in the Company and all outsourced functions are with
parties who have their own internal controls and
procedures.
External Audit
Ernst & Young LLP has been the Company's
external auditor since the Company's incorporation. This is the
eleventh year of audit.
The external auditor is required to rotate the
audit partner every five years. As a result, Richard Le Tissier has
replaced David Moore as the Ernst & Young LLP lead audit
partner, who started his tenure in 2018 and ended with the audit of
the 2022 Annual Report and Financial Statements. Richard Le Tissier
therefore started his tenure with the audit of the 2023 Annual
Report and Financial Statements. There are no contractual
obligations restricting the choice of external auditor and the
Company will put the audit services contract out to tender
periodically. It continues to be decided that the audit services
contract will not be put out to tender for the next reporting
period due to mutual benefits and efficiencies of Ernst &
Young's external audit contract for the Company with the audits of
other Riverstone private funds. Under Companies Law, the
reappointment of the external auditor is subject to Shareholder
approval at the Annual General Meeting.
The Audit Committee assessed the
qualifications, expertise and resources, and independence of the
external auditor as well as the effectiveness of the audit process.
This review covered all aspects of the audit service provided by
Ernst & Young LLP, including obtaining a report on the audit
firm's own internal quality control procedures and consideration of
the audit firm's annual transparency reports. The Audit
Committee also approved the external audit terms of engagement and
remuneration. During 2023 and into 2024, the Audit Committee and/or
the Audit Committee Chair held formal and ad hoc private meetings
with the external auditor. The Audit Committee Chair also
maintained regular contact with the audit partner throughout the
year. These meetings provide an opportunity for open dialogue with
the external auditor without management being present. Matters
discussed included the auditor's assessment of significant
financial risks and the performance of management in addressing
these risks, the auditor's opinion of management's role in
fulfilling obligations for the maintenance of internal controls,
the transparency and responsiveness of interactions with
management, confirmation that no restrictions have been placed on
them by management, maintaining the independence of the audit, and
how they have exercised professional challenge and scepticism in
dealing with material judgemental areas. The Audit Committee will
continue to monitor the performance of the external auditor on an
annual basis and will consider their independence and objectivity,
taking account of appropriate guidelines. In addition, the Audit
Committee Chair will continue to maintain regular contact with the
lead audit partner outside the formal Committee meeting schedule,
not only to discuss formal agenda items for upcoming meetings, but
also to review any other significant matters. Members of the Audit
Committee also sat in on the valuation meetings between the
Investment Manager and external auditor.
The Audit Committee reviews the scope and
results of the audit, its cost effectiveness and the independence
and objectivity of the external auditor, with particular regard to
the level of non-audit fees. The Audit Committee is also monitoring
developments, in this regard, with respect to the Crown
Dependencies' Audit Rules and Guidance. Notwithstanding such
services the Audit Committee considers Ernst & Young LLP to be
independent of the Company and that the provision of such non-audit
services is not a threat to the objectivity and independence of the
conduct of the audit.
To further safeguard the objectivity and
independence of the external auditor from becoming compromised, the
Audit Committee has a formal policy governing the engagement of the
external auditor to provide non-audit services. This precludes
Ernst & Young LLP from providing certain services such as
valuation work or the provision of accounting services and also
sets a presumption that Ernst & Young LLP should only be
engaged for non-audit services where Ernst & Young LLP are best
placed to provide the non-audit service for example, the interim
review. Note 13 details services provided by Ernst & Young
LLP. In addition to processes put in place to ensure
segregation of audit and non-audit roles, Ernst & Young LLP is
required, as part of the assurance process in relation to the
audit, to confirm to the Audit Committee that it has both the
appropriate independence and the objectivity to allow it to
continue to serve the members of the Company. This confirmation is
received every six months and no matters of concern were identified
by the Audit Committee.
To fulfil its responsibility regarding the
independence of the external auditor, the Audit Committee
considers:
· discussions with
or reports from the external auditor describing its arrangements to
identify, report and manage any conflicts of interest;
and
· the extent of
non-audit services provided by the external auditor.
To assess the effectiveness of the external
auditor, the committee reviews:
· the external
auditor's fulfilment of the agreed audit plan and variations from
it;
· discussions or
reports highlighting the major issues that arose during the course
of the audit; and
· feedback from
other service providers evaluating the performance of the audit
team.
The Audit Committee is satisfied with Ernst
& Young LLP's effectiveness and independence as external
auditor having considered the degree of diligence and professional
scepticism demonstrated by them. Having carried out the review
described above and having satisfied itself that the external
auditor remains independent and effective, the Audit Committee has
recommended to the Board that Ernst & Young LLP be reappointed
as external auditor for the year ending 31 December
2024.
The Audit Committee has provided the Board
with its recommendation to the Shareholders on the re-appointment
of Ernst & Young LLP as external auditor for the year ending 31
December 2024. Accordingly, a resolution proposing the
reappointment of Ernst & Young LLP as our external auditor will
be put to Shareholders at the Annual General Meeting.
On behalf of the Audit Committee,
John
Roche
Chair of the
Audit Committee
28 February 2024
Statement of Financial Position
As at 31 December 2023
|
Note
|
31 December
2023
$'000
|
31
December
2022
$'000
|
Assets
|
|
|
|
Non-current
assets
|
|
|
|
Investment at fair value through profit or
loss
|
6
|
666,024
|
723,102
|
Total
non-current assets
|
|
666,024
|
723,102
|
|
|
|
|
Current
assets
|
|
|
|
Trade and other receivables
|
|
2,276
|
598
|
Cash and cash equivalents
|
7
|
5,781
|
15,755
|
Total current
assets
|
|
8,057
|
16,353
|
|
|
|
|
Total
assets
|
|
674,081
|
739,455
|
|
|
|
|
Current
liabilities
|
|
|
|
Trade and other payables
|
|
512
|
665
|
Total current
liabilities
|
|
512
|
665
|
|
|
|
|
Total
liabilities
|
|
512
|
665
|
|
|
|
|
Net
assets
|
|
673,569
|
738,790
|
|
|
|
|
Equity
|
|
|
|
Share capital
|
8
|
1,038,721
|
1,101,674
|
Retained deficit
|
|
(365,152)
|
(362,884)
|
Total
equity
|
|
673,569
|
738,790
|
|
|
|
|
Number of
Shares in issue at year end
|
8
|
42,195,789
|
50,891,658
|
|
|
|
|
Net Asset
Value per Share ($)
|
12
|
15.96
|
14.52
|
The Financial Statements of the Company were
approved and authorised for issue by the Board of Directors on 28
February 2024 and signed on its behalf by:
Richard
Horlick
|
John
Roche
|
Chair of the
Board
|
Director
|
The accompanying notes form an integral part
of the Company's Financial Statements.
Statement of Comprehensive Income
For the year ended 31 December 2023
|
Note
|
1 January
2023 to
31 December
2023
$'000
|
1 January
2022 to
31
December
2022
$'000
|
Investment
profit
|
|
|
|
Change in fair value of investment at fair
value through profit or loss
|
6
|
2,722
|
95,939
|
|
|
|
|
Expenses
|
|
|
|
Directors' fees and expenses
|
9
|
(902)
|
(854)
|
Legal and professional fees
|
|
(608)
|
(1,036)
|
Other operating expenses
|
|
(3,654)
|
(3,732)
|
Total
expenses
|
|
(5,164)
|
(5,622)
|
|
|
|
|
Operating
(loss)/profit for the financial year
|
|
(2,442)
|
90,317
|
|
|
|
|
Foreign exchange gain/(loss)
|
|
174
|
(1,388)
|
|
|
|
|
(Loss)/profit
for the year
|
|
(2,268)
|
88,929
|
Total
comprehensive (expense)/income for the year
|
|
(2,268)
|
88,929
|
|
|
|
|
Basic and
Diluted (Loss)/Earnings per Share (cents)
|
12
|
(4.86)
|
171.87
|
|
|
|
|
All activities derive from continuing
operations.
The accompanying notes form an integral part
of the Company's Financial Statements.
Statement of Changes in Equity
For the year ended 31 December 2023
|
|
Share
capital
$'000
|
Retained
deficit
$'000
|
Total
equity
$'000
|
As at 1
January 2023
|
|
1,101,674
|
(362,884)
|
738,790
|
|
|
|
|
|
Loss for the financial year
|
|
-
|
(2,268)
|
(2,268)
|
Total
comprehensive expense for the year
|
|
-
|
(2,268)
|
(2,268)
|
Buyback and cancellation of shares
|
8
|
(62,953)
|
-
|
(62,953)
|
|
|
|
|
|
As at 31
December 2023
|
|
1,038,721
|
(365,152)
|
673,569
|
|
|
Share
capital
$'000
|
Retained
deficit
$'000
|
Total
equity
$'000
|
As at 1
January 2022
|
|
1,133,854
|
(451,813)
|
682,041
|
|
|
|
|
|
Profit for the financial year
|
|
-
|
88,929
|
88,929
|
Total
comprehensive income for the year
|
|
-
|
88,929
|
88,929
|
Buyback and cancellation of shares
|
8
|
(32,180)
|
-
|
(32,180)
|
|
|
|
|
|
As at 31
December 2022
|
|
1,101,674
|
(362,884)
|
738,790
|
The accompanying notes form an integral part of
the Company's Financial Statements.
Statement of Cash Flows
For the year ended 31 December 2023
|
Note
|
1 January
2023 to
31 December
2023
$'000
|
1 January
2022 to
31
December
2022
$'000
|
Cash flow used
in operating activities
|
|
|
|
(Loss)/Profit for the financial year
|
|
(2,268)
|
88,929
|
Adjustments for:
|
|
|
|
(Increase) in fair value of investment at fair
value through profit or loss
|
6
|
(2,722)
|
(95,939)
|
Foreign exchange gain/(loss)
|
|
(174)
|
1,388
|
(Increase)/Decrease in trade and other
receivables
|
|
(1,678)
|
372
|
(Decrease)/Increase in trade and other
payables
|
|
(153)
|
1
|
Net cash used
in operating activities
|
|
(6,995)
|
(5,249)
|
|
|
|
|
Cash flow
generated from investing activities
|
|
|
|
Distribution from the Partnership
|
6
|
59,800
|
47,276
|
Net cash
generated from investing activities
|
|
59,800
|
47,276
|
|
|
|
|
Cash flow used
in financing activities
|
|
|
|
Buyback of shares
|
8
|
(62,953)
|
(32,180)
|
Net cash used
in financing activities
|
|
(62,953)
|
(32,180)
|
|
|
|
|
Net movement in cash and cash equivalents
during the year
|
|
(10,148)
|
9,847
|
Cash and cash equivalents at the beginning of
the year
|
|
15,755
|
7,296
|
Effect of foreign exchange rate
changes
|
|
174
|
(1,388)
|
|
|
|
|
Cash and cash
equivalents at the end of the year
|
|
5,781
|
15,755
|
(1) Cash
flows from operating activities for the year ended 31 December 2023
are presented by adjusting Loss for the year before tax as opposed
to Operating loss for the year. Cash flows from operating
activities for the year ended 31 December 2022 have been
re-presented in the format adopted for the year ended 31 December
2023.
The accompanying notes form an integral part of
the Company's Financial Statements
Notes to the Financial Statements
For the year ended 31 December 2023
1. General
information
REL is a company limited by shares, which was
incorporated on 23 May 2013 in Guernsey with an unlimited life and
registered with the GFSC as a Registered Closed-ended Collective
Investment Scheme pursuant to the POI Law. The Company's Ordinary
Shares were admitted to the UK Listing Authority's Official List
and to trading on the London Stock Exchange as part of its IPO
which completed on 29 October 2013. The registered
office of the Company is PO Box 286, Floor 2, Trafalgar
Court, Les Banques, St Peter Port, Guernsey, GY1
4LY.
The Company makes its investments through the
Partnership, a Cayman Islands registered exempted limited
partnership, in which the Company is the sole limited partner. The
principal place of business of the Partnership is the Cayman
Islands. Both the Company and the Partnership are subject to the
Investment Management Agreement with the Investment Manager, a
partnership registered and regulated in the Cayman
Islands.
The Partnership has the right to invest
alongside the Private Riverstone Funds in all Qualifying
Investments in which the Private Riverstone Funds participate.
These Private Riverstone Funds are managed and advised by
affiliates of the Investment Manager. Further detail of these
investments is provided in the Investment Manager's
Report.
2. Accounting
policies
Basis of preparation
The Financial Statements for the year ended 31
December 2023 have been prepared in accordance with IFRS and with
the Companies (Guernsey) Law, 2008, (as amended) (the "Companies
Law").
In the preparation of these Financial
Statements, the Company followed the same accounting policies and
methods of computation as compared with those applied in the
previous year.
The Financial Statements have been prepared on
a going concern basis. The Board has examined areas of possible
financial risk, in particular the projected cash requirements for
the Company and the Partnership. After due consideration, the
Directors believe that the Company has adequate financial resources
and suitable management arrangements in place to continue in
operational existence for a period of at least twelve months from
the date of approval of these Financial Statements. Accordingly,
the Financial Statements have been prepared on a going concern
basis.
Foreign currencies
The functional currency of the Company is U.S.
Dollars reflecting the primary economic environment in which the
Company operates.
The Company has chosen U.S. Dollars as its
presentation currency for financial reporting purposes.
Transactions during the year, including
purchases and sales of investments, income and expenses are
translated into U.S. Dollars at the rate of exchange prevailing on
the date of the transaction. Monetary assets and liabilities
denominated in currencies other than U.S. Dollars are retranslated
at the functional currency rate of exchange ruling at the reporting
date. Non-monetary items that are measured in terms of historical
cost in a currency other than U.S. Dollars are translated using the
exchange rates as at the dates of the initial transactions.
Non-monetary items measured at fair value in a currency other than
U.S. Dollars are translated using the exchange rates at the date
when the fair value was determined. Foreign currency transaction
gains and losses on financial instruments classified as at fair
value through profit or loss are included in profit or loss in the
Statement of Comprehensive Income as part of the "Change in fair
value of investments at fair value through profit or loss".
Exchange differences on cash and cash equivalents are included in
profit or loss in the Statement of Comprehensive Income as "Foreign
exchange gain/(loss)".
Financial instruments
In accordance with IFRS 9, financial assets
and financial liabilities are recognised in the Company's Statement
of Financial Position when the Company becomes a party to the
contractual provisions of the instrument.
Financial assets
At initial recognition, financial
assets are classified based on the Company's business model for
managing the financial assets and the contractual cash flow
characteristics of the financial asset. The Company initially
measures a financial asset at its fair value.
a) Investment at fair value
through profit or loss
i.
Classification
Financial assets classified at FVTPL are those
that do not meet the contractual cash flow test and are managed
with their performance evaluated on a fair value basis in
accordance with the Company's investment strategy. The Company
includes in this category its only investment, being the
Partnership.
ii.
Measurement
Investments made by the Company in the
Partnership are measured initially and subsequently at fair value,
with changes in fair value taken to the Statement of Comprehensive
Income. These fair value movements are predominantly driven by the
fair value movements in the Partnership's underlying
investments.
The Company has determined that the fair value
of its investment in the Partnership is $666 million (31 December
2022: $723 million), such valuation being
calculated in accordance with applicable IFRS accounting standards
and IPEV Valuation Guidelines. No adjustment to the
net asset value of the Partnership has been made, as this is deemed
equivalent to fair value.
b) Cash and cash
equivalents
Cash and cash equivalents comprises cash on
hand and demand deposit. Cash equivalents are held to meet short
term cash commitments and comprise other short-term highly liquid
investments with an original maturity of three months or less that
are readily convertible to a known amount of cash and are subject
to an insignificant risk of changes in value.
c) Trade and other
receivables
Trade receivables are classified as financial
assets at amortised cost. They are measured at amortised cost less
impairment assessed using the simplified approach of the expected
credit loss model based on experience of previous losses and
expectations of future
losses.
Trade and other
payables
Trade payables are classified as financial
liabilities at amortised cost.
Equity
The Company's Ordinary Shares are classified
as equity and upon issuance, the fair value of the consideration
received is included in equity, net of share issue costs (excluding
share issue costs of the IPO). All formation and initial expenses
of the Company, including the share issue costs of its IPO, have
been borne by the Investment Manager.
Repurchase of
Ordinary Shares for cancellation
The cost of repurchasing Ordinary Shares,
including any related stamp duty and transaction costs, is charged
to 'Share Capital' and dealt with in the Statement of Changes in
Equity. Share repurchase and cancellation transactions are
accounted for on a trade date basis.
Expenses
Expenses include legal, accounting, auditing
and other operating expenses. They are recognised on an accruals
basis in the Statement of Comprehensive Income in the period in
which they are incurred.
Provisions
and Contingent Liabilities
In line with IAS 37 Provisions, Contingent
Liabilities and Contingent Assets, we recognise provisions when the
Company has a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be
required to settle the obligation and the amount can be reliably
estimated.
Where this criterion is not met we disclose a
contingent liability if the Company has a possible obligation, or
has a present obligation with an outflow that is not probable or
which cannot be reliably estimated. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and
the risks specific to the liability.
Assessment as
an Investment entity
Although the Company only has one direct
investment, it has indirect exposure to more than one investment
held through the underlying Partnership. The Directors are of the
opinion that the Company meets the essential criteria and typical
characteristics of an Investment Entity as defined in IFRS
10.
Amended
standards and interpretations
Accounting standards and interpretations have
been published and will be mandatory for the Company's accounting
periods beginning on or after 1 January 2023 or later periods. The
following are the new or amended accounting standards or
interpretations applicable to the current accounting period of the
Company:
· Amendments to
IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting
policies (effective for annual periods beginning on or after 1
January 2023); and
· Amendments to
IAS 8 - Definition of Accounting Estimates (issued on 12 February
2021 and effective for annual periods beginning on or after 1
January 2023);
The impact of these amendments were not
material to the reported results and financial position of the
Company.
Certain amendments to accounting standards
have been published that are not mandatory for 31 December 2023
reporting periods and have not been early adopted by the Company.
These amendments are not expected to have a material impact on the
Company in the current or future reporting periods and on
foreseeable future transactions.
3. Critical accounting
judgements, estimates and assumptions
The preparation of Financial Statements
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses.
Estimates and judgements are continually
evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances.
Judgements
In the process of applying the Company's
accounting policies, management has made the following critical
judgements, which have the most significant effect on the amounts
recognised in the Financial Statements:
Assessment
of control over the Partnership
The Company makes its investments through the
Partnership in which it is the sole limited partner.
The Board has assessed whether the Company has
all the elements of control as prescribed by IFRS 10 in relation to
the Company's investment in the Partnership and has concluded that
although the Company is the sole limited partner, it has some
influence but does not control the Partnership and therefore
accounts for the Partnership at fair value.
Assessment
of the Partnership as a structured entity
The Company considers the Partnership to be a
structured entity under IFRS 12. Transfer of funds by the
Partnership to the Company is determined by the General Partner
(see Note 9). The risks associated with the Company's investment in
the Partnership are disclosed in Note 10. The summarised financial
information for the Company's investment in the Partnership is
disclosed in Note 6.
Contingent
Liabilities - Performance Fee Allocation
In the ordinary course of business, we monitor
the performance fee allocation and provide for anticipated costs
where an outflow of resources is considered probable and a
reasonable estimate can be made of the likely outcome.
Where an outflow is not probable but is
possible a contingent liability may still exist and its relevant
details will be disclosed.
In January 2020, the Management Engagement
Committee of REL, consisting of REL's independent directors, agreed
with RIGL Holdings, LP (formerly Riverstone International Limited),
REL's Investment Manager (the "Investment Manager"), to amend the
terms on which REL is required to pay a performance allocation (the
"performance allocation") in respect of REL's investments. These
terms are disclosed in Note 9.
At the reporting date we are not aware of
any evidence to indicate that a present obligation exists, nor is
it probable that an outflow of resources will be required such that
any amount should be provided for, even though there were realisations of certain investments during the
period. This is due to the Portfolio Level Cost Benchmark and 8 per
cent. Hurdle Rate not being met.
Estimates and
assumptions
Fair
valuation of investment in the Partnership
The area involving a high degree of judgement
or complexity and where assumptions and estimates are significant
to the Financial Statements has been identified as the risk of
misstatement of the valuation of the investment in the Partnership.
Revisions to accounting estimates are recognised in the period in
which the estimate is revised and in any future periods affected.
The Board's determination that no discount or premium should be
applied to the net asset value of the Partnership involves a degree
of judgement due to the nature of the Partnership's investments and
other assets and liabilities and the valuation techniques and
procedures adopted by the Partnership.
A summary of the more relevant aspects of IPEV
to the valuation of the Partnership's underlying valuations are set
out below:
Marketable (Listed) Securities - where an
active market exists for the security, the value is stated at the
bid price on the last trading day in the period. Marketability
discounts are not generally applied unless there is some
contractual, governmental or other legally enforceable restriction
preventing realisation at the reporting date.
Unlisted Investments - are carried at such
fair value as the Investment Manager considers appropriate, and as
approved or adjusted by the Board, taking into account the
performance of each investee company and the exercise of ratchets,
options or other incentive schemes. Methodologies used in arriving
at the fair value include prices of recent investment, earnings
multiples, net assets, discounted cash flows analysis and industry
valuation benchmarks. Valuations may be derived by reference to
observable valuation measures for comparable companies or
transactions (examples include discount rates, forward oil prices,
production multiples, volatility of comparable public traded
prices, and multiplying a key performance metric of the investee
company such as estimated, unobservable EBITDA by a relevant
valuation multiple observed in the range of comparable companies or
transactions), adjusted for differences between the investment and
the referenced comparable.
The resulting accounting estimates will, by
definition, seldom equal the related actual results.
Climate
change
In preparing the Financial Statements, the
Directors have considered the impact of climate change,
particularly in the context of the climate change risks identified
in the ESG Report.
In preparing the Financial Statements, the
Directors have considered the medium- and longer-term cash flow
impacts of climate change on a number of key estimates included
within the Financial Statements.
In line with IFRS the Partnership's
investments are valued at fair value. The Level 1 are valued
using quoted prices in active markets and therefore these reflect a
market participants' view of climate change risk. In determining
the value of Partnership's Level 3 investments consideration is
made as to whether there are any specific climate risks which could
directly impact the value of such investments, including
the estimates of future cash flows and future
profitability. In the current and previous period there is no
material impact to the value of the Partnership's Level 3
investments.
Having assessed the impact of Climate Change
on the Company, the Directors concluded this is not expected to
have a significant impact on the going concern and viability
assessments.
4. Taxation
The Company has made an election to, and
currently expects to conduct its activities so as to be treated as
a partnership for U.S. federal income tax purposes. Therefore, the
Company expects that it generally will not be liable for U.S.
federal income taxes. In the normal course of business, REL may
form wholly owned subsidiaries, to be treated as C Corporations for
U.S. tax purposes. The C Corporations serve to protect REL's public
investors from incurring U.S. ECI. The C Corporations file U.S.
corporate tax returns with the U.S. IRS and pay U.S. corporate
taxes on its income. Each of the Company's Shareholders who are
liable for U.S. taxes will take into account their respective share
of the Company's items of income, gain, loss and deduction in
computing its U.S. federal income tax liability as if such
Shareholder had earned such income directly, even if no cash
distributions are made to the Shareholder.
The Company is exempt from taxation in
Guernsey under the provisions of the Income Tax (Exempt Bodies)
(Guernsey) Ordinance, 2008 and is charged an annual exemption fee
of £1,200.
The Cayman Islands at present impose no taxes
on profit, income, capital gains or appreciations in value of the
Partnership. There are also currently no taxes imposed in the
Cayman Islands by withholding or otherwise on the Company as a
limited partner of the Partnership on profit, income, capital gains
or appreciations in respect of its partnership interest nor any
taxes on the Company as a limited partner of the Partnership in the
nature of estate duty, inheritance or capital transfer
tax.
Local taxes may apply at the jurisdictional
level on profits arising in operating entity investments. Further
taxes may apply on distributions from such operating entity
investments. The company is structured, and has structured its
investments, to eliminate the incurrence of ECI by REL's investors.
Based upon the current commitments and investments held through REL
US Corp., the future U.S. tax liability on profits is expected to
be in the range of 21 to 27.5 per cent. (31 December 2022: 21 to
27.5 per cent.). Additionally, depending on REL US Corp's current
and accumulated earnings and profit, the future U.S. tax liability
on distributions from REL US Corp is expected to be 0 per cent. and
30 per cent., respectively, for those distributions determined to
be return of capital and dividend income. Any applicable taxes are
captured in the Company's NAV through the fair value movements in
the underlying investments held by the Partnership and its related
Investment Undertakings.
5. Fair value
IFRS 13 'Fair Value Measurement' requires
disclosure of fair value measurement by level. The level in the
fair value hierarchy within which the financial assets or financial
liabilities are categorised is determined on the basis of the
lowest level input that is significant to the fair value
measurement, adjusted if necessary.
Financial assets and financial liabilities are
classified in their entirety into only one of the three
levels:
·
Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
·
Level 2 - inputs other than quoted prices included within
Level 1 that are observable for the assets or liabilities, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices);
·
Level 3 - inputs for the assets or liabilities that are not
based on observable market data (unobservable inputs).
The Company's only financial instrument
carried at fair value is its investment in the Partnership which
has been classified within Level 3 as it is derived using
unobservable inputs. Amounts classified under Level 3 for the year
ended 31 December 2023 were $666 million (31 December 2022: $723
million).
The fair value of all other financial
instruments approximates to their carrying value.
Transfers during the period
There have been no transfers between levels
during the year ended 31 December 2023 (31 December 2022: $nil).
Any transfers between the levels will be accounted for on the last
day of each financial period. Due to the nature of the investment
in the Partnership, it is always expected to be classified under
Level 3.
Valuation methodology and process
The Directors base the fair value of the
investment in the Partnership on the value of the limited
partnership capital account received from the General Partner,
which is determined on the basis of the fair value of the
Partnership's assets and liabilities, adjusted if necessary, to
reflect liquidity, future commitments, and other specific factors
of the Partnership. This is based on the components within the
Partnership, principally the value of the Partnership's investments
in addition to cash, cash equivalents and short-term money market
and other fixed income securities held. Any fluctuation in the
value of the Partnership's investments in addition to cash, cash
equivalents and short-term money market and other fixed income
securities held will directly impact on the value of the Company's
investment in the Partnership.
The Partnership's investments are valued using
the techniques described in the Company's valuation policy. The
Investment Manager's assessment of fair value of investments held
by the Partnership, through Investment Undertakings, is determined
in accordance with IPEV Valuation Guidelines. When valuing the
Partnership's investments, the Investment Manager reviews
information provided by the underlying investee companies and other
business partners and applies IPEV methodologies, to estimate a
fair value as at the date of the Statement of Financial Position,
subject to Board approval. It is the opinion of the Directors, that
the IPEV valuation methodology used in deriving a fair value is
generally not different from the fair value requirements of IFRS
13. In the event that there is a difference, the requirements of
IFRS 13 override the IPEV requirements.
The Investment Manager values the investments
on a quarterly basis using common industry valuation techniques,
including comparable public market valuations, comparable merger
and acquisition transaction valuations and discounted cash flow
valuations. For early-stage private investments, Riverstone's
investment due diligence process includes assumptions about
short-term financial results in determining the appropriate
purchase price for the investment. For the SPAC Sponsor
investments, the Investment Manager applies discounts to the
closing price of the publicly traded shares for lack of identified
target, risk of unsuccessful closing of the business combination
and applicable lock-up periods post-closing. The techniques used in
determining the fair value of the Company's investments through the
Partnership are selected on an investment-by-investment basis so as
to maximise the use of market based observable inputs.
REL's valuation policy is compliant with both
IFRS and IPEV Valuation Guidelines and is applied consistently from
period to period. As the Company's investments held in its
structure are generally not publicly quoted, valuations require
meaningful judgement to establish a range of values, and the
ultimate value at which an investment is realised may differ from
its most recent valuation and the difference may be
significant.
For the year ended 31 December 2023, the
valuations of the Company's investments, through the Partnership,
are detailed in the Investment Manager's Report.
Qualitative Information for Level
3 Fair Value Measurements as at 31 December 2023
Industry: Energy
|
|
|
|
|
|
|
|
|
Range
|
|
|
|
Fair value of Level 3 Investments (in
thousands)
|
Valuation
technique(s)
|
Unobservable
input(s)
|
Low
(1)
|
High
(1)
|
Weighted Average (1)
|
Sensitivity of
the
input to fair value
of
Level 3
investments(2)
|
Fair value of Level
3
Investments affected by
unobservable input (3) (in thousands)
|
|
|
|
|
|
|
|
|
$157,807
|
Public comparables
|
2024E EV
/ EBITDA multiple
|
12.5x
|
27.5x
|
22.3x
|
30 per cent. weighted average
change in the input would result in 2 per cent. change in the total
fair value of Level 3 investments
|
29,406
|
|
|
2024E EV
/ Revenue Multiple (5)
|
1.3x
|
10.6x
|
7.4x
|
40 per cent. weighted average
change in the input would result in 5 per cent. change in the total
fair value of Level 3 investments
|
80,493
|
|
|
2025E EV
/ Revenue Multiple
|
1.5x
|
2.0x
|
1.9x
|
20 per cent. weighted average
change in the input would result in 1 per cent. change in the total
fair value of Level 3 investments
|
34,250
|
|
|
2026E EV
/ Revenue Multiple
|
1.3x
|
1.3x
|
1.3x
|
30 per cent. weighted average
change in the input would result in 1 per cent. change in the total
fair value of Level 3 investments
|
7,125
|
|
|
2027E EV
/ Revenue Multiple(
|
1.0x
|
2.0x
|
1.0x
|
30 per cent. weighted average
change in the input would result in 1 per cent. change in the total
fair value of Level 3 investments
|
3,125
|
|
|
2027E EV
/ EBITDA Multiple(5)
|
2.0x
|
6.0x
|
2.6x
|
30 per cent. weighted average
change in the input would result in 1 per cent. change in the total
fair value of Level 3 investments
|
3,125
|
|
|
|
|
|
|
|
|
Transaction comparables
|
Precedent M&A Transaction
|
6.6x
|
17.8x
|
12.8x
|
50 per cent. weighted average
change in the input would result in 3 per cent. change in the total
fair value of Level 3 investments
|
17,385
|
|
Discounted cash flow
|
Discount
Rate(4)
|
30%
|
10%
|
18%
|
+/-50 per cent. weighted average
change in the input would result in -/+1 per cent. change in the
total fair value of Level 3 investments
|
70,189
|
|
|
|
|
|
|
|
|
$16,934
|
Other(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$174,741
|
Total
|
|
|
|
|
|
|
Qualitative Information for Level 3 Fair
Value Measurements as at 31 December 2022
Industry: Energy
|
|
|
|
|
|
|
|
|
Range
|
|
|
|
Fair value of Level 3 Investments (in
thousands)
|
Valuation
technique(s)
|
Unobservable
input(s)
|
Low
(1)
|
High
(1)
|
Weighted Average (1)
|
Sensitivity of
the
input to fair value
of
Level 3
investments(2)
|
Fair value of Level
3
Investments affected by
unobservable input (3) (in thousands)
|
|
|
|
|
|
|
|
|
$255,797
|
Public comparables
|
2023E EV
/ EBITDA Multiple
|
16.0x
|
36.0x
|
34.1x
|
25 per
cent. weighted average change in the input would result in
1 per cent. change in the
total fair value of Level 3 investments
|
53,156
|
|
|
2024E EV
/ EBITDA Multiple
|
1.0x
|
3.0x
|
1.0x
|
25 per
cent. weighted average change in the input would result in
6 per cent. change in the
total fair value of Level 3 investments
|
118,348
|
|
|
2022E
EV/Revenue Multiple
|
2.0x
|
12.4x
|
7.2x
|
20 per
cent. weighted average change in the input would result in
1 per cent. change in the
total fair value of Level 3 investments
|
40,043
|
|
|
2023E
EV/Revenue Multiple
|
2.0x
|
19.1x
|
10.9x
|
20 per
cent. weighted average change in the input would result in
1 per cent. change in the
total fair value of Level 3 investments
|
113,406
|
|
|
|
|
|
|
|
|
Transaction comparables
|
Asset
Value ($m/kW)
|
$56
|
$182
|
$58
|
50 per cent. weighted average
change in the input would result in 1 per cent. change in the total fair
value of Level 3 investments
|
118,348
|
|
Discounted cash flow
|
Discount
Rate(4)
|
30%
|
10%
|
30%
|
+/-50 per
cent. weighted average change in the input would result in
-/+1 per cent.
change in the total fair value of Level 3 investments
|
138,348
|
|
|
|
|
|
|
|
|
$188,795
|
Other(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$444,592
|
Total
|
|
|
|
|
|
|
(1) Calculated based on fair values of the Partnership's Level 3
investments.
(2) Based on its professional experience and recent market
conditions, the Investment Manager has provided the Board with
these weighted average change in the inputs with a forecasted time
period of 6 to 12 months.
(3) Some of the Partnership's Level 3 investments are valued
using one or more of the techniques which utilise one or more of
the unobservable inputs, so the amounts in the "Fair value of Level
3 investments" column will not aggregate to the total fair value of
the Partnership's Level 3 investments as they have not been
adjusted to reflect the specific weighting applied to each method
at the year end.
(4) Discounted cash flow technique involves the use of a discount
factor of 10 per cent.
(5) As at 31 December 2023, the sensitivity of this unobservable
input to the total fair value of Level 3 investments was determined
to be significant by applying the same methodology that determined
it not to be significant as at 31 December 2022.
(6) 'Other' include certain investments that are not subject to a
sensitivity analysis because they are insensitive to the changes in
inputs set out above as at 31 December 2023 and 31 December 2022,
respectively.
The Board reviews and considers the fair value
of each of the Partnership's investments arrived at by the
Investment Manager before incorporating such values into the fair
value of the Partnership. The variety of valuation bases adopted,
quality of management information provided by the underlying
investee companies and the lack of liquid markets for a number of
these investments mean that there are inherent difficulties in
determining the fair value of these investments and such
difficulties cannot be eliminated. Therefore, the amounts realised
on the sale of certain of these investments may differ from the
fair values reflected in these Financial Statements and
incorporated into the fair value of the Company's investment in the
Partnership and the differences may be significant.
The Board approves the valuations performed by
the Investment Manager and monitors the range of reasonably
possible changes in significant observable inputs on a regular
basis with consultation from the Investment Manager. Using its
extensive industry experience, the Investment Manager provides the
Board with its determination of the reasonably possible changes in
significant unobservable inputs in normal market conditions as of
the year end.
The Directors have considered whether a
discount or premium should be applied to the net asset value of the
Partnership and have concluded that as the Partnership's underlying
assets are measured at fair value, no adjustment to the net asset
value of the Partnership has been deemed to be necessary (see Note
3).
6. Investment at fair value
through profit or loss
The movement in fair value is derived from the
fair value movements in the underlying investments held by the
Partnership, net of income and expenses of the Partnership and its
related Investment Undertakings, including any performance
allocation and applicable taxes. The table below reconciles the
Company's Level 3 assets during the year.
|
31 December
2023
$'000
|
31
December
2022
$'000
|
Cost
|
|
|
Brought forward
|
1,046,814
|
1,094,090
|
Distribution from the Partnership
|
(59,800)
|
(47,276)
|
Carried forward
|
987,014
|
1,046,814
|
|
|
|
Fair value
movement through profit or loss
|
|
|
Brought forward
|
(323,712)
|
(419,651)
|
Fair value movement during the year - see
Summary Income Statement below
|
2,722
|
95,939
|
Carried forward
|
(320,990)
|
(323,712)
|
|
|
|
Fair value at
year end
|
666,024
|
723,102
|
Summary financial information for
the Partnership's investments and its related Investment
Undertakings
Summary
Balance Sheet
|
31 December
2023
$'000
|
31
December
2022
$'000
|
Investments at fair value
|
384,255
|
657,040
|
Cash and cash equivalents
(1)
|
283,593
|
68,483
|
Management fee payable - see Note 9
|
(2,193)
|
(2,682)
|
Other net assets
|
369
|
261
|
Fair value of
REL's investment in the Partnership
|
666,024
|
723,102
|
(1) These
figures, together with the $2 million held at REL US Corp (31
December 2022: $35.3 million), comprise the $286 million cash and
cash equivalents held in the Partnership (31 December 2022: $103.8
million).
Reconciliation of Partnership's
investments at fair value
|
31 December
2023
$'000
|
31
December
2022
$'000
|
Investments at fair value - Level
1
|
207,495
|
177,136
|
Investments at fair value - Level 3 -
see Note 5
|
174,741
|
464,592
|
Investments at fair
value(1)
|
382,236
|
621,728
|
Cash and cash equivalents
|
2,019
|
35,312
|
Partnership's
investments at fair value
|
384,255
|
657,040
|
(1)
Partnership holds investments indirectly through
Investment Undertaking
Summary
Income Statement
|
1 January
2023 to
31 December
2023
$'000
|
1 January
2022 to
31
December
2022
$'000
|
Unrealised and realised gain on Partnership's
investments
|
5,315
|
108,696
|
Interest and other income
|
9,215
|
1,477
|
Management fee expense - see Note 9
|
(9,431)
|
(11,302)
|
Other operating expenses
|
(2,377)
|
(2,932)
|
Portion of
the operating gain for the year attributable to REL's investment in
the Partnership
|
2,722
|
95,939
|
Reconciliation of unrealised and
realised gain on Partnership's investments
|
1 January
2023 to
31 December
2023
$'000
|
1 January
2022 to
31
December
2022
$'000
|
Unrealised gain on Partnership's
investments
|
48,358
|
148,511
|
Realised loss on Partnership's
investments
|
(43,024)
|
(37,235)
|
General Partner's performance allocation - see
Note 9
|
-
|
-
|
Release of provision for taxation
|
(19)
|
(2,580)
|
Unrealised
and realised gain on Partnership's investments
|
5,315
|
108,696
|
7. Cash and cash
equivalents
These comprise cash and short-term bank
deposits available on demand. The carrying amounts of these assets
approximate to their fair value.
8. Share
capital
|
31 December
2023
$'000
|
31
December
2022
$'000
|
Authorised:
|
|
|
Ordinary Shares of no par value
|
Unlimited
|
Unlimited
|
|
Total
No.
|
Total
No.
|
Issued and
fully paid:
|
|
|
Unlimited
Shares of no par value
|
|
|
Shares as at inception
|
-
|
-
|
Issued on 23 May 2013
|
1
|
1
|
Issued on 29 October 2013
|
71,032,057
|
71,032,057
|
Issued on 10 October 2014
|
5,000,000
|
5,000,000
|
Issued on 11 December 2015
|
8,448,006
|
8,448,006
|
Cancelled during year ended 31 December
2018
|
(4,583,333)
|
(4,583,333)
|
Cancelled during year ended 31 December
2020
|
(16,958,265)
|
(16,958,265)
|
Cancelled during year ended 31 December
2021
|
(8,000,867)
|
(8,000,867)
|
Cancelled during year ended 31 December
2022
|
(4,045,941)
|
(4,045,941)
|
Cancelled during year ended 31 December
2023
|
(8,695,869)
|
-
|
Shares as at
year end
|
42,195,789
|
50,891,658
|
Share
capital
|
$'000
|
$'000
|
Share capital brought forward
|
1,101,674
|
1,133,854
|
Movements for the year:
|
|
|
Cancellation of shares
|
(62,953)
|
(32,180)
|
Share capital
as at year end
|
1,038,721
|
1,101,674
|
The Company has one class of Ordinary Shares.
The issued value of the Ordinary Shares represents 100 per cent. of
the total issued value of all share capital. Under the Company's
Articles of Incorporation, on a show of hands, each Shareholder
present in person or by proxy has the right to one vote at general
meetings. On a poll, each Shareholder is entitled to one vote for
every Share held.
Shareholders are entitled to all dividends
paid by the Company and, on a winding up, providing the Company has
satisfied all of its liabilities, the Shareholders are entitled to
all of the surplus assets of the Company. The Ordinary Shares have
no right to fixed income.
On 15 May 2023, the Company announced a share
buyback programme for £30.0 million in the value of the Company's
Ordinary Shares. During 2023 the Company acquired 5,513,673
Ordinary Shares which were subsequently cancelled.
On 17 August 2023, the Company announced a
Tender Offer for £18.4 million in the value of the Company's
Ordinary Shares. The Company acquired 3,182,196 Ordinary Shares
which were cancelled on 29 September 2023.
Following the cancellation of Ordinary Shares
from the Tender Offer and share buyback programme, the share
capital of the Company is 42,195,789 Ordinary Shares in
aggregate.
9. Related party
transactions
The following parties are considered to be the
Company's related parties as defined by IFRS.
Directors
The Company has six non-executive Directors
(31 December 2022: seven). The Chair of the Board is entitled to
annual remuneration of £145,200 (31 December 2022: £132,000). The
Chair of the Audit Committee is entitled to annual remuneration of
£90,750 (31 December 2022: £82,500), the Chair of the Management
Engagement Committee is entitled to annual remuneration of £78,650
(31 December 2022: £71,500) and the Chair of the Nomination and
Remuneration Committee is entitled to remuneration of £78,650 (31
December 2022: £71,500). The other independent Directors are
entitled to annual remuneration of £72,600 (31 December 2022:
£66,000).
Directors' fees and expenses for the year
ended 31 December 2023 amounted to $901,531 (31 December 2022:
$854,413) which resulted in a reduction to the 31 December 2023
quarter-end management fee as further discussed below. $nil of
Directors' expenses were outstanding at year-end (31 December 2022:
$nil).
Partnership
In accordance with section 4.1(a) of the
Partnership Agreement, the Company received distributions in
aggregate of $59.8 million (31 December 2022: $47.2 million) from
the Partnership through the year to 31 December 2023. The Company
also received inter-entity loans of $1.7 million from the
Partnership to fund further investments and the Tender Offer. In
accordance with section 4.1(a) of the Partnership Agreement, in the
event of the Company requiring additional funds for working
capital, it is entitled to receive distributions from the
Partnership.
Investment Manager
The Investment Manager, an affiliate of
Riverstone, provides advice to the Company and the General Partner
on the origination and completion of new investments, on the
management of the portfolio and on realisations, as well as on
funding requirements, subject to Board approval. For the provision
of services under the Investment Management Agreement, the
Investment Manager is paid in cash out of the assets of the
Partnership an annual management fee equal to 1.5 per cent. per
annum of the Company's Net Asset Value (including cash). The fee is
payable quarterly in arrears and each payment is calculated using
the quarterly Net Asset Value as at the relevant quarter
end.
The Investment Manager has agreed to deduct
from its annual management fee all fees, travel costs and related
expenses of the Directors exceeding the following annual
limits:
Portion of
NAV
|
Limit (as a
percentage of the then last published NAV)
|
Up to and including £500 million
|
0.084 per cent.
|
From £500 million to and including £600
million
|
0.084 per cent. at £500 million and thereafter
adjusted downwards proportionately to NAV to 0.07 per cent. at £600
million
|
From £600 million to and including £700
million
|
0.07 per cent. at £600 million and thereafter
adjusted downwards proportionately to NAV to 0.06 per cent. at £700
million
|
Above £700 million
|
0.06 per cent.
|
The above limits are subject to adjustment by
agreement between the Investment Manager and the Company acting by
its independent Directors. Based on the last published NAV as of 31
December 2023, the maximum amount of annual fees, travel and
related expenses of the Directors is $568,574 (31 December 2022:
$765,682). During the year ended 31 December 2023, fees and
expenses of the Directors amounted to $901,531 (31 December 2022:
$854,413), resulting in a reduction of $332,957 to the 31 December
2023 quarter-end management fee (31 December 2022: reduction of
$88,731 of the quarter-end management fee).
During the year ended 31 December 2023, the
Partnership incurred management fees of $9,430,572 (31 December
2022: $11,302,322) of which $2,192,927 remained outstanding as at
the year-end (31 December 2022: $2,681,729). In addition, the
Company and Partnership, in aggregate, reimbursed the Investment
Manager $2,528,979 in respect of amounts paid on their behalf for
the year (31 December 2022: $2,028,851), of which $2,498,492
related to legal and professional fees of the Company and
Partnership ($218,956 specific to the Company) (31 December 2022:
$1,376,733), and $101,386 related to travel and other operating
expenses of the Investment Manager (all specific to the Company),
(31 December 2022: $192,603), and reimbursable amounts from the
Investment Manager of $70,900 (31 December 2022: due to the
Investment Manager of $459,515) related to expenses incurred by
portfolio companies (all specific to the Partnership).
The circumstances in which the Company and the
Investment Manager may terminate the Investment Management
Agreement are as follows:
Event
|
Notice period
|
Consequences of termination
|
By the Company if the Investment Manager is in
material breach which has not been rectified
|
12 months
|
The General Partner is entitled to receive a
payment equal to four times the quarterly management fee payable to
the Investment Manager on the basis of the Company's most recent
Net Asset Value ($8,771,708) and an amount equal to the performance
allocation due on the Company's investments on the basis, at the
Company's option, of the latest quarterly valuation ($nil) or the
actual realisation value for each investment.
|
By the Investment Manager if the Company is in
material breach which has not been rectified
|
12 months
|
The General Partner is entitled to receive a
payment equal to twenty times the quarterly management fee payable
to the Investment Manager on the basis of the Company's most recent
Net Asset Value ($43,858,530) and an amount equal to the
performance allocation due on the Company's investments on the
basis, at the General Partner's option, of the latest quarterly
valuation ($nil) or the actual realisation value for each
investment.
|
By the Company if the Investment Manager
becomes insolvent or resolves to wind up or if the Investment
Manager commits an act of fraud or wilful default in relation to
the Company which results in material harm to the
Company
|
Immediate
|
No payment to be made to the Investment
Manager or the General Partner.
|
The Investment Management Agreement cannot be
terminated by either the Company or the Investment Manager without
cause.
Following the seventh anniversary of the
Company's London listing on 29 October 2020, a discontinuation
resolution was proposed and not passed, therefore the Investment
Management Agreement will continue in perpetuity subject to the
termination for cause provisions described above. However, either
the Board or Shareholders holding in aggregate 10 per cent. of the
Company's voting securities can call an EGM at any time to vote on
the liquidation of the Company (75 per cent. of the votes cast in
favour required) or run-off of its portfolio (50 per cent. of the
votes cast in favour required).
Under both these scenarios, the General
Partner would be entitled to twenty times the most recent quarterly
management fee payable to the Investment Manager ($43,858,530 as of
31 December 2023).
General Partner
The General Partner makes all management
decisions, other than investment management decisions, in relation
to the Partnership and controls all other actions by the
Partnership and is entitled to receive a performance allocation,
calculated and payable at the underlying investment holding
subsidiary level, equal to 20 per cent. of the gross realised
profits (if any) in respect of a disposal, in whole or in part, of
any underlying asset of the Company.
The General Partner is entitled to receive its
performance allocation in cash, all of which, after tax,
Riverstone, through its affiliate RELCP, reinvests in Ordinary
Shares of the Company on the terms summarised in Part I and Part
VIII of the IPO Prospectus.
During the year ended 31 December 2023, the
Partnership paid performance allocation of $nil (31 December 2022:
$nil) of which $nil remained outstanding as at the year-end (31
December 2022: $nil).
On 3 January 2020, the Company announced
amendments to performance allocation arrangements under the
Investment Management Agreement that were effective from 30 June
2019. The amended terms on which the Company is required to pay a
performance allocation in respect of its investment are as
follows:
· Portfolio
level cost benchmark: A performance allocation will only be
distributed in respect of a realised investment if, at the time of
the realisation of the relevant investment, the aggregate of the
fair market value of all of the Company's then unrealised
investments and the proceeds of all of its realised investments
since inception exceeds the aggregate acquisition price of all of
the Company's unrealised and realised investments. If this
portfolio level cost benchmark is not met at the time of
realisation of the relevant investment, distribution of the
performance allocation is subject to deferment as described further
below. As of 31 December 2023, the portfolio level cost benchmark
was in deficit of $84.7 million.
· 8 per
cent. hurdle rate: A performance allocation will only be accrued
for payment upon the realisation of an investment if the proceeds
from that investment exceed an amount equal to its acquisition cost
plus an 8 per cent. annual cumulative hurdle rate calculated from
the date of investment to the date of realisation. If the hurdle is
met, the performance allocation will be 20 per cent. of all Net
Profits in respect of each such investment. As of 31 December 2023,
five investments exceeded the hurdle rate and the total portfolio's
Gross IRR was approximately (1) per cent.
· Full
realisation: A performance allocation will only be calculated and
accrued on the full realisation of the entire interest in an
investment unless a partial realisation results in the full return
of all capital invested in such investment. Otherwise, no
performance allocation will be payable on partial disposals and the
ability for the Investment Manager to elect to receive a
performance allocation on an investment that has been held by the
Company for at least seven years (but not sold) has been
removed.
· Deferral:
If the portfolio level cost benchmark is not met at the time of
full realisation of the relevant investment, it will be retested on
a quarterly basis for the following three years. If, at any
time during those three years, the benchmark is satisfied for four
continuous quarters, the relevant performance allocation will then
become distributable without interest. Any accrued but
undistributed performance allocation that has been deferred due to
the portfolio level cost benchmark test will expire after 36
months.
In accordance with the revised terms above, no
further performance allocation will be payable until the $84.7
million of realised and unrealised losses to date at 31 December
2023 are made whole with future gains. The earned performance
allocation of $0.8 million at 31 December 2023 expired
in October 2023 as the aforementioned losses were not made whole.
Since REL has not yet met the appropriate Cost Benchmark at 31
December 2023, $32.2 million in performance allocation was not
accrued in accordance with the terms of the current agreement,
which would have been accrued under the prior agreement. The
Investment Manager will continue to be required to apply each
performance allocation (net of taxes) to acquire ordinary shares of
the Company.
Distribution
of Investment Proceeds
In addition, the Company and the Investment
Manager have agreed that, going forward, 20 per cent. of the Net
Profits attributable to each fully realised investment, net of
taxes, withholdings or reserves for taxes will, at the discretion
of the Company, be available for distribution to the Company's
Shareholders, whether by dividend or share repurchases.
Cornerstone Investors
Each of the Cornerstone Investors has acquired
an indirect economic interest in each of the General Partner and
the Investment Manager depending on the size of their commitment
and the total issue size, up to an aggregate maximum indirect
economic interest of 20 per cent. in each, for nominal
consideration. These interests entitle the Cornerstone Investors to
participate in the economic returns generated by the General
Partner, including from the performance allocation, and the
Investment Manager, which receives the management fee.
10. Financial risk
management
Financial risk management
objectives
The Company's investing activities, through
its investment in the Partnership, intentionally expose it to
various types of risks that are associated with the underlying
investee companies of the Partnership, including the ongoing
volatility in the oil and gas market. The Company makes the
investment in order to generate returns in accordance with its
investment policy and objectives.
The most important types of financial risks to
which the Company is exposed are market risk (including price,
interest rate and foreign currency risk), liquidity risk and credit
risk. The Board of Directors has overall responsibility for the
determination of the Company's risk management and sets policy to
manage that risk at an acceptable level to achieve those
objectives. The policy and process for measuring and mitigating
each of the main risks are described below.
The Investment Manager and the Administrator
provide advice to the Company which allows it to monitor and manage
financial risks relating to its operations through internal risk
reports which analyse exposures by degree and magnitude of risks.
The Investment Manager and the Administrator report to the Board on
a quarterly basis.
Categories of financial
instruments
|
31 December
2023
$'000
|
31
December
2022
$'000
|
Financial
assets
|
|
|
Investment at
fair value through profit or loss:
|
|
|
Investment in the Partnership
|
666,024
|
723,102
|
Other
financial assets:
|
|
|
Cash and cash equivalents
|
5,781
|
15,755
|
Trade and other receivables
|
2,276
|
598
|
|
|
|
Financial
liabilities
|
|
|
Financial
liabilities:
|
|
|
Trade and other payables
|
(512)
|
(665)
|
Capital risk management
The Company manages its capital to ensure that
the Company will be able to continue as a going concern while
maximising the capital return to Shareholders. The capital
structure of the Company consists of issued share capital and
retained earnings, as stated in the Statement of Financial
Position.
In order to maintain or adjust the capital
structure, the Company may buy back shares or issue new shares.
During the year, the Company bought and cancelled 8,695,869
Ordinary Shares. There are no external capital requirements imposed
on the Company.
The Company's investment policy is set out in
the Investment Policy section of the Annual Report.
Market risk
Market risk includes price risk, foreign
currency risk and interest rate risk.
(a) Price risk
The underlying investments held by the
Partnership present a potential risk of loss of capital to the
Partnership and hence to the Company. The Company invests through
the Partnership. Price risk arises from uncertainty about future
prices of underlying financial investments held by the Partnership,
which at year-end was $368,027,035 (31 December 2022:
$621,728,409). Please refer to Note 5 for quantitative information
about the fair value measurements of the Partnership's Level 3
investments. There were $207 million (31 December 2022: $177
million) Level 1 investments which are exposed to price risk as
well. A change of +/- 10 per cent. in the Level 1 investments would
result in a +/- $20.7 million change in their fair value (31
December 2022: a change of +/- 10 per cent. in the Level 1
investments would result in a +/- $17.7 million change in their
fair value).
The Partnership is exposed to a variety of
risks which may have an impact on the carrying value of the
Company's investment in the Partnership. The Partnership's risk
factors are set out in (a)(i) to (a)(iii) below.
(i)
Not actively
traded
The Partnership's investments are not
generally traded in an active market but are indirectly exposed to
market price risk arising from uncertainties about future values of
the investments held. The underlying investments of the Partnership
vary as to industry sub-sector, geographic distribution of
operations and size, all of which may impact the susceptibility of
their valuation to uncertainty.
Although the investments are in the same
industry, this risk is managed through careful selection of
investments within the specified limits of the investment policy.
The investments are monitored on a regular basis by the Investment
Manager.
(ii)
Concentration
The Company, through the Partnership, invests
in the global energy sector, with a particular focus on businesses
that engage in oil and gas exploration and production and midstream
investments in that sector. This means that the Company is exposed
to the risk of only making investments in the global energy sector,
which may further relate to sub-sector, geography, and the relative
size of an investment or other factors. Whilst the Company is
subject to the investment and diversification restrictions in its
investment policy, within those limits, material concentrations of
investments have arisen.
The Board and the Investment Manager monitor
the concentration of the investment in the Partnership on a
quarterly basis to ensure compliance with the investment
policy.
(iii) Liquidity
The Company's underlying investments through
the Partnership are dynamic in nature. The Partnership will
maintain flexibility in funding by keeping sufficient liquidity in
cash and cash equivalents which may be invested on a temporary
basis in line with the cash management policy as agreed by the
Board from time to time.
As at 31 December 2023, $285.6
million(1) or 42.6 per cent. (31 December 2022:
$103.8(1) million or 14.3 per cent.) of the
Partnership's financial assets, including those held by its
wholly-owned subsidiaries, REL US Corp and REL US Centennial
Holdings, LLC, were cash and cash equivalent balances, being a mix
of cash balances held on deposit with several A or higher rated
banks and short term fixed rate securities.
(1) These
figures are comprised of $283.6 million (2022: $68.5 million) held at the
Partnership and $2
million (2022: $35.3 million) held at REL US Corp.
(b) Foreign currency
risk
The Company has exposure to foreign currency
risk due to the payment of some expenses in Pounds Sterling.
Consequently, the Company is exposed to risks that the exchange
rate of its currency relative to other foreign currencies may
change in a manner that has an adverse effect on the value of that
portion of the Company's assets or liabilities denominated in
currencies other than the U.S. Dollar.
The following tables set out, in U.S. Dollars,
the Company's total exposure to foreign currency risk and the net
exposure to foreign currencies of the monetary assets and
liabilities:
As at 31
December 2023
|
$
|
£
|
Total
|
Assets
|
$'000
|
$'000
|
$'000
|
Non-current
assets
|
|
|
|
Investment in the
Partnership(1)
|
666,024
|
-
|
666,024
|
Total
non-current assets
|
666,024
|
-
|
666,024
|
|
|
|
|
Current
assets
|
|
|
|
Trade and other receivables
|
2,238
|
38
|
2,276
|
Cash and cash equivalents
|
932
|
4,849
|
5,781
|
Total current
assets
|
3,170
|
4,887
|
8,057
|
|
|
|
|
Current
liabilities
|
|
|
|
Trade and other payables
|
110
|
402
|
512
|
Total current
liabilities
|
110
|
402
|
512
|
|
|
|
|
Total net
assets
|
669,084
|
4,485
|
673,569
|
(1) Includes the fair value of one investment held through the
Partnership, Crescent Point Energy, denominated in CAD and
therefore subject to foreign currency risk. This investment had an
aggregate fair value of $57.2 million as at 31 December
2023.
As at 31 December 2022
|
$
|
£
|
Total
|
Assets
|
$'000
|
$'000
|
$'000
|
Non-current assets
|
|
|
|
Investment in the
Partnership(1)
|
723,102
|
-
|
723,102
|
Total non-current assets
|
723,102
|
-
|
723,102
|
|
|
|
|
Current assets
|
|
|
|
Trade and other receivables
|
572
|
26
|
598
|
Cash and cash equivalents
|
2,037
|
13,718
|
15,755
|
Total current assets
|
2,609
|
13,744
|
16,353
|
|
|
|
|
Current liabilities
|
|
|
|
Trade and other payables
|
100
|
565
|
665
|
Total current liabilities
|
100
|
565
|
665
|
|
|
|
|
Total net assets
|
725,611
|
13,179
|
738,790
|
(1) Includes the fair value of one investment held through the
Partnership, Hammerhead Energy (now Cresent Point Energy),
denominated in CAD and therefore subject to foreign currency risk.
This investment had an aggregate fair value of $153.7 million as at
31 December 2022.
(c) Interest Rate
Risk
The Company's exposure to interest rate risk
relates to the Company's cash and cash equivalents held through the
Partnership. The Company is subject to risk due to fluctuations in
the prevailing levels of market interest rates. Any excess cash and
cash equivalents are invested at short-term market interest rates.
As at the date of the Statement of Financial Position, the majority
of the cash and cash equivalents were held by the Partnership on
interest bearing fixed deposit accounts and Treasury Bills. Any
exposure to interest rate risk at the underlying investment level
is captured within price risk.
The Company has no other interest-bearing
assets or liabilities as at the reporting date. As a consequence,
the Company is only exposed to minimal variable market interest
rate risk. Management does not expect any residual interest rate
risk to be material, and therefore sensitivity analysis has not
been provided.
|
31 December
2023
$'000
|
31
December
2022
$'000
|
Non-interest
bearing
|
|
|
Cash and cash equivalents
|
5,781
|
15,755
|
Liquidity risk
Ultimate responsibility for liquidity risk
management rests with the Board of Directors.
Liquidity risk is defined as the risk that the
Company may not be able to settle or meet its obligations on time
or at a reasonable price.
The Company adopts a prudent approach to
liquidity management and through the preparation of budgets and
cash flow forecasts maintains sufficient cash reserves to meet its
obligations. During the year, the Company received distributions in
aggregate of $59.8 million (£47.1 million) from the Partnership
(2022: $47.3/£39.1 million) to continue to fund the 2022 and 2023
share buyback programmes, 2023 Tender Offer and ongoing expenses.
As in prior years, in accordance with the Partnership Agreement, if
the Company requires additional funds for working capital, it is
entitled to receive further distributions from the Partnership. In
order to do so, the Company would submit a distribution request
approved by the Board to the Partnership, which would then be
required to arrange for the payment of the requested amount. Since
REL's inception, the Company has requested and received twelve
distributions from the Partnership for working capital needs. As at
31 December 2023, REL, through the Partnership, had available
liquid resources of $286 million in excess of potential unfunded
commitments of $6.2 million, but currently, as of the date of this
report, REL, through the Partnership, has total potential unfunded
commitments of up to $6.0 million.
The Company's financial assets (excluding
equity investments) and liabilities have an expected maturity of
less than 12 months from 31 December 2023 (2022: less than 12
months from 31 December 2022). Based on the assessment outlined
above, the Board has concluded that, as of the date of this report,
the Company and Partnership have sufficient available liquid
resources to meet current liabilities as they fall due over the
next 13 months to 31 March 2025.
Credit risk
Credit risk refers to the risk that a
counterparty will default on its contractual obligations resulting
in financial loss to the Company. Any exposure to credit risk at
the underlying investment level is captured within price
risk.
Financial assets mainly consist of cash and
cash equivalents, trade and other receivables, and investments at
fair value through profit or loss. The Company's risk on liquid
funds, including those held by the Partnership(1), is
reduced because it can only deposit monies with institutions with a
minimum credit rating of "single A". The Company mitigates its
credit risk exposure on its investment at fair value through profit
or loss by the exercise of due diligence on the counterparties of
the Partnership, its General Partner and the Investment
Manager.
The table below shows the material cash
balances and the credit rating for the counterparties used at the
year-end date:
|
|
|
31 December
|
31
December
|
|
|
|
2023
|
2022
|
Counterparty
|
Location
|
Rating
|
$'000
|
$'000
|
Barclays Bank Plc
|
Guernsey
|
A
|
5,781
|
15,755
|
(1) The
Partnership holds its cash and cash equivalents ($284 million) at
Barclays Bank Plc (Rating: A) and Citibank (Rating: A+).
The Company's maximum exposure to loss of
capital from credit risk at the year-end is shown below:
31 December
2023
|
Carrying Value and Maximum
exposure
$'000
|
Other financial assets (including cash and
cash equivalents but excluding prepayments and loan from the
Partnership)
|
4,039
|
31 December 2022
|
Carrying Value and
Maximum exposure
$'000
|
Other financial assets (including cash and
cash equivalents but excluding prepayments)
|
15,755
|
Gearing
As at the date of these Financial Statements
the Company itself has no gearing. The Company may have indirect
gearing through the operations of the underlying investee
companies.
11. Segmental reporting
Operating segments are reported in a manner
consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, who
is responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Board of
Directors, as a whole. The key measure of performance used by the
Board to assess the Company's performance and to allocate resources
is the Total Return of the Company's Net Asset Value and therefore
no reconciliation is required between the measure of profit or loss
used by the Board and that contained in the Financial
Statements.
For management purposes, the Company is
organised into one main operating segment, which invests in one
limited partnership.
All of the Company and the Partnership's
income is derived from within Guernsey and the Cayman
Islands.
All of the Company's non-current assets are
located in the Cayman Islands.
Due to the Company's nature, it has no
customers.
12. (Loss)/Earnings per Share and Net
Asset Value per Share
(Loss)/Earnings per Share
|
31 December 2023
|
31 December
2022
|
|
Basic / Diluted
|
Basic /
Diluted
|
(Loss)/Profit for the year ($'000)
|
(2,268)
|
88,929
|
Weighted average numbers of Shares in
issue
|
46,651,893
|
51,742,789
|
(Loss per share)/EPS (cents)
|
(4.86)
|
171.87
|
The (Loss)/Earnings per Share is based on the
profit or loss of the Company for the year and on the weighted
average number of Shares the Company had in issue for that
year.
The weighted average number of Shares during
the year is 46,651,893 (31 December 2022: 51,742,789).
There are no dilutive Shares in issue as at 31
December 2023 (31 December 2022: nil).
Net Asset Value per Share
|
31 December 2023
|
31 December
2022
|
|
Basic / Diluted
|
Basic /
Diluted
|
NAV
($'000)
|
673,569
|
738,790
|
Number of
Shares in issue
|
42,195,789
|
50,891,658
|
Net Asset
Value per Share ($)
|
15.96
|
14.52
|
Net Asset
Value per Share (£)
|
12.53
|
11.99
|
Share Price
(£)
|
8.01
|
6.78
|
Discount to
NAV (per cent.)
|
36.09
|
43.46
|
The Net Asset Value per Share is arrived at by
dividing the net assets as at the date of the Statement of
Financial Position by the number of Ordinary Shares in issue at
that date. The Discount to NAV is arrived at by calculating the
percentage discount of the Company's Net Asset Value per Share to
the Company's closing Share price as at the date of the Statement
of Financial Position.
13. Auditor's Remuneration
Other operating expenses include but is not limited
to all fees payable to the auditor, which can be analysed as
follows:
|
2023
$'000
|
2022
$'000
|
Ernst &
Young LLP Audit fees
|
617
|
626
|
|
|
|
|
2023
|
2022
|
|
$'000
|
$'000
|
Ernst & Young LLP Interim Review
fees
|
213
|
211
|
Ernst &
Young Non-Audit fees
|
213
|
211
|
14. IFRS to US GAAP Reconciliation
The Company's Financial Statements are
prepared in accordance with IFRS, which in certain respects differ
from US GAAP. These differences are not material and therefore
no reconciliation between IFRS and US GAAP has been presented. For
reference, please see below for a summary of the key judgments and
estimates taken into account with regards to the Company as of 31
December 2023, as well as the Shareholders' financial highlights
required under US GAAP.
Assessment as
an Investment Entity
As stated in Note 2, REL meets the
definition of an investment entity under IFRS 10. Per US GAAP
(Financial Services - Investment Companies (Topic 946): Amendments
to the Scope, Measurement, and Disclosure Requirements or "ASC
946"), REL meets the definition of an investment company, and as
required by ASC 946, REL measures its investment in the Partnership
at FVTPL, which in turn measures its investment in the underlying
investments at FVTPL.
REL's
Investment in the Partnership
As stated in Note 3, although the Company is
the sole limited partner, it does not control the Partnership (as
that is attributable to the General Partner) and, since REL meets
the definition of an investment company in accordance with IFRS 10,
it measures its investment in the Partnership at FVTPL. Taking into
consideration all applicable US GAAP requirements (ASC 946 and ASC
323), REL accounts for its investment in the Partnership at FVTPL
which is similar to the IFRS 10 requirements.
Fair Value
Measurements
The fair value of the underlying investments
held by the Partnership are determined based on valuation
techniques and inputs that are observable and unobservable in the
market which market participants have access to and will use to
determine the exit price or selling price of the investments.
The change in valuation of REL's investments held by the
Partnership is then reflected in the fair value of REL's investment
in the Partnership. No additional disclosures are needed, as the
applicable fair value valuation techniques and disclosures are
consistent to those made under IFRS.
Shareholders'
Financial Highlights
|
Year Ended
31 December
2023
|
Year Ended
31 December
2022
|
Expense ratio1
|
2.5%
|
2.7%
|
Performance Allocation
ratio1
|
0.0%
|
0.0%
|
Total Expense and Performance Allocation
ratio
|
2.5%
|
2.7%
|
Net investment loss
ratio2
|
(1.9) %
|
(2.6) %
|
Internal rate of return3, beginning
of year
|
(3.8) %
|
(5.4) %
|
Internal rate of return3, end of
year
|
(3.7) %
|
(3.8) %
|
Net contributed capital to total capital
commitments4
|
100.0%
|
100.0%
|
1. The
expense ratio is calculated using total expenses of the Company and
the Partnership allocated to the Shareholders divided by the
Shareholders' average capital balance for the year presented. For
the years ended 31 December 2023 and 2022, the performance
allocation realised by the General Partner of the Partnership was
$nil and $nil, respectively, and the performance allocation accrued
by the General Partner of the Partnership was approximately $nil
and $nil, respectively.
2. The net
investment loss ratio is the Shareholders' investment income of the
Company and Partnership reduced by total expenses of the Company
and the Partnership divided by the Shareholders' average capital
balance for the year presented. However, net investment loss does
not include any realised or unrealised gains/losses generated from
the sale or recapitalisation of an investment of the Partnership.
Thus, net investment loss includes dividend and interest income of
the Company and the Partnership less the total expenses of the
Company and the Partnership incurred during the year
presented.
3. The
internal rate of return since the commencement of operations
("IRR") is computed based on the dates of the Shareholders' capital
contributions to the Company, distributions from the Company to the
Shareholders, and the fair value of the Shareholders' NAV as of 31
December 2023. The IRR of the Shareholders is net of all fees and
performance allocation to the General Partner of the Partnership.
The computation of the IRR for an individual Shareholder may vary
from the IRR presented above due to the timing of capital
transactions.
4. Net
contributed capital is based on the Shareholders' gross capital
contributions.
15. Post-Year End
Update
As announced 8 February 2024, the
Company proposes to return $200 million (equivalent to
approximately £158 million on the basis of the prevailing USD:GBP
exchange rate) of its excess capital to shareholders by means of a
tender offer at a price of £10.50 per ordinary share. The Tender
Price represents a premium of approximately 31 per cent. to the
closing market price per ordinary share of £8.00 on 7 February 2024
and represents a 16 per cent. discount to the unaudited net asset
value per ordinary share of £12.53 as at 31 December 2023 (on the
basis of the prevailing USD:GBP exchange rate at 31 December 2023
of 1.2736). The Company launched the 2024 Tender Offer on 23
February 2024 for up to 15,047,619 of the Company's ordinary
shares, representing 36 per cent. of the existing shares in issue
(excluding any ordinary shares held in treasury, of which there are
none currently) and the 2024 Tender Offer will close on 25 March
2024. The 2024 Tender Offer will require shareholder approval at an
extraordinary general meeting of the Company's shareholders, which
is due to be held on 26 March 2024, and will be subject to other
legal, regulatory and customary conditions.
On 3 February 2024, a potential acquiror of
FreeWire, who had been under exclusivity, withdrew from the sale
process. Given the accelerating cash constraints and limited
runway in combination with the sale process withdrawal, FreeWire
evaluated all alternatives which culminated in a sale of the
company on 20 February 2024 to a private investor. The
consideration with respect to the sale was 100 per cent. assumption
of all company liabilities. As of 20 February 2024, REL,
through the Partnership, has a realized Gross MOIC of 0.00x in the
FreeWire investment, which is no longer an investment in the
portfolio.
Alternative performance measures
("APMs")
This Annual Report and Accounts contain APMs,
which are financial measures not defined in IFRS. These include
certain financial and operational highlights and key financials, as
well as in the performance section of the Board Chair's Statement.
The definition of each of these APMs is shown below.
The Company assesses its performance using a
variety of measures that are not specifically defined under IFRS
and are therefore termed APMs. The APMs that the Company uses may
not be directly comparable with those used by other companies.
These APMs are used to present a clearer picture of how the Company
has performed over the year and are all financial measures of
historical performance.
For the 2023 Annual Report, the APMs,
Performance Allocation Ratio and Net Contributed Capital to Total
Capital Commitments are no longer deemed relevant and have been
removed from the below table. The performance allocation has been
nil since amendments to the Investment Management Agreement in
2020, as the portfolio level cost benchmark has remained in
deficit. The Shareholders' gross capital contributions have
remained at 100 per cent. for many years.
The table below defines our APMs.
APM
|
Definition
|
Purpose
|
Calculation and
(where relevant) reconciliation to IFRS
|
NAV per Ordinary Share
|
The Company's NAV divided by the number of Ordinary
Shares.
|
A measure of the value of one ordinary share.
|
The net assets as shown on the statement of
financial position ($674 million as at 31 December
2023 and $739 million as at 31 December 2022) divided by the number
of Ordinary Shares in issue as at the calculation date
(42,195,789 as at 31 December 2023 and 50,891,658 as
at 31 December 2022).
|
Ordinary NAV total return
|
The increase/(decrease) in the NAV per ordinary
share.
|
A measure of the overall financial performance of the
Company.
|
The difference in the NAV per Ordinary Share at the
beginning and end of the year from the statement of financial
position ($15.96 for the year ended 31 December 2023
& $14.52 for the year ended 31 December 2022) as a percentage
of the opening NAV per Ordinary Share as shown in the Statement of
Financial Position (being $14.52 per ordinary share as
at 31 December 2022 & $12.41 as at 31 December 2021).
|
Premium/(discount) to NAV
|
The amount by which the ordinary share price is
higher/lower than the NAV per Ordinary Share, expressed as a
percentage of the NAV per ordinary share.
|
A measure of the performance of the Company's share
price relative to the NAV per Ordinary Share.
|
The difference between the Company's share price and
NAV per Ordinary Share as a relative percentage of the NAV per
Ordinary Share (36.1 per cent. as at 31 December 2023
and 43.5 per cent. as at 31 December 2022).
|
Annual total costs' impact on return per year
|
The impact on return each year that total costs,
including GP performance allocation, have on the investment
return.
|
A measure to show how total costs, including GP
performance allocation, affect the return from the Company.
|
Annual total costs of the Company and Partnership as
a per cent. of average NAV of the Company:
Total annual costs for the year ended 31 December
2023: $16,989,622 (31 December 2022: $19,856,075).
Average NAV of the Company for the year ended 31
December 2023: $666,773,589 (31 December 2022: $742,637,411).
Annual total costs' impact of return per year:
2.6 per cent. as of 31 December 2023
(2.6 per cent. as of 31 December 2022).
|
Reconciliation of Partnership's investments
|
The annual investment value of the Partnership,
including capital deployed into the Company's assets, cash received
from the Company's investment portfolio and the net unrealised
change in value.
|
A reconciliation of the Partnership's investments on
an annual basis.
|
For the year ended 31 December 2023:
$622 million - Brought Forward
$22 million - Capital Invested
$(272) million - Cash Proceeds
$10 million - Change in Unrealised Gain/
(Loss)
$382 million - Carried Forward
For the year ended 31 December 2022:
$578 million - Brought Forward
$95 million - Capital Invested
$(164) million - Cash Proceeds
$113 million - Change in Unrealised Gain/(Loss)
$622 million - Carried Forward
|
Expense Ratio
|
The impact on return each year that total costs,
excluding GP performance allocation, have on the investment
return.
|
A measure to show how costs, excluding GP performance
allocation, affect the return from the Company.
|
As shown in Note 14, the expense ratio is
calculated using total expenses of the Company and the Partnership
allocated to the Shareholders divided by the Shareholders' average
capital balance for the year presented 1.9
per cent. for the year ended 31 December 2023 & 2.7 per
cent. for the year ended 31 December 2022).
|
Net Investment Loss Ratio
|
The impact on return each year that total costs,
net of interest income, have on the investment return.
|
A measure to show how total costs, net of interest
income, affect the return from the Company.
|
As shown in Note 14, the net investment loss
ratio is the Shareholders' investment income of the Company and
Partnership reduced by total expenses of the Company and the
Partnership divided by the Shareholders' average capital balance
for the year presented. However, net investment loss does not
include any realised or unrealised gains/losses generated from the
sale or recapitalisation of an investment of the Partnership. Thus,
net investment loss includes dividend and interest income of the
Company and the Partnership less the total expenses of the Company
and the Partnership incurred during the year presented. (1.9
per cent. for the year ended 31 December 2023 & 2.6 per
cent. for the year ended 31 December 2022).
|
Internal Rate of Return
|
The cumulative return on Shareholders'
investment.
|
A measure to show the return from the Company.
|
As shown in Note 14, the internal rate of
return since the commencement of operations ("IRR") is computed
based on the dates of the Shareholders' capital contributions to
the Company, distributions from the Company to the Shareholders,
and the fair value of the Shareholders' NAV as of 31 December 2023.
The IRR of the Shareholders is net of all fees and performance
allocation to the General Partner of the Partnership.
(3.7) per cent. as
of 31 December 2023
(3.8) per cent. as of 31 December
2022
(5.4) per cent. as of 31 December
2021
|
Glossary of Capitalised Defined
Terms
"Administrator" means Ocorian
Administration (Guernsey) Limited (formerly Estera International
Fund Managers (Guernsey) Limited);
"Admission" means admission, on 29
October 2013, to the Official List and/or admission to trading on
the London Stock Exchange, as the context may require, of the
Ordinary Shares becoming effective in accordance with the Listing
Rules and/or the LSE Admission Standards as the context may
require;
"AEOI
Rules" means Automatic Exchange of Information;
"AIC"
means the Association of Investment Companies;
"AIC
Code" means the AIC Code of Corporate Governance;
"AIF"
means Alternative Investment Funds;
"AIFM"
means AIF Manager;
"AIFMD" means EU Alternative Investment
Fund Managers Directive (No. 2011/61EU);
"Aleph
Midstream" means Aleph Midstream
S.A;
"Annual
General Meeting" or "AGM" means the general meeting of the
Company;
"Annual
Report and Financial Statements" means the annual
publication of the Company provided to the Shareholders to describe
their operations and financial conditions, together with their
Financial Statements;
"Anuvia" means Anuvia Plant
Nutrients;
"APMs"
means Alternative Performance Measures;
"Articles of
Incorporation" or "Articles" means the articles of
incorporation of the Company, as amended from time to
time;
"ASC
946" means per US GAAP (Financial Services -
Investment Companies (Topic 946): Amendments to the Scope,
Measurement, and Disclosure Requirements;
"Audit
Committee" means a formal committee of the Board with
defined terms of reference;
"Board" or "Directors" means the directors of the
Company;
"Boe/d" means Barrels of Oil
Equivalent Per Day;
"CAD"
or "C$" means Canadian
dollar;
"CanEra
III" means CanEra Inc.;
"Carrier
II" means Carrier Energy Partners II LLC;
"Castex
2005" means Castex Energy 2005 LLC;
"Castex
2014" means Castex Energy 2014 LLC;
"Centennial" means Centennial Resource
Development, Inc.;
"CNOR"
means Canadian Non-Operated Resources LP;
"Companies
Law" means the Companies (Guernsey) Law, 2008, (as
amended);
"Company" or "REL" means Riverstone Energy
Limited;
"Company
Secretary" means Ocorian Administration (Guernsey) Limited
(formerly Estera International Fund Managers (Guernsey)
Limited);
"Cornerstone
Investors" means those investors who have acquired Ordinary
Shares and acquired a minority economic interest in the General
Partner and in the Investment Manager, being AKRC Investments LLC,
Casita, L.P., KFI and McNair;
"Corporate
Brokers" means JP Morgan Cazenove and Deutsche
Numis;
"C
Corporation" means a C Corporation, under U.S. federal
income tax law, being a corporation that is taxed separately from
its owners;
"Crescent
Point Energy" means Crescent Point Energy Corp;
"CRS"
means Common Reporting Standard;
"DCRB"
means Decarbonisation Plus Acquisition Corporation;
"DCRC"
means Decarbonisation Plus Acquisition Corporation III
"DCRN"
means Decarbonisation Plus Acquisition Corporation II;
"Depositary" means Ocorian Depositary
Company (UK) Limited (formerly Estera Depositary Company (UK)
Limited);
"Disclosure
Guidance and Transparency Rules" or "DTRs" mean the disclosure guidance
published by the FCA and the transparency rules made by the FCA
under section 73A of FSMA;
"Discontinuation Resolution" means a
special resolution that was proposed and not passed by the
Company's Shareholders to discontinue the Company within six weeks
of the seventh anniversary of the Company's first Admission if the
trading price has not met the Target Price, and the Invested
Capital Target Return has not been met;
"Discount to
NAV" means the situation where the Ordinary shares of the
Company are trading at a price lower than the Company's Net Asset
Value;
"E&P" means exploration and
production;
"Eagle
II" means Eagle Energy Exploration, LLC;
"Earnings per
Share" or "EPS" or
''Loss per Share'' means the Earnings or Loss per Ordinary Share
and is expressed in U.S. dollars;
"EBITDA" means earnings before interest,
taxes, depreciation and amortisation;
"ECI"
means effectively connected income, which refers to all income from
sources within the United States connected with the conduct of a
trade or business;
"EEA"
means European Economic Area;
"EGM"
means an Extraordinary General Meeting of the Company;
"Enviva" means Enviva Holdings,
LP;
"ESG" means
Environmental, Social and Governance;
"EU"
means the European Union;
"EV"
means enterprise value;
"FATCA" means Foreign Account Tax
Compliance Act;
"FCA"
means the UK Financial Conduct Authority (or its successor
bodies);
"Fieldwood" means Fieldwood Energy
LLC;
"Financial
Statements" means the audited financial statements of the
Company, including the Statement of Financial Position, the
Statement of Comprehensive Income, the Statement of Cash Flows, the
Statement of Changes in Equity and associated notes;
"FRC"
means Financial Reporting Council;
"FreeWire" means FreeWire Technologies,
Inc.
"Fund
V" means Riverstone Global Energy & Power Fund V,
L.P.;
"Fund
VI" means Riverstone Global Energy & Power Fund VI,
L.P.;
"FVTPL" means Fair Value
through the profit or loss;
"General
Partner" means REL IP General Partner LP (acting through its
general partner, REL IP General Partner Limited), the general
partner of the Partnership and a member of the Riverstone
group;
"GFSC"
or "Commission" means the
Guernsey Financial Services Commission;
"GFSC
Code" means the GFSC Finance Sector Code of Corporate
Governance;
"GHG"
means greenhouse gases;
"GoodLeap" means GoodLeap,
LLC;
"Gross
IRR" means an aggregate, annual, compound, gross internal
rate of return on investments. Gross IRR does not reflect expenses
to be borne by the relevant investment vehicle or its investors
including, without limitation, performance allocation, management
fees, taxes and organisational, partnership or transaction
expenses;
"Gross
MOIC" means gross multiple of invested capital;
"Group14" means Group14 Technologies,
Inc.;
"Hammerhead
Energy" means Hammerhead Energy Inc.;
"Henry
Hub" means a pipeline interchange of natural gas in
North America used as a benchmark in gas pricing;
"Hyzon" means Hyzon Motors,
Inc.;
"IAS"
means international accounting standards as issued by the Board of
the International Accounting Standards Committee;
"IEA"
means International Energy Agency;
"IFRS"
means the International Financial Reporting Standards as adopted by
the European Union, being the principles-based accounting
standards, interpretations and the framework by that name issued by
the International Accounting Standards Board;
"ILX
III" means ILX Holdings III LLC;
"Infinitum
Electric" means Infinitum Electric, Inc.;
"IRR"
means the internal rate of return since the commencement of
operations;
"Interim
Report" means the Company's half yearly report and unaudited
interim condensed financial statements for the period ended 30
June;
"Investment
Manager" or "IM"
means RIL (effective through 17 August 2020) and RIGL (effective
after 17 August 2020) which are both majority-owned and controlled
by Riverstone;
"Investment
Management Agreement" or "IMA" means the investment management
agreement dated 24 September 2013 between RIL, the Company and the
Partnership (acting through its General Partner) under which RIL is
appointed as the Investment Manager of both the Company and the
Partnership (effective 17 August 2020), the 2nd Amended
& Restated investment management agreement effective after 17
August 2020 between RIGL, the Company and the Partnership (acting
through its General Partner) under which RIGL is appointed as the
Investment Manager of both the Company and the Partnership and the
3rd Amended & Restatement investment management
agreement effective 9 December 2020 between RIGL, the Company and
the Partnership (acting through its General Partner);
"Invested
Capital Target Return" means, as defined in the Articles,
the Gross IRR of 8 per cent. on the portion of the proceeds of the
Issue (as such term is defined in the Company's Prospectus) that
have been invested or committed to an investment ("Invested
Capital") in respect of the period from the dates of investment or
commitment of that Invested Capital (being the dates from which a
management fee has been paid in respect of that Invested Capital)
to the seventh anniversary of the first Admission, calculated by
reference to the prevailing U.S. dollar valuations (as of the
seventh anniversary of the first Admission (or earlier disposal))
of the investment acquired with that Invested Capital and sales
proceeds of investments that have been disposed of prior to such
seventh anniversary and taking account of any distributions made on
those investments prior to the seventh anniversary of the first
Admission;
"Investment
Undertaking" means the Partnership, any intermediate holding
or investing entities that the Company or the Partnership may
establish from time to time for the purposes of efficient portfolio
management and to assist with tax planning generally and any
subsidiary undertaking of the Company or the Partnership from time
to time;
"IPEV
Valuation Guidelines" means the International Private Equity
and Venture Capital Valuation Guidelines;
"IPO"
means the initial public offering of shares by a private company to
the public;
"IRS"
means the Internal Revenue Service, the revenue service of the U.S.
federal government;
"ISA"
means International Standards on Auditing (UK);
"ISAE
3402" means International Standard on Assurance Engagements
3402, "Assurance Reports on Controls at a Service
Organisation";
"ISIN"
means an International Securities Identification Number;
"KFI"
means Moore Capital Management, formerly known as Kendall Family
Investments, LLC, a cornerstone investor in the Company;
"Liberty
II" means Liberty Resources II LLC;
"Listing
Rules" means the listing rules made by the UK Listing
Authority under section 73A Financial Services and Markets Act
2000;
"Loanpal" means Loanpal, LLC;
"London Stock
Exchange" or "LSE"
means London Stock Exchange plc;
"LSE
Admission Standards" means the rules issued by the London
Stock Exchange in relation to the admission to trading of, and
continuing requirements for, securities admitted to the Official
List;
"Management
Engagement Committee" means a formal committee of the Board
with defined terms of reference;
"Management
Fee" means the management fee to which the Investment
Manager is entitled;
"McNair" means RCM Financial Services,
L.P. for the purposes of acquiring Ordinary Shares and Palmetto for
the purposes of acquiring a minority economic interest in the
General Partner and the Investment Manager;
"Meritage
III" means Meritage Midstream Services III, L.P.;
"Mmbtu" means one million British
thermal units;
"NASDAQ" means National Association of
Securities Dealers Automated Quotations
Stock Market;
"NAV per
Share" means the Net Asset Value per Ordinary
Share;
"Net Asset
Value" or "NAV"
means the value of the assets of the Company less its liabilities
as calculated in accordance with the Company's valuation policy and
expressed in U.S. dollars;
"Net
MOIC" means gross multiple of invested capital net of taxes
and performance allocation on gross profit;
"Net
Profits" means the proceeds received from each realised
investment (after the expenses related to its disposal) minus the
acquisition price of that realised investment;
"Nomination
and Remuneration Committee" means a formal committee of the
Board with defined terms of reference;
"NURS"
means non-UCITS retail schemes;
"NYSE"
means The New York Stock Exchange;
"Official
List" is the list maintained by the Financial Conduct
Authority (acting in its capacity as the UK Listing Authority) in
accordance with Section 74(1) of the Financial Services and Markets
Act 2000;
"ONE"
or "Our Next Energy" means
Our Next Energy, Inc.;
"Onyx
Power" means Onyx Strategic Investment Management I
BV;
"Ordinary
Shares" means redeemable ordinary shares of no par value in
the capital of the Company issued and designated as "Ordinary
Shares" and having the rights, restrictions and entitlements set
out in the Articles;
"Origo" means Origo Exploration Holding
AS;
"Partnership" or "RELIP" means Riverstone Energy
Investment Partnership, L.P., the Investment Undertaking in which
the Company is the sole limited partner;
"Partnership
Agreement" means the partnership agreement in respect of the
Partnership between inter alios the Company as the sole limited
partner and the General Partner as the sole general partner dated
23 September 2013;
"Performance
allocation" means the performance allocation to which the
General Partner is entitled;
"Permian
Resources" means Permian Resources Corporation;
"PIPE"
means private investment in public entity;
"POI
Law" means the Protection of Investors (Bailiwick of
Guernsey) Law, 2020, as amended;
"Private
Riverstone Funds" means Fund V and all other private
multi-investor, multi-investment funds that are launched after
Admission and are managed or advised by the Investment Manager (or
one or more of its affiliates) and excludes Riverstone employee
co-investment vehicles and any Riverstone managed or advised
private co-investment vehicles that invest alongside either Fund V
or any multi-investor multi-investment funds that the Investment
Manager (or one or more of its affiliates) launches after
Admission;
"Prospectuses" means the prospectus
published on 24 September 2013 by the Company in connection with
the IPO of Ordinary Shares and further prospectus published on 23
November 2015;
"PRT"
means Riverstone Performance Review Team;
"Qualifying
Investments" means all investments in which Private
Riverstone Funds participate which are consistent with the
Company's investment objective where the aggregate equity
investment in each such investment (including equity committed for
future investment) available to the relevant Private Riverstone
Fund and the Company (and other co-investees, if any, procured by
the Investment Manager or its affiliates) is $100 million or
greater, but excluding any investments made by Private Riverstone
Funds where both (a) a majority of the Company's independent
directors and (b) the Investment Manager have agreed that the
Company should not participate;
"RCO"
means Riverstone Credit Opportunities, L.P.;
"RELCP" means Riverstone Energy Limited
Capital Partners, LP (acting by its general partner Riverstone
Holdings II (Cayman) Ltd.) a Cayman exempted limited partnership
controlled by affiliates of Riverstone;
"Ridgebury
H3" means Ridgebury H3, LLC;
"RIGL"
means RIGL Holdings, LP;
"RIL"
means Riverstone International Limited;
"Riverstone" means Riverstone Holdings
LLC and its affiliated entities (other than the Investment Manager
and the General Partner), as the context may require;
"Rock
Oil" means Rock Oil Holdings, LLC;
"SEC"
means the U.S. Securities and Exchange Commission;
"SaaS"
means Software as a Service;
"Samsung
Portfolio" means Samsung Ventures' battery technology
focused venture capital portfolios;
"Shareholder" means the holder of one or
more Ordinary Shares;
"Sierra" means Sierra Oil and Gas
Holdings, L.P.;
"Solid
Power" means Solid Power, Inc.;
"SPAC"
means special purpose acquisition company;
"Stewardship
Code" means the UK Stewardship Code;
"Target
Price" means, as defined in the Articles, £15.00, subject to
(a) downward adjustment in respect of the amount of all dividends
and other distributions, stock splits and equity issuances below
the prevailing NAV per Ordinary Share made following the first
Admission and (b) upward adjustment to take account of any share
consolidations made following the first Admission;
"Tender
Offer" means the £18.4 million in value of ordinary shares
acquired by the Company in 2023;
"Three Rivers
III" means Three Rivers Natural Resources Holdings III
LLC;
"Total Return
of the Company's Net Asset Value" means the capital
appreciation of the Company's Net Asset Value plus the income
received from the Company in the form of dividends;
"T-REX" or "T-REX Group" means T-REX Group,
Inc.;
"Tritium" means Tritium DCFC
Limited;
"UCITS" means undertakings for
collective investment in transferable securities;
"UK"
or "United Kingdom" means
the United Kingdom of Great Britain and Northern
Ireland;
"UK
Code" means The UK Corporate Governance Code
2018, issued by the FRC;
"UK Listing
Authority" or "UKLA"
means the Financial Conduct Authority;
"U.S."
or "United States" means
the United States of America, its territories and possessions, any
state of the United States and the District of Columbia;
"US
GAAP" means the accounting principles generally accepted in
the United States;
"VWAP"
means Volume-Weighted Average Price;
"WTI"
means West Texas Intermediate which is a grade of crude oil used as
a benchmark in oil pricing;
"£" or
"Pounds Sterling" or
"Sterling" means British
pound sterling and "pence"
means British pence; and
"$"
means United States dollars and "cents" means United States
cents.
Directors and General Information
Directors
Richard Horlick (Chair of the Board from 1 March
2023)
Patrick Firth
Karen McClellan (from 25 May 2023)
John Roche
Jeremy Thompson
Claire Whittet
Audit Committee
Patrick Firth (Chair of the Committee until 31 December
2023)
John Roche (Chair of the Committee from 1 January
2024)
Richard Horlick
Karen McClellan (from 25 May 2023)
Jeremy Thompson
Claire Whittet
Management Engagement Committee
Claire Whittet (Chair)
Patrick Firth
Richard Horlick
Karen McClellan (from 25 May 2023)
John Roche
Jeremy Thompson
Nomination and Remuneration Committee
Jeremy Thompson (Chair)
Patrick Firth
Richard Horlick
Karen McClellan (from 25 May 2023)
John Roche
Claire Whittet
Investment Manager
RIGL Holdings, LP
190 Elgin Avenue
George Town
Grand Cayman
KY1-9005
Cayman Islands
Investment Manager's Performance Review Team
Pierre Lapeyre
David Leuschen
Baran Tekkora
Website: www.RiverstoneREL.com
ISIN: GG00BBHXCL35
Ticker: RSE
|
Administrator and Company Secretary
Ocorian Administration (Guernsey) Limited
PO Box 286
Floor 2
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 4LY
Channel Islands
Registered office
PO Box 286
Floor 2
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 4LY
Channel Islands
Registrar
Link Asset Services
65 Gresham Street
London
EC2V 7NQ
United Kingdom
Principal banker and custodian
Barclays Bank PLC
PO Box 41
Le Marchant House
Le Truchot
St Peter Port
Guernsey
GY1 3BE
Channel Islands
|
English solicitors to the Company
Hogan Lovells International LLP
Atlantic House
Holborn Viaduct
London
EC1A 2FG
United Kingdom
Guernsey advocates to the Company
Carey Olsen
Carey House
PO Box 98
Les Banques
St Peter Port
Guernesey
GY1 4BZ
Channel Islands
U.S. legal advisors to the Company
Vinson & Elkins LLP
1001 Fannin Street
Suite 2500
Houston, Texas
TX 77002
United States of America
Independent auditor
Ernst & Young LLP
PO Box 9, Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey
GY1 4AF
Channel Islands
Corporate Brokers
JP Morgan Cazenove
25 Bank Street
Canary Wharf
London
E15 5JP
United Kingdom
Deutsche Numis
The London Stock Exchange
Building
10 Paternoster Square
London
EC4M 7LT
United Kingdom
|
SWISS SUPPLEMENT
ADDITIONAL INFORMATION FOR INVESTORS IN
SWITZERLAND
This Swiss
Supplement is supplemental to, forms part of and should be read in
conjunction with the Audited Financial Statements for the year
ended 31 December 2023 for RIVERSTONE ENERGY LIMITED (the
"Fund").
Effective from 20 July 2015, the Fund had
appointed Société Générale as Swiss Representative and Paying
Agent. The current Prospectus, the Memorandum and Articles of
Association and the annual report of the Fund can be obtained free
of charge from the representative in Switzerland, Société Générale,
Paris, Zurich Branch, Talacker 50, P.O. Box 5070, CH-8021 Zurich.
The paying agent of the Fund in Switzerland is Société Générale,
Paris, Zurich Branch, Talacker 50, P.O. Box 5070, CH-8021 Zurich.
The Company may offer Shares only to qualified investors in
Switzerland. In respect of the Shares distributed in and from
Switzerland, the place of performance and jurisdiction is the
registered office of the Swiss Representative.
Cautionary
Statement
The Board Chair's Statement, the Investment
Manager's Report and the Report of the Directors have been prepared
solely to provide additional information for Shareholders to assess
the Company's strategies and the potential for those strategies to
succeed. These should not be relied on by any other party or for
any other purpose.
The Board Chair's Statement, the Investment
Manager's Report and the Report of the Directors may include
statements that are, or may be deemed to be, "forward-looking
statements". These forward-looking statements can be identified by
the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "expects", "intends",
"may", "will" or "should" or, in each case, their negative or other
variations or comparable terminology.
These forward-looking statements include all
matters that are not historical facts. They appear in a number of
places throughout this document and include statements regarding
the intentions, beliefs or current expectations of the Directors
and the Investment Adviser, concerning, amongst other things, the
investment objectives and investment policy, financing strategies,
investment performance, results of operations, financial condition,
liquidity, prospects, and distribution policy of the Company and
the markets in which it invests.
By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future
performance.
The Company's actual investment performance,
results of operations, financial condition, liquidity, distribution
policy and the development of its financing strategies may differ
materially from the impression created by the forward-looking
statements contained in this document.
Subject to their legal and regulatory
obligations, the Directors and the Investment Manager expressly
disclaim any obligations to update or revise any forward-looking
statement contained herein to reflect any change in expectations
with regard thereto or any change in events, conditions or
circumstances on which any statement is based.
Riverstone
Energy Limited
PO Box 286, Floor 2,
Trafalgar Court, Les Banques, St Peter
Port, Guernsey, GY1 4LY, Channel Islands.
T 44 (0) 1481 742742
F 44 (0) 1481 742698
Further information available
online:
www.RiverstoneREL.com