TLEP Thomaslloyd Energy Impact Trust Plc

TIDMTLEI TIDMTLEP

RNS Number : 6436H

ThomasLloyd Energy Impact Trust PLC

31 July 2023

LEI: 254900VC23329JCBR9G82

31 July 2023

ThomasLloyd Energy Impact Trust plc (the " Company " )

Notices of Requisitioned General Meeting and Adjourned Annual General Meeting

Introduction

On 11 July 2023, the Company received a requisition notice pursuant to section 303 of the Companies Act 2006 in respect of shares beneficially owned by ThomasLloyd Cleantech Infrastructure Fund SICAV and ThomasLloyd SICAV - Energy Impact Credit Fund requiring three resolutions which were not voted on at the annual general meeting held on 30 June 2023 (the "AGM"), including a vote on the continuation of the Company (the "Continuation Resolution"), to be put before shareholders (the "Requisition"). As a result of the Requisition, the Company is now required to convene a general meeting (the "Requisitioned General Meeting") for the purpose of allowing shareholders to consider and vote on those three resolutions. The full text of the resolutions is set out in the Notice of Requisitioned General Meeting at the end of the circular which is today being posted to shareholders (the "Circular"); copies will shortly be available for inspection on the Company's website, www.tlenergyimpact.com , and at the National Storage Mechanism, which is located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

The AGM was adjourned prior to the Continuation Resolution and two other resolutions (being the Company's authority to make market purchases of its own shares and to hold general meetings on shorter notice) being put to the vote on the basis that the Board considered that shareholders should have been given the opportunity to make a fully-informed decision on the Company's future once the annual report for the financial period ended 31 December 2022 (the "Annual Report") had been published. The Company is still required to reconvene the adjourned annual general meeting (the "Adjourned Annual General Meeting") in order to propose the business that was not put to the vote at the AGM. To satisfy that requirement and to remove that burden from the Company at a future date, the Adjourned Annual General Meeting is now also being reconvened to be held immediately following the conclusion of the Requisitioned General Meeting. The resolutions to be proposed at the Adjourned Annual General Meeting are necessarily exactly the same as the resolutions being proposed at the Requisitioned General Meeting (save for the numbering of the resolutions).

This announcement highlights a number of reasons why the Board is unanimously recommending that shareholders vote against the Continuation Resolution at both the Requisitioned General Meeting and the Adjourned Annual General Meeting (together the "Meetings"). This is not a recommendation that the Board is making lightly because, like many shareholders, the Board believes in the value of the impact strategy the Company was established to deliver.

Before setting out the detailed reasoning for its recommendation, the Board sets out below some introductory remarks.

The Board, with complete independence and with no pre-set agenda, is assessing the position of the Company and whether the Board believes that shareholders should vote for the Company to continue in its present form. It is the Board's duty to deliver effective governance and oversight of the Company's investment manager, ThomasLloyd Global Asset Management (Americas) LLC (the "Investment Manager"), on behalf of shareholders.

The Board has been engaging with shareholders following the suspension of listing and trading of the Company's shares on 25 April 2023 (the "Suspension") and understands fully that an end to the Suspension is one of shareholders' highest priorities. In order for this to be achieved, the financial statements for the financial period ended 31 December 2022 (the "Financial Statements"), Annual Report and audit for the financial period ended 31 December 2022 (the "2022 Audit") must be completed and the Annual Report and Financial Statements published.

The holding of a continuation vote is not a precondition to the ending of the Suspension and the outcome of the vote on the Continuation Resolution will not prevent or further delay the Financial Statements, Annual Report and the 2022 Audit being completed or the Suspension being lifted.

When the Board first became aware of the serious issues facing the Company in relation to the 200 MW DC solar PV to-be-constructed project in Rewa Ultra Mega Solar Park in India (the "RUMS Project"), the Board resolved that it was not in the interests of the Company and its shareholders to have a public dispute with the Investment Manager and the Board wished to work constructively with the Investment Manager to seek to ensure that the Board and shareholders have a full understanding of the position, that the completion of the Financial Statements, Annual Report and 2022 Audit is achieved as quickly as possible and that the Suspension can be lifted. To be clear, a vote against the Continuation Resolution will not preclude or delay the completion of the Financial Statements, Annual Report and 2022 Audit or the lifting of the Suspension. The impact of the Continuation Resolution not passing is explained below under the heading "Impact of the Continuation Resolution not passing".

The Board's recommendation to adjourn the AGM on 30 June 2023 prior to voting on the Continuation Resolution was primarily based on its judgement that it was simply not sensible or realistic at that time to expect anyone to form a considered view on the financial position and prospects of the Company (i) whose valuation is uncertain, (ii) whose principal construction asset is economically unviable and where the non-completion penalties may be substantial, (iii) whose Financial Statements, Annual Report and 2022 Audit cannot currently be completed, (iv) whose shares are suspended from trading and (v) where there is no clear strategy for the future of the Company.

The Board's secondary motivation was to work privately with the Investment Manager to ensure that the Board, its advisers and the Company's auditor, Deloitte LLP (the "Auditor"), could establish with confidence what had happened with the RUMS Project and to undertake other significant workstreams required to get the Company back on track, if possible. As a result of the Requisition, the Board now has to explain in further detail some of the key issues facing the Company and provide shareholders with a recommendation now on whether to vote for or against the Continuation Resolution.

For the reasons stated below the Board recommends that shareholders should vote against the Continuation Resolution at each of the Meetings.

Reasons why The Board is recommending that SHAREHOLDERS vote against the Continuation Resolution

Continued delay in finalising valuations and completing the Financial Statements, Annual Report and 2022 Audit

It should be possible to readmit the Company's shares to trading as soon as the Company is able to complete the Financial Statements, the Annual Report and 2022 Audit and publish the Annual Report. The Board is, therefore, working as hard as it can to achieve this. Much, however, depends on the information supplied to the Board and the Auditor and the trust and confidence which each of them has in that information because the Financial Statements must show a true and fair view of the Company.

In accordance with standard practice, the Investment Manager should provide oral and written representations to the Board and the Auditor in connection with the valuations of the Company's assets and the audit of the Financial Statements. In order to be confident that those representations are complete and accurate and can therefore be relied upon, as well as complying with their duties more generally, it is essential for the Board and the Auditor to understand fully the circumstances which led to the Suspension and specifically:

-- who at the Investment Manager was aware the RUMS Project had become economically unviable and at what time;

-- why the economic unviability was not disclosed to the Board or the Auditor until 17 April 2023; and

-- why the liabilities relating to non-completion of the RUMS Project provided to the Board on 21 April 2023 were estimated to be only US$5 million whereas subsequent analysis has revealed they could be up to US$33.5 million.

Furthermore, material information has only very recently been provided to the Board in relation to Talettutayi Solar Projects Eight Private Limited, a subsidiary of the Company's Indian renewable energy platform ("SolarArise"), which, on 5 December 2022 won 100 MW AC of capacity in a reverse auction for a solar PV project with an estimated cost of US$69 million to be constructed in the State of Maharashtra. Information on this project should have been provided to the Board and the Auditor for the purposes of evaluating the 31 December 2022 valuations - it was not. In addition, the potential cash equity requirements included in the investment deployment of existing cash resources and cashflow projections for the Company provided to the Board and the Auditor in connection with the 2022 Audit and the preparation of the Annual Report did not include this project.

The issues set out above, as well as the other valuation issues referred to below, illustrate the challenges that the Board and the Auditor now have in being able to satisfy themselves about the quality and reliability of the information being given to them by the Investment Manager.

Against this backdrop:

-- The Board discussed with the Investment Manager the requirement for a comprehensive investigation into what happened with the RUMS Project and, in particular, who at the Investment Manager knew what and when regarding the economic viability of the project, and why the Board was not informed of its economic unviability until April 2023. Such an investigation would require the full cooperation of the Investment Manager, typically including granting access to emails and telephone and other records at the Investment Manager. Accordingly, the Board determined it was better to work jointly with the Investment Manager in this regard to expedite the conclusion of the investigation.

In response, however, the Investment Manager (or one of its affiliated companies) has appointed an investment operations and risk advisory services firm to investigate some matters on its own behalf. The Investment Manager has refused to give the Board the opportunity to approve or input into, or even access to, that consultant's scope of work. The Investment Manager has shared a copy of the scope with the Auditor but prohibited the Auditor from sharing the scope with the Board.

The Board has also been informed by the Investment Manager that neither the Board nor the Auditor will be given access to the consultant's final report. Instead, the Investment Manager has proposed that its own summary of the findings of its consultant's report is presented only to the Auditor, again prohibiting the Auditor from sharing that information with the Board. Prohibiting the Auditor from sharing information with the Board is inappropriate because the Auditor would then be asked to rely on information for which the Board is not able to take responsibility.

Having recently been made aware that the Investment Manager's Chief People Officer was present throughout the consultant's interview of at least one employee of the Investment Manager, the Board is concerned about the independence of the investigation being undertaken on behalf of the Investment Manager.

-- Separately, for the purposes of corporate governance and independently of the investigation referred to above and with a view to establishing the key facts regarding what happened with the RUMS Project, the Board has sent the Investment Manager a list of critical questions for it to answer. These questions were first sent to the Investment Manager on 19 June 2023, with follow-up emails sent on 27 June and 13 July 2023 and, to date, the Board has not received any meaningful answers to them.

In short, some three months since the Suspension, the Board still does not have the full picture of what happened with the RUMS Project and, in particular, has no information regarding who at the Investment Manager knew what and when in relation to the economic viability of the project and why material matters were not brought to the Board's attention until April 2023.

The Board is disappointed with the approach taken by the Investment Manager and has been left with no alternative but to discuss an alternative plan for securing the information required to enable the Financial Statements, Annual Report and 2022 Audit to be completed. Accordingly, the Board has agreed with the Auditor that additional audit evidence will be required to finalise the Annual Report and 2022 Audit, including financial, tax and, potentially, other due diligence reports on the Company's investments. This is necessary, in the absence of the ability to rely on the representations of the Investment Manager, to ensure the completeness and accuracy of all information required to prepare the valuations and finalise the Annual Report. The Board is in the process of having discussions on the scope, costs and timelines for this work. Inevitably, this will result in further costs and delays in finalising the Financial Statements, Annual Report and 2022 Audit.

Continuing uncertainty over the Company's financial position

As notified in the announcements on 24 April, 6 June and 12 July 2023, and for the reasons set out below and elsewhere in this announcement, there remains considerable uncertainty over the valuation of the Company's investments.

In May 2023, the Board appointed PricewaterhouseCoopers LLP ("PwC") to assist the Company's AIFM and the Board with the finalisation of the valuation of the Company's portfolio as at 31 December 2022. As announced on 12 July 2023, the Board has received a draft report from PwC on the valuation of the Company's assets. Based on the issues being considered, the Board believes that the portfolio valuation as at 31 December 2022 could reflect a material downward movement relative to the 30 September 2022 valuation and to the draft valuations as at 31 December 2022 provided to the Board in February 2023.

Shareholders should also note that the 31 December 2022 valuations will also reflect: (i) a leading independent power consultancy's price forecasts for the Philippines wholesale electricity spot market price, which was commissioned by the Board in December 2022 and were below the forecasts previously used by the Investment Manager; and (ii) amendments to the Investment Manager's valuation models following an external audit of them commissioned by the Board in January 2023.

The Board is currently considering several matters, which are wider ranging and more concerning than just the macro-economic factors which have driven valuation revisions across the infrastructure sector, including whether revenue, operating cost and tax projections were unrealistically optimistic.

In addition to the above and, as previously announced, US$8.2 million of costs are expected to be written off if the RUMS Project does not proceed and a further reduction in the fair value as at 31 December 2022 is expected to be required due to the contingent liability risk associated with non-completion penalties for the project and legal costs which are estimated to be up to US$33.5 million on the basis that the project would not have gone ahead at that date.

The price of solar modules has fallen in recent weeks and the Investment Manager has determined that there are circumstances where it could now be in shareholders' interests to proceed with construction and is currently assessing this option with the Board. If the RUMS Project does proceed, which the Board expects would be subject to prior FCA and Shareholder approval for a material change to the country limit in the Company's investment policy, the project would still be expected to have a material negative net present value at the current time.

In short, therefore, the Company's financial position is hard to ascertain based on the information currently available but is likely to show a material downward adjustment in the Company's NAV as at 31 December 2022 relative to 30 September 2022. In such circumstances, the Board cannot recommend voting in favour of the Continuation Resolution.

Lack of a plan from the Investment Manager to assist in the potential relaunch of the Company

As part of the process to prepare the Annual Report, in light of the slow deployment of capital by the Company, changed macro-economic conditions affecting the sector and the issues that have arisen in the management of the Company's assets, the Board had asked for an updated fund model from the Investment Manager to confirm whether the Company's target returns are still realistic and whether changes to the Company's investment strategy or policy in order to achieve acceptable returns for shareholders should be considered. Despite repeated requests for this information, it has not been received by the Board.

The Investment Manager agreed some weeks ago to deliver an investment proposal to assist in the potential relaunch of the Company, addressing matters such as the future investment strategy and policy and realistic target returns, to the Board by the end of July 2023. At the time of this announcement, the Board is still awaiting delivery of this proposal.

The Board does not believe that it would be prudent to vote in favour of the Continuation Resolution where the future direction and prospective financial returns of the Company are unclear.

Conclusion

In summary, the Board has been working tirelessly to provide shareholders with full information on the Company's position, facilitate the completion of the 31 December 2022 valuations and the 2022 Audit and enable trading in the Company's shares to resume. The Board was seeking to work privately with the Investment Manager and present shareholders with a full picture prior to asking them to vote on the Continuation Resolution, but the Board's hand has been forced by the Requisition.

The Board considers that there are serious and currently unanswered questions regarding the valuation of the Company's investments and the approach taken by the Investment Manager. The Board therefore has no alternative but to recommend that shareholders vote against the Continuation Resolution at each of the Meetings.

Impact of the Continuation Resolution not passing

In the event that the Continuation Resolution is not passed, the Board will consult with shareholders with a view to establishing the most appropriate way forward for the Company. Based on feedback from recent shareholder engagement, the Board is aware of the importance of the impact strategy which the Company was established to deliver to many shareholders. Accordingly, proposals to be considered by the Board may include a relaunch of the Company as well as an orderly managed wind-down. However, any proposal to relaunch the Company would be required to offer a compelling investment proposition for both existing and prospective investors and, therefore, enable the Company to scale up its size significantly over time. As required by the Company's articles of association, the Board's proposals regarding the Company's future will be put to shareholders for their approval within four months of the date of the Meetings. In the meantime, the Board will continue to work tirelessly to finalise the Financial Statements, Annual Report and

2022 Audit and get the Suspension lifted.

As announced on 12 July 2023, shareholders should be aware that, if the Continuation Resolution is not passed, the Company will be entitled to terminate its investment management agreement with the Investment Manager summarily at any time and without further payment in respect of the Investment Manager's initial five-year term of appointment. In the circumstances, the Board believes that it is in the interests of shareholders to have that option to terminate.

Further information regarding the Suspension

Trading in the Company's shares was suspended on 25 April 2023 on the basis that the Company was not at that time able to assess accurately its financial position.

As a result of the issues arising in relation to the RUMS Project and broader issues described in this announcement, the Company was also unable to meet the deadline of 30 April 2023 required by the FCA for the publication of the Annual Report, which would have resulted in a suspension of listing and trading of the Company's shares in any event.

Based on the Company's recent engagement with shareholders it seems that some shareholders are under the impression that the Company's listing will be cancelled automatically by the FCA if the Suspension lasts for more than six months. This is not the case. The FCA has the right to cancel the Company's listing after this deadline, but in practice is unlikely to do so while the Company continues to take active steps towards the publication of the Annual Report.

As set out above, the Board and its advisers continue to take all possible steps to ensure that the Financial Statements, Annual Report and 2022 Audit can be completed, the Annual Report published, and the Suspension lifted as soon as practicable. It should also be noted that a vote against the Continuation Resolution will not prevent or further delay the finalisation of the Financial Statements, Annual Report and 2022 Audit or the lifting of the Suspension.

ARRANGEMENTS FOR THE REQUISITIONED GENERAL MEETING AND THE ADJOURNED ANNUAL General Meeting

The Meetings will be held on Thursday, 24 August 2023 at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M 7SH. The Requisitioned General Meeting will commence at 10.00 a.m. and will be followed by the Adjourned Annual General Meeting.

The Meetings will be held in person. If you decide not to attend the Meetings in person, it is important that you do still cast your votes in respect of the business of the Meetings and you can do so by voting by proxy in accordance with the instructions set out in the Circular under the heading "Action to be taken in respect of the Meetings".

The results of each Meeting will be announced through a Regulatory Information Service and on the Company's website, www.tlenergyimpact.com , as soon as possible once known.

Resolutions to be proposed at the MEETINGS

As explained above, the resolutions to be proposed at the Requisitioned General Meeting and the Adjourned Annual General Meeting are necessarily exactly the same (save for the numbering of the resolutions).

The full text of the resolutions is set out in both the Notice of Requisitioned General Meeting and the Notice of Adjourned Annual General Meeting set out at the end of the Circular. The resolutions are being proposed as ordinary and special resolutions as set out below. An ordinary resolution requires more than 50 per cent. of the votes cast to be in favour in order for the resolution to be passed. A special resolution requires at least 75 per cent. of the votes cast to be in favour in order for the resolution to be passed.

Ordinary resolution 1 at the Requisitioned General Meeting (being the same as ordinary resolution 5 at the Adjourned Annual General Meeting)

This is the Continuation Resolution which has been explained in detail elsewhere in this announcement.

Special resolution 2 at the Requisitioned General Meeting (being the same as special resolution 6 at the Adjourned Annual General Meeting)

The Company's existing power to buy back its own shares through the market will lapse at the conclusion of the Adjourned Annual General Meeting. This resolution seeks authority for the Company to make market purchases of its own ordinary shares. If passed, the resolution gives authority for the Company to purchase up to 26,335,137 of its ordinary shares, representing 14.99 per cent. of the Company's issued ordinary share capital as at the date of this announcement. The Company currently has no treasury shares. Shareholders should note that as this resolution is the same at each Meeting, the resolution(s), if passed, will only give authority to purchase up to 26,335,137 ordinary shares and not any higher or aggregated number of ordinary shares.

The resolution specifies the minimum and maximum prices which may be paid for any ordinary shares purchased under this authority. The authority will expire at the conclusion of the Company's next annual general meeting to be held in 2024.

The Directors believe that the ability to buy-back shares is an important capital management tool and that, from time to time and subject to market conditions, it may be in shareholders' best interests to buy back the Company's shares. The Company would only buy back shares when they are trading at a discount to the net asset value per share.

The Company may either cancel any shares it purchases under this authority or transfer them into treasury (and subsequently sell or transfer them out of treasury or cancel them). The Company does not have any options or outstanding share warrants.

Special resolution 3 at the Requisitioned General Meeting (being the same as special resolution 7 at the Adjourned Annual General Meeting)

The Companies Act 2006 stipulates that the notice period for general meetings (other than annual general meetings) is 21 days unless shareholders' approval to reduce the notice period has been given. This resolution would allow the Company to hold general meetings (other than annual general meetings) on at least 14 clear days' notice.

If approved, the resolution will be effective until the end of the Company's next annual general meeting to be held in 2024. The Board will consider, on a case-by-case basis, whether the use of the flexibility offered by the shorter notice period is merited, taking into account the circumstances, including whether the business of the meeting is time sensitive.

Recommendation

For the reasons set out above, the Directors unanimously recommend shareholders vote against resolution 1 to be proposed at the Requisitioned General Meeting and against resolution 5 to be proposed at the Adjourned Annual General Meeting. The Directors intend to vote against both of those resolutions in respect of their holdings of ordinary shares, amounting to 131,000 ordinary shares in aggregate (representing approximately 0.07 per cent. of the issued share capital of the Company as at the date of this announcement).

The Directors unanimously recommend shareholders vote for resolutions 2 and 3 to be proposed at the Requisitioned General Meeting and for resolutions 6 and 7 to be proposed at the Adjourned Annual General Meeting for the reasons set out above. The Directors intend to vote for all of those resolutions in respect of their holdings of ordinary shares.

Sue Inglis, Chair of ThomasLloyd Energy Impact Trust plc, said: "The Board is extremely disappointed that the Investment Manager has failed to explain who knew what and when about the economic unviability of the RUMS Project. The Investment Manager's approach is forcing us to commission due diligence reports to ensure we have complete and reliable information on the Company's investments, further delaying publication of the Annual Report and lifting the Suspension. Combined with the significant loss arising from the RUMS Project, an expected material downward adjustment to the valuation of other investments, and the lack of a forward-looking plan from the Investment Manager, this leaves us with no option but to recommend voting against continuation."

Enquiries:

 
ThomasLloyd Energy Impact Trust plc                                 Tel: +4 4 (0)20 3757 1892 
 Sue Inglis, Chair 
Shore Capital (Joint Corporate Broker)                               Tel: +44 (0)20 7408 4050 
 Robert Finlay / Rose Ramsden (Corporate) 
 Adam Gill / Matthew Kinkead / William Sanderson (Sales) 
 Fiona Conroy (Corporate Broking) 
Peel Hunt LLP (Joint Corporate Broker)                               Tel: +44 (0)20 7418 8900 
 Luke Simpson / Huw Jeremy (Investment Banking Division) 
 Alex Howe / Richard Harris / Michael Bateman / Ed Welsby (Sales) 
Smith Square Partners LLP                                            Tel: +44 (0)20 3696 7260 
 (Financial Adviser to the Company) 
 Ben Mingay / John Craven 
 
Camarco (PR Adviser)                                                 Tel: +44 (0)20 3757 4982 
 Louise Dolan / Eddie Livingstone-Learmonth / Phoebe Pugh           thomaslloyd@camarco.co.uk 
 

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July 31, 2023 02:00 ET (06:00 GMT)