118 thousand households

provided with
clean energy

In line with the fund’s strategy of supporting experienced developers in increasing Europe’s renewable energy generation capacity, the fund made a follow-on investment in Silvius Sun, in July 2014. The latter is a project company owned by Solar Access, which has a portfolio of 19 roof-mounted solar projects in Belgium totalling 20.4MWp. Solar Access is a Dutch-based international developer and operator of solar power projects. In 2013, Triodos Renewables Europe Fund made a first investment in Silvius Sun. In line with the planned investment the fund also acquired an equity stake in the portfolio. Through this follow-on transaction Silvius Sun has become a joint venture of Triodos Renewables Europe Fund and Solar Access. At the same time the fund also provided additional mezzanine capital to Silvius Sun to acquire the remaining shares in one of the 19 solar projects in the Silvius Sun portfolio. The acquisition of the remaining shares of one of the projects also included the disposal of the shares in another smaller project. Although the total investment of the fund increased, the portfolio capacity decreased in 2014 from 21 to 20 projects and from 20.4MWp to 19.4MWp. The Silvius Sun project consists of roof-mounted solar pv plants on industrial and agricultural buildings and benefits from the green certificate regime for solar projects in Flanders. The electricity is primarily used by the host companies on whose roofs the plants are installed. The existing portfolio produced approximately 14.9GWh in 2014. The last 4MWp of the portfolio will be grid connected in the first quarter of 2015. This additional capacity will generate sufficient renewable energy to cover the energy demand of 950 homes.

Triodos Renewables Europe Fund is a co-investor in Growind B.V., owner and operator of a 20 turbine wind farm located on the Eemshaven Harbour close to Delfzijl, the Netherlands. In September 2014, Growind agreed a scheme with 2-B Energy, a Dutch wind turbine technology development company, to host and test its latest generation of 6MW offshore wind turbines on the site. Both parties co-invest in the additional 175-metres, two-bladed (rather than the traditional three blades) turbine and will share the benefit of this high yielding technology at the test site. Triodos Renewables Europe Fund is pleased to thus indirectly contribute to innovation in the sector.

The sale (divestment) of the 12MW biomass project was completed in June 2014. The fund had provided a EUR 2 million subordinated debt facility to project Lijnco. The combination of poor technical performance, changes in biomass fuel costs and low wholesale electricity prices required the fund to make a full provision on the project in 2012, so there is no impact on current share price. Whilst investment in biomass-powered projects remains in its scope, the fund will reflect on learning from the former investments and also on the life cycle sustainability, both commercial and environmental before considering further investment into this asset class. With ample opportunities to invest in solar pv and wind projects, the fund will not focus on investing in biomass in the foreseeable future.

Country allocation (% of value of investments), December 31, 2014

Country allocation (% of value of investments), December 31, 2014 (pie chart)

Source: Triodos Investment Management

Sector allocation (% of value of investments), December 31, 2014

Sector allocation (% of value of investments), December 31, 2014 (pie chart)

Source: Triodos Investment Management

The fund’s portfolio of renewable energy assets is geographically diversified across six European countries. In addition to benefiting from exposure to regional wind and solar radiation resources this spreads the fund’s exposure to regulatory risks. A substantial part of the fund’s revenues are derived from regulatory support, the rest being from electricity sales. Whilst the European Union (EU) policies are supportive of the proliferation of renewable energy and the use of regulatory support to achieve this, at a national level support is delivered via a variety of mechanisms. Maintaining exposure to a range of countries mitigates the risk of the fund’s performance being materially impacted by changes in national support mechanisms. In all countries where the fund is invested, with the exception of Spain, the regulatory regimes have been stable.

In June 2014, the Spanish parliament approved the expected new law for the Spanish energy sector, in anticipation of which the fund took provisions in 2013. The fund assessed the impact of the new regulation for the coming three years until 2017. Beyond this, the revised regulations allow for the Spanish government to adjust the tariff subject to certain Spanish market developments. Based on a range of scenarios on how the tariff might develop, the fund considers the provision taken as appropriate.

Solar pv projects, both ground-mounted as well as solar roof systems, account for 55% of the portfolio, and wind 45%. The revenues from investments in solar pv have been the most stable. In 2014, wind supply was lower than average in Northern Europe, which has resulted in lower-than–forecasted revenues from the wind assets. The technical performance across the fund’s wind portfolio has been good with an average technical availability in line with targets. The portfolio no longer includes any investment in biomass technologies which proved to be both technically and commercially challenging. The fund continues to review opportunities to invest in small- to medium-scale hydro power projects, in addition to wind and solar pv.

All in all, the fund’s weighted average portfolio discount rate decreased slightly from 9.5% at the end of 2013 to 8.9% at the end of 2014. This reduction in the discount rate is consistent with the fund’s valuation methodology, which considers the maturity and operational stability of projects, the country risk premium and risk-free rates, and the value of assets in the market.

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