TIDMH2O
RNS Number : 0762S
Aqua Resources Fund Limited
15 November 2011
15 November 2011
Aqua Resources Fund Limited - Interim Management Statement
Aqua Resources Fund Limited ("Aqua" or the "Company"), the
Authorised closed-ended investment scheme managed by FourWinds
Capital Management ("FWCM" or the "Manager") established to invest
in global water opportunities, today issues its Interim Management
Statement for the period from 30 June 2011 to 14 November 2011 (the
"Period").
Financial position and performance
The Company manages a diversified portfolio of water-related
investments. The latest published unaudited net asset value ("NAV")
per ordinary share of the Company ("Ordinary Share") at 30June 2011
was EUR1.0321, corresponding to a NAV of EUR74.8 million at the
Company level.
As at 30 September 2011, Aqua's estimated unaudited NAV per
Ordinary Share was EUR1.0310, down by 11 basis points from the 30
June 2011 published unaudited NAV per Ordinary Share. This decrease
resulted from:
- operating expenses (including management fee);
- a decrease of approximately 49% in the share price of one of
Aqua's portfolio companies, China Hydroelectric Corporation
("CHC"), impacting the NAV by approximately 2.89%; and
- positive currency movements, which impacted the NAV by approximately 3.54%.
For the purposes of calculating the estimated unaudited NAV, the
Company has not re-valued its investments since 31 December 2010.
As a consequence, during the year, the NAV has only been subject to
the effects of changes in operating expenses, foreign exchange
rates and fluctuations in the CHC stock price. Furthermore, as a
consequence of its follow-on investments in Ranhill Water
Technology (Cayman) Limited ("RWT") made in January and February
2011, as at 30 June 2011 the Company booked an unrealised gain
based upon the discounted purchase price of the new subscriptions
in RWT versus the fair value of RWT(1) .
At 11 November 2011, Aqua's share price closed at EUR0.3775.
30 September2011 30 June2011 % change
(EUR) (EUR)
----------------------------------------------------------- ----------------- ------------- ---------
NAV per Ordinary Share 1.0310 1.0321 -0.11%
(unaudited) (unaudited)
----------------------------------------------------------- ----------------- ------------- ---------
Closing middle market share price (London Stock Exchange) EUR0.42 EUR0.4425 -4.5%
----------------------------------------------------------- ----------------- ------------- ---------
At 30 September 2011, the Company had invested approximately
94%, and committed approximately 96.3%, of its net assets. The
balance is held in cash, with no gearing. (1) Aqua Resources Fund
Limited half-yearly management report and unaudited condensed
interim consolidated statements for the six months ended 30 June
2011.
Material events during the Period
Update on China Hydroelectric Corporation
Aqua owns 1,980,537 American Depositary Shares ("ADS") of CHC.
On 10 November 2011, CHC announced its unaudited consolidated
earnings for the three months ended 30 September 2011. Revenue for
the period wasUS$16.3 million, with EBITDA of US$10.3 million,
which represented a decrease of 11% and 17% respectively against
the corresponding period in 2010 due to below average hydrological
conditions and lower effective tariffs. These factors were
partially offset by incremental revenue during the period from
projects acquired after 30 Sep 2010. Gross profit decreased by 37%
to US$7.6 million with gross margins also decreasing to 46%.
During that period, CHC sold 415.1 million Kilowatt hour
("kWh"), a decrease of 5% from the corresponding period in 2010.
This was attributable to a 51.9 million kWh contribution from
projects acquired since 30 September 2010, offset by a 73.4 million
kWh, or 18% decline, in power sold by existing projects. The
effective tariff for that period decreased by 10% to RMB0.27 per
kWh compared with RMB0.30 per kWh in the corresponding period in
2010due to higher revenue contributions from projects located in
Yunnan province where tariffs are lower than those in the Fujian
and Zhejiang provinces. Tariffs vary at CHC's individual projects,
which causes effective tariffs, which are a consolidated figure, to
vary based on different revenue contribution mixes. Installed
capacity increased year-on-year to 563.8Mega Watt ("MW") from 493.4
MW in the third quarter ended 30 September 2010but remains
unchanged quarter-on-quarter.
On 22 August 2011, CHC placed 2.9million new ADS with Vicis
Capital Master Fund ("Vicis") for US$3.45 per ADS, thereby funding
CHC with an aggregate amount of US$10 million. This issuance
represented 5.4% of the company on a post-placement basis. 1 ADS is
equivalent to 3 ordinary shares of CHC. Vicis is the second largest
shareholder in the company with a post-placement stake of 24%.
CHC also amended an existing warrant held by Vicis to buy an
outstanding 10million ordinary shares (or 3.33million ADS) by (i)
reducing the exercise price on the balance of the warrant from US$5
per ordinary share to US$1.15 per ordinary share, or US$3.45 per
ADS; and by (ii) extending the expiration date of the warrant from
10 November 2011 to 31 December2013.
CHC's share price traded in a range of US$4.19 (1 July 2011) and
US$1.46(10 November 2011) during the Period. CHC share price closed
at US$1.51on 11November 2011.
The Manager continues to believe that CHC represents a unique
growth opportunity given the Chinese power supply shortage issues,
coupled with the Chinese government's continued support to move
towards renewable energy resources as per the 12(th) Five-Year plan
released in January 2011.
Investment update
Aqua has built a strong and diversified water portfolio by way
of investments involving the supply, use and treatment of what is
an increasingly scarce, and absolutely essential, resource. It
continues to actively manage its portfolio of investee companies,
which at 30 September 2011 accounted for 94% of its net assets
(with a further 2.3% of net assets committed to current
investments).
Aqua has built its portfolio through providing growth capital to
operators of projects in water and wastewater as well as
hydroelectricity, and to equipment and innovation providers whose
products and services seek to ensure that the broader water
industry increases its efficiency and provides end-users, whether
individuals or industrials, with cleaner and better quality water
without dramatic increases in cost. By investing across this water
value chain, Aqua has been able to diversify the risk across a very
broad range of industries and geographies whilst maintaining a
fundamental link to the core driver behind its investments.
As at 14 November2011, the Company held investments in a total
of five companies with operations in the United Kingdom,
Continental Europe, China, Thailand, South Korea, Malaysia, North
Africa, South Africa and the Middle East, as well as in the United
States and Mexico, providing an attractive underlying geographic
diversification.
At 14 November 2011, the Company held the following
investments:
China Hydroelectric Corporation
CHC is a growing owner, operator and consolidator of small
hydroelectric power projects in the People's Republic of China
("PRC"), and is the largest independent small electric power
producer. Installed capacity has grown from 58 MW in 2007to 563.8
MW as at 30 June 2011. CHC operates 26 generating stations
throughout four provinces in the PRC (Yunnan, Sichuan, Zhejiang and
Fujian). CHC was founded in 2006 and its headquarters are in
Beijing. As at 30 June 2011, CHC had a market capitalisation of
approximately US$208 million. The Company owns approximately 3.7%
of CHC's ordinary shares. At 31December 2010, CHC represented 13.4%
of NAV.
Ranhill Water Technology (Cayman) Limited
RWT is the international joint venture established in March 2009
by the Company and the Ranhill Group to invest in water and
wastewater operations in the PRC and Thailand. RWT owns and
operates five water and wastewater concessions in the PRC. Amongst
them are the Yichun potable water treatment plant and the Xiao Lan
waste water treatment plant, both located in the fast growing
Jiangxi Province. Furthermore, RWT currently owns and operates two
plants on a long-term contract basis in Thailand. The Company owns
45.2% of RWT. At 31December 2010, RWT represented 29.1% of NAV.
Waterleau GroupN.V.("Waterleau")
Waterleau is a privately held global environmental technology,
solutions and services company. It provides a wide range of water,
wastewater and solid waste and air treatment solutions for both
industrial and municipal clients. Waterleau applies these
technologies to purify wastewater and produce renewable energy from
wastewater and bio-waste. Incorporated in 2000, Waterleau had a
turnover in excess of EUR60 million in 2010, with over 10% EBITDA
margin. It has been profitable for five consecutive years and has
been growing at double digit rates since inception. It currently
employs approximately 250 people across offices in Belgium, France,
Morocco, Egypt, India, China, Turkey and Brazil. At 31December
2010, Waterleau represented 28.2% of NAV.
Bluewater Bio International
BBI is a privately held technology provider which has a
proprietary technology called HYBACS (Hybrid Bacillus Activated
Sludge) process. HYBACS is increasingly regarded by a growing
number of companies both in Europe and in the Middle East to be
commercially superior to many existing treatment processes
worldwide, across a wide range of treatment requirements. BBI
provides a cost effective, advanced biological solution for the
treatment of wastewater. BBI is involved at all stages of the
process from plant design and cost through to installation,
commissioning, employee training and on-going operation and
maintenance. The Company owns approximately 17% of BBI and holds
some senior secured debt. At 31December 2010, BBI represented 14.5%
of NAV.
In-Pipe Technology, Inc. ("In-Pipe")
In-Pipe is a privately held technology provider which has a
patented biological process that treats wastewater upstream within
the underground sewer system. It presents an innovative alternative
to traditional solutions which treat wastewater upon arrival at the
treatment plant, leading to substantial cost savings by means of
reduction of aeration energy required, sludge output and
infrastructure corrosion. In-Pipe operates in the United States,
Mexico, Canada and Spain. The Company owns 26% of In-Pipe on a
fully diluted basis. At 31December 2010, In-Pipe represented 4.9%
of NAV.
Further enquiries
FourWinds Capital Management, Investment Manager
Kimberly Tara, Chief Executive Officer
Valerie Daoud Henderson, Head of Europe Environment Group
Jui Kian Lim, Head of Asia Environment Group
info@fourwindscm.com
Cenkos Securities plc, Corporate Broker
Will Rogers +44 (0)20 7397 1920
Dion Di Miceli +44 (0)20 7397 1921
HSBC Securities Services (Guernsey) Limited, Administrator
Tel: +44 (0) 1481 707 000
CitigateDeweRogerson, PR Advisor
Kevin Smith / Lindsay Noton +44 207 638 9571
Important information
This Interim Management Statement has been produced solely to
provide additional information to shareholders of the Company to
meet the relevant requirements of the U.K. Listing Authority's
Disclosure and Transparency Rules. It should not be relied upon by
any other party for any other purpose. The information in this
statement has not been audited except as indicated.
The information related to the Company included in this
statement is provided for information purposes only and does not
constitute an invitation or offer to subscribe for or purchase
shares in the Company. This material is not intended to provide a
sufficient basis on which to make an investment decision. All
investments are subject to risk. An investment in the Company
should be regarded as long term in nature and is suitable only for
sophisticated investors, investment professionals, high net worth
individuals, unincorporated associations and partnerships and
trustees of high value trusts, in each case, who can bear the
economic risk of a substantial or entire loss of their investment.
Prospective investors are advised to seek expert legal, financial,
tax and other professional advice before making any investment
decisions.
The Company is a Guernsey domiciled Authorised Closed-ended
investment scheme pursuant to section 8 of the Protection of
Investors (Bailiwick of Guernsey) Law 1987, as amended and rule
6.02 of the Authorised closed-ended Investment Schemes Rules
2008.
Fundamentals
Listing date: 24 July 2008
Ordinary shares outstanding: 72,464,340
Latest audited NAV per Ordinary Share (31 December 2010):
EUR1.1252
Latest estimated unaudited NAV per Ordinary Share (30 September
2011): EUR1.0310
Number of investments/continents: 5/3
Total invested and committed (30 September 2011): 94% and 96.3%
of net assets
Investment objective
The Company's investment objective is to provide long term
capital appreciation through exposure to a diversified portfolio of
water-related investments.
The Company will invest principally in businesses that are
involved in (i) Water Treatment and Recycling (i.e. waste-water and
recycling, water treatment and purification);(ii) Water
Infrastructure ( i.e. water distribution);and (iii) Water
Application and Conversion (water- to- energy and desalination)
with the objective of capturing the growth opportunities emerging
from the attractive long-term tailwinds driving the water
industry.
End.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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