Interim Management Statement
December 17 2009 - 8:55AM
UK Regulatory
TIDMVEN2
RNS Number : 3090E
Ventus 2 VCT PLC
17 December 2009
Ventus 2 VCT plc
17 December 2009
VENTUS 2 VCT PLC
Interim Management Statement
Ventus 2 VCT plc (the 'Company') presents its second interim management
statement for the financial year ending 28 February 2010, as required by the UK
Listing Authority's Disclosure and Transparency Rule 4.3.
The Company published its most recent Half-yearly Financial Report on 28 October
2009. This interim management statement summarises the information as at the
date of the Half-yearly Financial Report and further developments up to the date
of this statement. The Company also published a regulatory news announcement on
1 December 2009 regarding one of its investee companies, Redimo LFG Limited
("Redimo LFG"). Further information relating to this investment is given in this
statement.
Net Asset Value and Dividends - Ordinary Shares
The Net Asset Value ("NAV") of the ordinary share fund as at 31 August 2009
stood at GBP10.4 million or 92.9 pence per ordinary share.
As a result of the change to the valuation of the holding in Redimo LFG for the
reasons explained below, the NAV of the ordinary share fund as at 30 November
2009 stood at GBP9.4 million or 83.9 pence per ordinary share. There have been
no material changes in the valuations of any other investments in the ordinary
share fund since the date of the last Half-yearly Financial Report.
An interim dividend for the financial year ending 28 February 2010 of 1.50 pence
per ordinary share was declared on 28 October 2009. This will be paid on 13
January 2010 to all ordinary shareholders on the register as at the close of
business on 11 December 2009.
The Company has already announced that it expects to declare a final ordinary
share dividend for the financial year ending 28 February 2010. The proposed
final dividend will be declared when the Company's Annual Report and Accounts
are issued in May. In view of the circumstances regarding Redimo LFG the final
ordinary share dividend will be lower than the final ordinary share dividend
declared in the previous financial year.
The Company's long term objective, which is to pay an annual dividend of between
6 pence and 10 pence per ordinary share once all of its assets are fully
operational, remains in place.
Net Asset Value and Dividends - "C" Shares
The NAV of the "C" share fund as at 30 November 2009 stood at GBP6.4 million or
93.0 pence per "C" share. This is a reduction of 0.7 pence per "C" share since
the date of the last Half-yearly Financial Report.
The Company has not declared or paid any dividends on the "C" shares since their
issue.
Investments - Ordinary Shares
As at 30 November 2009 the Company held investments attributable to the ordinary
share capital valued at GBP8.0 million in a total of 18 companies. For further
details of completed investments relating to the ordinary share capital please
refer to the Investment Manager's Report in the Company's Half-yearly Financial
Report dated 28 October 2009.
Investments - "C" Shares
The Company has made one investment of GBP325,000 from the funds raised under
the "C" share offer. The Investment Manager holds exclusivity agreements in
respect of a series of new projects which it is expected will lead to the
Company investing up to GBP1 million of the "C" share capital. The Investment
Manager is also assessing several other potential investment opportunities.
Redimo LFG Limited
The Company holds an investment in Redimo LFG, made from the ordinary share pool
of capital. The Company has invested GBP1 million into Redimo LFG and has
received dividends to date of GBP175,000. Redimo LFG owns and operates a
portfolio of assets which generate electricity from landfill gas.
Two of the key variables in Redimo LFG's financial performance are the number of
operational hours achieved by the engines at each of its sites (and therefore
the amount of electricity that is generated) and the price at which that
electricity can be sold.
The announcement on 1 December 2009 explained that Redimo LFG has experienced
operational issues with the generating equipment at the largest site in its
portfolio. This led to more engine downtime than had been projected in the
budget at the time the investment was made. Redimo LFG has also experienced gas
volumes at the smallest of the sites within its portfolio declining at a quicker
rate than originally forecast. This is resulting in a reduction in energy
generation at this site. In addition, Redimo LFG is the only operating asset in
the Company's investment portfolio to have a significant element of electricity
market risk in its energy offtake contracts. Winter 2009/10 wholesale energy
prices are much lower than anticipated and this has further contributed to a
shortfall against Redimo LFG's anticipated revenues.
Remedial works have been carried out on the generating equipment at the largest
site to rectify the operational issues. Reports commissioned by the Investment
Manager over recent weeks suggest that the works have had a positive effect on
the level of operational availability. Whilst these indications are encouraging,
it is still too early to draw any firm conclusions for the longer term. Forward
projections for wholesale energy prices in 2010 and beyond remain lower than
originally budgeted and so, notwithstanding the improvement in operating
performance, Redimo LFG is expected to be operating below its budgeted financial
performance for the foreseeable future.
At the time of the original investment in 2008 Redimo LFG entered into a long
term bank loan facility, which is secured on its assets. As a result of the
lower than expected revenues in this financial period Redimo LFG is now in
breach of certain covenants under the loan facility. The Investment Manager is
in discussions with the lending bank to agree the most appropriate way forward.
The ability of Redimo LFG to trade out of its current position is contingent on
maintaining the improved levels of operational performance and also on the level
of future wholesale energy prices. Given the uncertainty on both of these key
elements and given that Redimo LFG is currently in breach of certain covenants
under the loan facility, the Company has determined that at the current time it
is prudent to write down the value of its investment in Redimo LFG to zero.
The valuation of Redimo LFG will be reassessed periodically in line with the
Company's valuation guidelines. The main factors in such a valuation will be
Redimo LFG's ability to demonstrate that the lending covenants can be met, such
that there is a reasonable prospect that it can remedy the existing breaches of
the loan covenants and commence paying dividends to the Company in the future.
Whilst the current financial position is clearly under pressure, Redimo LFG
continues to operate its assets and has not ceased trading.
The difficulties with the investment in Redimo LFG have had a disproportionate
effect in the current financial year on the ability of the Company to pay
dividends. The assets in the Redimo LFG portfolio were already operational when
the Company invested and therefore this holding has been one of the earlier cash
generative investments in the portfolio. As such Redimo LFG made a significant
contribution to the Company's ordinary share dividend distributions in the last
financial year. As other investments in the Company's investment portfolio
become fully operational, it is anticipated that the Company's annual dividends
will be less sensitive to the performance of individual investee companies.
Top Up Offer
On 18 November 2009 the Company launched a joint top up offer with Ventus 3 VCT
plc to raise up to GBP1.0 million per VCT through an issue of new ordinary
shares. The joint offer is now oversubscribed.
Those who have applied under the offer and have been successful will soon
receive a communication regarding the offer price and further details of the
process. As described in the top up offer document, the offer price will be
adjusted to reflect the updated NAV published in this statement. Applicants who
have not been successful will be notified shortly.
Other than described above, the Board is not aware of any events during the
period from 1 September 2009 to the date of this statement which have had a
material impact on the financial position of the Company.
Enquiries should be directed to Steve Read (0207 939 5149) or Matthew Ridley
(0207 939 5350).
Issued on behalf of the Board
The City Partnership UK Limited
Company Secretary
17 December 2009
This information is provided by RNS
The company news service from the London Stock Exchange
END
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