Performance of REDSIDE funds in February 2023

Monthly reporting of REDSIDE funds for the period 2/2023

NOVA Real Estate

In February 2023, the appreciation of the NOVA Real Estate fund reached a value of 0.46%.

During February, the reconstruction of the new retail unit in the Panorama building was completed, where the company Pojistovna VZP is moving from the premises in the mezzanine. This allowed us to rent a unit that has its advantages due to its visibility, but the entrance from the tram stop together with a short landing had to be completed.

In the area of the prices of the energy we purchase, we see a positive development during the first quarter, which correlates with our expectations and the set strategy in the form of contracts at spot prices.

During Q1'23, rent indexation took place according to lease agreements, with the overwhelming majority of tenants accepting the indexation. Through the real estate portfolio, there should be an automatic increase in income, built into the contracts, which balances any fluctuation in the amount of market yields with the follow-up to the portfolio valuation.

Report NOVA Real Estate

NOVA Green Energy Sub-Fund 1

In the Krnča biomass heating plant, Subfund 1 continuously takes steps for the purpose of financial and operational optimization. The Slovak decree set the ceiling of purchase prices for electricity from biomass for the year 2023 at 232 EUR/MWh, which fortunately did not give another negative signal to the sector. We believe that, in the long term, the price ratios of wood chips and electricity will level out and these types of heating plants will continue to be profitable. Although the issued government measure did not thwart the production of electricity from biomass, the current market setting of wood chip and electricity prices currently offers the possibility of only partial coverage of input prices, and Subfund 1 is therefore considering various options for the continued operation of the heating plant this year, including temporary shutdown/conservation.

The projects of two biomass heating plants, whose secured claims are also the assets of Subfund 1, face similar price-operational problems as the Krnča heating plant. However, here as well as the current management, we believe in the long-term perspective of the heating plants. A motion for a payment order was filed in Austria in the matter of the recovery of receivables from the title of these two heating plants, the matter will be further resolved in the local courts.

In accordance with the purpose and announced intentions of the Side pocket project, in February the ownership share of FVE Barcs, which operates a 15 MW photovoltaic power plant, was transferred to Subfund 2, in exchange for the issue of investment shares in NOVA Green Energy – Subfund 2. After the settlement of the transaction, Subfund 1, except of the above-mentioned assets forming a side pocket, will also own investment shares of Subfund 2, which operates promising photovoltaic power plants, worth almost EUR 55 million.

The appreciation of Sub-Fund 1 in February 2023 was 0.39% and for 2023 it reached 0.79% YTD.

With effect from 1 August 2022, Sub-fund 1 does not formally plan, with regard to the gradual termination of activity, further investments in new resources. On the other hand, it focuses on the management and optimization of assets falling into the "Side Pocket", with the aim of eliminating all risks and transferring these assets to Subfund 2. We have published detailed information in the form of questions and answers regarding the fund distribution project on the website of Subfund 1 in the section "FAQ - "Side pocket".

Report NOVA Green Energy subfund 1

NOVA Green Energy Sub-Fund 2

Also in February, work continued on the development of several PV plants, especially in the Czech and Slovak Republics. We received studies for 12 roof installations on the roofs of buildings owned by sister fund NOVA Real Estate. These studies show that these 12 roofs could be equipped with photovoltaic power plants with an output of up to 3 MWp. For investment in these PV plants, we are considering investment subsidy support from a subsidy program of the MFŽP or MPO. The rest of the applications for the connection of factories to the distribution network are being submitted, discussions are currently underway with tenants about the buyout, or sale of electricity at the place of production/installation of PV plants. In the pilot project of the Orlice rooftop PV plant, we signed a contract for the construction of a PV plant for 2 collection points and handed over the construction site.

In Slovakia, an implementing decree was approved, which set purchase price ceilings for photovoltaic sources as well. This windfall tax will not have any impact for PV plants that have contracted purchase prices and meet several other conditions, i.e. for all PV plants owned by Subfund 2 in Slovakia. Due to the wear and tear of the inverters at some PV plants in Slovakia and the impossibility of further repairing them, we are preparing for the gradual start of repowering consisting in the replacement of the inverters themselves. Due to the specific technical parameters at several Slovak PV plants, together with the replacement of the inverters, it is also necessary to replace the transformers and some other devices and cabling. However, even so, the replacement should only last for a few days, and a major impact on the production of electricity from these PV plants cannot be assumed. Exchanges of inverters are typical for PV plants (it is one of the few components that must be replaced during the lifetime of the PV plant) and were assumed in the financial plans, these exchanges also take place roughly according to earlier time estimates.

Report NOVA Green Energy subfund 2