(Alliance News) - Riverstone Energy Ltd on Friday said its investment manager has agreed to amend the terms for performance payments.
Energy industry investor Riverstone Energy makes payments to its investment manager, Riverstone International Ltd, based on investment performance. However, under the amended terms Riverstone Energy will only be required to make payments in respect of a realised investment if a portfolio-level cost benchmark is met.
The benchmark is that, at the time of the realisation, the fair market value of Riverstone Energy's unrealised investments plus the proceeds of all its realised investments since inception is higher than the aggregate acquisition price of all its unrealised and realised investments.
Should this portfolio level cost benchmark not be met at the time of realisation then the performance allocation payment is subject to deferment.
Under deferment, the level cost benchmark will be retested on a quarterly basis for the next three years. If it is met for four quarters in a row in that three-year period, then the payment will be made without interest. Any accrued performance allocation not distributed after 36 months will expire.
In addition, the performance allocation is only accrued for payment upon realisation if the proceeds are higher than the acquisition cost plus an 8% annual cumulative hurdle rate. Should the hurdle be met, the amount paid is to be 20% of net profit from the investment, meaning proceeds from each realised investment - deducting the acquisition price of the realised investment.
On top of this, payment will only be calculated and accrued on the full realisation of the entire interest in an investment unless partial realisation results in the full return of all capital invested. No performance allocation is payable on partial disposal.
The investment manager's ability to elect to receive a performance allocation based on an investment that has been held by Riverstone Energy for seven years or more without being sold has been removed.
Furthermore, Riverstone Energy and its investment manager have agreed to distribute 20% of net profit from each fully realised investment to shareholders, either through a dividend or share repurchase.
Amendments are effective as of June 2019 and apply to all current and future Riverstone Energy investments.
Shares in Riverstone Energy were marginally higher at 429.00 pence in London late on Friday morning.
By Anna Farley; annafarley@alliancenews.com
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