The board of ThomasLloyd Energy Impact Trust (TLEI ) has issued a stinging rebuke to ThomasLloyd Global Asset Management, its fund manager, and urged investors to vote against the continuation of the Foreign Office-backed investment company less than two years after its launch.

In a stock market statement summoning shareholders to a vote on the company’s future on 24 August, chair Sue Inglis (pictured below) made it clear that the board had lost confidence in ThomasLloyd over the financial problems at its ‘RUMS’ solar park construction project in India that led to the suspension of shares in the government-backed fund in April.

Cost overruns at the Rewa Ultra Mega Solar Park, in which 8% of the £138m portfolio was invested, have made the project economically unviable with the fund’s liabilities to non-completion penalties potentially ballooning to $33.5m from an initial estimate of $5m.

‘The board is extremely disappointed that the investment manager has failed to explain who knew what and when about the economic unviability of the RUMS Project,’ Inglis said. ‘The investment manager’s approach is forcing us to commission due diligence reports to ensure we have complete and reliable information on the company’s investments, further delaying publication of the annual report and lifting the suspension.

‘Combined with the significant loss arising from the RUMS Project, an expected material downward adjustment to the valuation of other investments, and the lack of a forward-looking plan from the investment manager, this leaves us with no option but to recommend voting against continuation,’ Inglis concluded. 

Inglis said the manager’s failure to provide ‘meaningful answers’ to its questions regarding the RUMS project on three occasions had delayed the publication of its 2022 annual report with the result its shares continued to be suspended, preventing investors from selling out.

The UK government is the trust’s largest shareholder after the Foreign Office became a cornerstone investor at its December 2021 launch, owning an 18% stake.

The chair said it was impossible to make a fair valuation when the board still does not understand who knew the RUMS project was economically unviable, why it took until 17 April to be informed and why non-completion liabilities had soared.

ThomasLloyd has appointed an investment operations and risk advisory services firm to investigate but had refused the board’s approval or input and was preventing the auditor Deloitte from sharing its findings as well. Neither Deloitte nor the board will see the final report, Inglis said. 

She also flagged concerns over the independence of ThomasLloyd’s investigation, highlighting that the fund manager’s chief people officer was present throughout the consultant’s interview of at least one employee.

No one was available to comment at ThomasLloyd, the Zurich-based impact fund manager, which faces immediate dismissal by the board without further payent if the continuation vote fails.

Earlier this month ThomasLloyd sought to use its 15% stake in TLEI to demand the continuation vote take place before the publication of the annual results, a move the board resisted.

Inglis held out a possibility the fund could be relaunched with a different fund manager, having received feedback that some investors liked its global inpact approach.

‘Today’s RNS statement raises serious governance issues by the investment manager and its apparent lack of cooperation with the board will reasonably raise further concerns in relation to the risk of any other underlying issues at the fund. Shares were first suspended on 25 April 2023 but the ongoing issues with TLEI look likely to continue,’ said Liberum analyst Joe Pepper.