TIDMTRIG
Renewables Infrastructure Grp (The)
11 October 2019
The Renewables Infrastructure Group: New research
11/10/19
Seeks to provide investors with long-term, stable dividends from
an increasingly diversified portfolio of renewable energy
assets...
Read more
The Renewables Infrastructure Group (TRIG) is a play on the
burgeoning renewable energy sector. It differentiates itself from
the other funds in the sector by being a non-specialist fund (wind,
solar and battery storage so far) but with a remit to invest across
the UK and in European countries where the directors and managers
believe there is a stable renewable energy framework. Recently TRIG
has announced a further extension of this policy, and the board is
seeking shareholder approval to increase the proportion of assets
the company can invest in Europe from 50% to 65%.
TRIG invests in assets which offer attractive long-term cash
flows, elements of which are linked to inflation. The aim of the
company is to provide long-term, stable dividends for shareholders,
with any surplus cash flows after debt amortisation being
re-invested to help maintain the capital value of the investment
portfolio. The current portfolio, when fully built out in 2020,
will be represented by 71 projects, with net capacity of 1.5GW.
This is equivalent to 1 million UK homes or 1% of the total
electricity generated in the UK.
Wind is currently the largest component of the portfolio (86% by
value). However in the company's recent announcement the managers
state that to further diversify the portfolio they are considering
investing in unsubsidised solar plants in Iberia, taking advantage
of steeply declining capital costs and high solar resource. Solar
provides a natural complement to wind technologies, given its peak
electricity generation is during the summer months, while for wind
peak generation occurs in the winter.
The push to invest overseas has gathered pace over the last
couple of years, and during the 2018 calendar year 77% of new
investments by value were made outside the UK. For the six months
to end-June 2019, the company has invested in five projects, all of
which are overseas (in Sweden, France and Germany). In total, 45%
of the portfolio is currently invested outside the UK, up from 28%
at the end of 2018.
TRIG has a progressive dividend policy. The company's dividend
has increased each year since launch, at an average compound annual
rate of 1.8% pa. Every year the board sets a dividend target for
the following year, payable in four equal installments. The current
dividend target is 6.64p per share, equivalent to a yield of 5.1%
at the current price and representing an increase of 2.2% from
2018.
The company has delivered strong and consistent returns since
inception. Over the past five years, it has outperformed the FTSE
All Share index on a NAV total return basis, but with lower
volatility. Since its initial public offering (IPO) in 2013 the
company has delivered total shareholder returns of 10.4% per annum
(to 30 June 2019).
TRIG currently has long-term gearing of approximately 36% of
portfolio enterprise value, all of which is all held at the project
level. This is at the low end of the peer group. The longer-term
debt is amortised over the life of each asset's specific subsidy
regime, which de-risks these assets over time (unsubsidised assets
are not geared).
The company continues to enjoy robust demand for its shares.
Currently the share price premium over NAV is around 14%, a slight
premium to the sector average premium of 12.7% (Source: Numis).
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October 11, 2019 09:15 ET (13:15 GMT)
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