TIDMTRIG
Renewables Infrastructure Grp (The)
02 April 2019
The Renewables Infrastructure Group: New research
02/04/19
-- The trust seeks to provide investors with long-term, stable
dividends whilst preserving the capital value of its investment
portfolio...
Read more
The Renewables Infrastructure Group (TRIG) differentiates itself
from its competitors in the listed renewable infrastructure
universe in that it aims to provide a diversified exposure to
renewable energy assets.
TRIG owns different technologies (wind, solar, battery storage)
across several countries (UK, Republic of Ireland, France, Sweden).
As a whole, these assets offer long-term cashflows, elements of
which are linked to inflation. As has proved to be the case during
2018, the diversification benefits of having a broad portfolio -
smoothing cashflows and reducing risks to specific factors - have
started to prove themselves.
TRIG is a c.GBP1.5bn Guernsey-domiciled company, listed on the
LSE and a member of the FTSE 250. It has investments in 63 assets
in four different regulatory zones, with an aggregate capacity of
1,323MW - enough electricity for the equivalent of around 700,000
UK homes, or 0.6% of the electricity generated in the UK. We
understand that this is equivalent to around 550,000 tons of CO(2)
saved per year.
Currently the company has the majority of its exposure to wind
farms, which represents 85% of the portfolio by value when fully
built out. Of this, c.5% is invested in wind farms located offshore
which the company is now seeking a mandate to increase exposure
past the existing 20% limit. At launch, solar made up only 10% of
the company's assets, but now constitutes 14%.
Over 2018 TRIG increased its geographic diversification with
investments in the Republic of Ireland, France and Sweden. In
January 2017, 17% of TRIG portfolio was invested outside the UK.
This had increased to 38% by March 2019. Investing in more assets
outside the UK has the benefit of contributing towards the
company's diversification of weather systems, regulations and
electricity markets, whilst offering mitigation against localised
risks.
TRIG's dividend has increased each year from launch at an
average compound annual rate of 1.8% pa. Each year the board set 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 at the current price of 5.6% and representing
an increase of 2.2% from 2018.
In NAV total return terms, the company has performed in-line
with the peer group, but is outperforming the FTSE All Share index
on a total return basis since launch, with considerably less
volatility. Since its initial public offer (to 31(st) December
2018), the company has delivered NAV total returns of 7.8% per
annum. This figure doesn't include the uplift to NAV from the
recent extension of the assumed life of the wind farm assets. In
share price terms it has performed better.
The company currently has long-term gearing of approximately 33%
of portfolio enterprise value, all of which is all held at the
project level. The company does sometimes have additional
short-term borrowings at the fund level under its Revolving
Acquisition Facility (RAF), currently GBP222m drawn. TRIG's
fund-raising to repay the RAF is in progress which, along with the
proceeds from a refinancing of some project investments is intended
to repay the RAF. Assuming this is successful, overall gearing is
estimated to be c. 35% of portfolio enterprise value, which 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.
TRIG has two managers who work together to achieve the company's
aims: InfraRed Capital Partners, which is responsible for the
financial management, sourcing and executing of new investments;
and Renewable Energy Systems (RES), which has a dedicated team of
more than 40 providing portfolio-level operations management.
The company has enjoyed robust demand for its shares, and
according to data from Numis has traded on an average premium to
NAV over the last year of 4.4%. At the current premium of c 5%, the
shares trade at a discount to the sector average premium of c
9%.
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