TIDMTRIG
RNS Number : 6373Q
Renewables Infrastructure Grp (The)
22 February 2023
22 February 2023
The Renewables Infrastructure Group Limited
"TRIG" or "the Company", a London-listed investment company
advised by InfraRed Capital Partners ("InfraRed") as Investment
Manager and Renewable Energy Systems ("RES") as Operations
Manager
Announcement of 2022 Annual Results
Highlights
For the year ended 31 December 2022
-- Strong earnings and NAV performance:
o Earnings per ordinary share of 21.5p (2021: 10p)
o NAV per ordinary share of 134.6p(1) as at 31 December 2022
(2021: 119.3p)
o Portfolio valuation(2) of GBP3,737m as at 31 December 2022
(2021: GBP2,726m)
-- Healthy operational cash generation:
o 2022 dividend target of 6.84p/share delivered and 2023
dividend target(3) set at 7.18p/share, a 5% increase
o Dividend cover of 1.55x (2021: 1.12x), or 2.6x before the
repayment of project level debt which was GBP174m during the
year
o Strong reinvestment cashflows
o GBP694m of investments made
o A renewed Revolving Credit Facility, extended to GBP750m
-- A diversified, 2.8GW portfolio of renewables assets:
o Portfolio generated 5,376GWh of electricity in the year (2021:
4,125GWh)
o 1.9m tonnes of CO(2) avoided in 2022(4)
o 1.6m homes (equivalent) powered with renewable
electricity(4)
1. The NAV per share as at 31 December 2022 is calculated on the
basis of the 2,483,583,248 Ordinary Shares in issue and to be
issued as at 31 December 2022 due to the Managers' shares in part
payment of the management fee.
2. On an Expanded Basis. Please refer to Section 3.2 of the
Annual Report for an explanation of the Expanded Basis.
3. This is a target only and not a profit forecast. There can be
no assurance that this target will be met.
4. Actual values calculated in accordance with the IFI Approach
to GHG Accounting for Renewable Energy. Calculated based on each
project's generation capacity, pro-rated for TRIG's share of
subordinated debt and equity capital.
Richard Morse, Chairman of TRIG, said:
"This has been an important year in the history of TRIG. The
Company's results have been the strongest in its history since IPO.
This is against a challenging macro-economic backdrop,
demonstrating the inherent quality of the Company's portfolio and
management.
The Company has grown significantly in value, while investing to
increase portfolio diversification and earnings visibility. Our
highly expert Managers, InfraRed and RES, continue to combine to
provide a unique proposition to investors. We also thank our
shareholders for participating in the Company's successful equity
issue in March, despite the challenges thrown up by the then recent
outbreak of war.
As policy makers in the UK and European Union grapple with
rising costs for consumers and governments, TRIG is well placed to
contribute to the decarbonisation, independence and affordability
of Europe's energy supply."
Richard Crawford, Partner, Head of Energy Income Funds, InfraRed
Capital Partners said:
"TRIG has had a very strong financial result for the year, not
only benefitting from high power prices, but also from strong
correlation to inflation, limited cash exposure to interest rate
increases and broad diversification. These characteristics make the
Company's assets highly attractive. With active portfolio and asset
management, InfraRed and RES continue to execute the Company's
differentiated strategy with strong progress made during the year
in the priority areas of solar and flexible capacity.
We have completed the construction of Vannier and Blary Hill
onshore windfarms during the year, with Grönhult onshore wind farm
and the Cadiz solar portfolio now being commissioned. Reinvesting
cashflows generated into construction projects is a key value
driver for the Company and brings vitally needed additional
renewables capacity.
Looking forward, we are pleased to raise the dividend target of
the Company to 7.18p, representing a 5% year on year increase,
reflecting strong expected cashflow generation from the portfolio.
We believe TRIG remains a compelling investment proposition: a
robust business model with two market-leading managers in InfraRed
and RES, sound board oversight, a highly supportive shareholder
base, and all underpinned with favourable sector fundamentals."
Publication of documentation
The below information is an extract from TRIG's 2022 Annual
Report. The Annual Report has been submitted to the National
Storage Mechanism and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism . It can
also be obtained from the Company Secretary or
from the Reports & Publications section of the Company's website, at https://www.trig-ltd.com/ .
Enquiries
InfraRed Capital Partners Limited +44 (0) 20 7484 1800
Richard Crawford
Phil George
Minesh Shah
Mohammed Zaheer
Maitland/AMO +44 (0) 20 7379 5151
Rhys Jones
Charles Withey
Investec Bank Plc +44 (0) 20 7597 4000
Lucy Lewis
Tom Skinner
Denis Flanagan
BNP Paribas +44 (0) 20 7595 9444
Virginia Khoo
Carwyn Evans
The Company
The Renewables Infrastructure Group ("TRIG" or the "Company") is
a leading London-listed renewable energy infrastructure investment
company. The Company seeks to provide shareholders with an
attractive long-term, income-based return with a positive
correlation to inflation by focusing on strong cash generation
across a diversified portfolio of predominantly operating
projects.
TRIG is invested in a portfolio of wind, solar and battery
storage projects across six countries in Europe with aggregate net
generating capacity of over 2.8GW; enough renewable power for 1.9
million homes and to avoid over 2.4 million tonnes of carbon
emissions per annum. TRIG is seeking further suitable investment
opportunities which fit its stated Investment Policy.
Further details can be found on TRIG's website at
www.trig-ltd.com .
Investment Manager
InfraRed Capital Partners is an international infrastructure
investment manager, with more than 180 professionals operating
worldwide from offices in London, New York, Sydney and Seoul. Over
the past 25 years, InfraRed has established itself as a highly
successful developer and custodian of infrastructure assets that
play a vital role in supporting communities. InfraRed manages
US$14bn+ of equity capital(5) for investors around the globe, in
listed and private funds across both income and capital gain
strategies.
A long-term sustainability-led mindset is integral to how
InfraRed operates as it aims to achieve lasting, positive impacts
and deliver on its vision of Creating Better Futures. InfraRed has
been a signatory of the Principles of Responsible Investment since
2011 and has achieved the highest possible PRI rating(6) for its
infrastructure business for seven consecutive assessments, having
secured a 5 star rating for the 2021 period. It is also a member of
the Net Zero Asset Manager's Initiative and is a TCFD
supporter.
InfraRed is part of SLC Management, the institutional
alternatives and traditional asset management business of Sun Life.
InfraRed represents the infrastructure equity arm of SLC
Management, which also incorporates BentallGreenOak, a global real
estate investment management adviser, and Crescent Capital, a
global alternative credit investment asset manager.
www.ircp.com
(5) Data as at Q3 2022. Equity Capital is calculated using a
5-year average FX rate.
(6) Principles for Responsible Investment ("PRI") ratings are
based on following a set of Principles, including incorporating ESG
issues into investment analysis, decision-making processes and
ownership policies. More information is available at
https://www.unpri.org/about-the-pri
Operations Manager
TRIG's Operations Manager is RES (" Renewable Energy Systems"),
the world's largest independent renewable energy company.
RES has been at the forefront of wind energy development for
over 40 years, with the expertise to develop, engineer, construct,
finance and operate projects around the globe. RES has developed or
constructed onshore and offshore wind, solar, energy storage and
transmission projects totalling more than 23GW in capacity. RES
supports over 10GW of operational assets worldwide for a large
client base. Headquartered in Hertfordshire, UK, RES is active in
11 countries and has over 3,000 employees engaged in renewables
globally.
RES is an expert at optimising energy yields, with a strong
focus on safety and sustainability. Further details can be found on
the website at www.res-group.com .
1 Chairman's Statement
Since TRIG's IPO in 2013, the Company has consistently provided
shareholders with sustainable returns from its diversified
portfolio of renewable infrastructure assets. I am delighted to
have joined TRIG as Chairman of the Board and am pleased to report
that we delivered a NAV total return[1] for 2022 of 18.9%.
TRIG's diversified portfolio remains resilient against a
backdrop of higher inflation and interest rates, benefiting from
strong inflation correlation and elevated power prices.
InfraRed, as Investment Manager, and RES, as Operations Manager,
continue to enhance the Company's portfolio both organically
through value enhancement initiatives, including the construction
of 378MW of new generation capacity ([2]) , and also through
acquisitions, with investments made into operating assets during
the year totalling 297MW of generation capacity ([3]) .
The Board remains grateful for the ongoing support of TRIG's
shareholders. The case for investment in renewables has never been
stronger, particularly in the context of the immediate energy
security and affordability challenges, as well as the
decarbonisation agenda. TRIG offers investors access to otherwise
illiquid renewables infrastructure and the opportunity for
participation in the net zero transition. The Company is also very
well supported by Managers who share the Board's commitment to
providing sustainable income and capital growth through investing
in the transition to net zero.
Increases in interest rates during the year and the impact of
the UK mini-budget have led to a sustained period of share prices
trading at discounts to Net Asset Values across real assets
investments companies. Specifically for the energy sub-sector,
governments' interventions have also weighed on investor sentiment.
In this context, TRIG's diverse portfolio, which has been
stress-tested through the pandemic and the more recent energy
crisis, ensures that the Company is strategically well positioned
in 2023 to continue to enhance value for shareholders and
contribute to greater energy security and faster
decarbonisation.
Financial performance
The NAV as at 31 December 2022 was 134.6p per share, an increase
of 15.3p per share in the year. Earnings for 2022 were 21.5p per
share. The material drivers of this strong financial performance in
the year were:
-- The Managers' ongoing delivery of active asset management to
maximise operational performance and additive investments,
providing greater geographic and technological diversification.
-- Increases in wholesale power prices and inflation, which feed
into the Company's revenues and portfolio valuation.
To some extent offset by:
-- An increase in valuation discount rates of 50bps on a
weighted average basis across the portfolio. The long-term,
inflation-correlated and lower risk, sustainable nature of
renewables infrastructure underpins the demand for assets.
-- Intervention by governments across Europe in the electricity
generation sector, in particular the UK Government's Electricity
Generator Levy and the European Council mandated cap on
inframarginal (non-gas) generator revenues, which were announced in
November 2022 and September 2022, respectively.
Over the next ten years, 63% of TRIG's forecast revenues are
directly linked to inflation through subsidy support mechanisms,
with the majority of remaining revenues indirectly linked to
inflation due to the relationship between power prices and
inflation indices, providing strong inflation protection. The
combination of a high degree of fixed revenues, strong inflation
correlation and power price forecasts that fully incorporate
government interventions, serve to reduce the risks arising from a
volatile macro outlook.
The Company has limited interest rate and refinancing risk.
Interest rates on debt across the portfolio investments are
substantially fixed. The Company has no structural short-to-medium
term debt and interest paid on the Group's revolving credit
facility ("RCF") ([4]) is linked to overnight interest rates. At
the time of publication, the RCF is GBP413m drawn, with substantial
headroom compared to its enlarged GBP750m committed capacity, and
matures in December 2025.
Forecast cash flows from the portfolio indicate that the
majority of these drawings can be repaid from re-investment cash
flows over the RCF term.
Dividends
Strong achieved power prices and close-to-budget asset
availability, tempered by below-budget generation, have contributed
to strong dividend cover in 2022. After operating and finance
costs, net cash flow covered the cash dividend 1.5 times[5], or 2.6
times before repayment of project-level debt.
Consistent with our policy of increasing the dividend when it is
considered prudent to do so, I am pleased to report a dividend
target ([6]) for 2023 of 7.18p per share, an increase of 5.0% on
the 2022 total dividend. TRIG has delivered five projects from
reinvested excess cash flows including Arenosas, El Yarte and Blary
Hill in 2022, and continues to fund construction commitments at the
Ranasjö and Salsjö onshore wind farms in Sweden from revenues
generated by the portfolio.
Investment activity
The identification of accretive acquisitions is key to portfolio
construction for TRIG. The Company's investment strategy remains
unchanged, targeting renewables and related infrastructure
investments ([7]) in the UK and mainland Europe ([8]) .
TRIG's largest investment during the period was a 10% stake in
the 1.2GW Hornsea One offshore wind farm in the UK. The Group also
made an incremental investment in the Merkur offshore wind farm in
Germany, a project we are very familiar with having first invested
in 2019. Offshore wind farms have an important role to play in the
portfolio: each of our six offshore wind projects benefits from
protected cash flows for the term of their government support
arrangements, which reduces the sensitivity of their equity returns
to changes in power price levels. These investments help to
facilitate the addition of unsubsidised, higher-returning projects
into the portfolio, such as the March 2022 acquisition of a 49%
stake in the Valdesolar solar park in Spain, whilst maintaining the
portfolio's overall power price sensitivity.
Construction and development assets offer a source of higher
risk-adjusted returns too. We are grateful to shareholders for
their support at the 2022 AGM to increase TRIG's construction and
development investment limit from 15% to 25%. In 2022, TRIG
acquired four development-stage battery storage sites, which will
provide c. 700MWh / 350MW flexible capacity once built. Flexible
capacity, which includes battery storage, is critical to the energy
transition and complements TRIG's renewable generation assets as it
responds, and financially benefits from, the intermittency of
renewables and electricity price volatility. At the period end,
construction and development exposure represented 8% of the total
portfolio.
Portfolio performance
Overall portfolio electricity generation in the year was 5%
below budget due to lower than expected weather resource in some
geographies and downtime resulting from both enhancement activities
and unscheduled maintenance. Further detail is provided in Section
2.3 - Operations Report.
78MW of generation capacity was constructed during the year at
Haut Vannier and Blary Hill onshore wind farms, with Blary Hill in
Scotland fully funded from re-investment proceeds. 301MW of
capacity is currently being commissioned, with Grönhult onshore
wind farm and the Cadiz solar projects well progressed and close to
construction completion; both are in the final commissioning stages
and exporting electricity. A further 471MW of capacity is in
construction or development.
Health and Safety ("H&S") has always been core to operations
across TRIG's portfolio. H&S performance is regularly reviewed
at both the project company level and by the Board across the whole
portfolio, and we continually strive to promote a strong safety
culture.
Sustainability
Sustainability, and the consideration of environmental, social
and governance ("ESG") factors, is central to TRIG's strategy and
InfraRed and RES's investment and asset management ethos, further
details of which can be found in TRIG's annual Sustainability
Report.
The United Nations Climate Change conference (COP27) in November
2022 and the UN Biodiversity Summit (COP15) in December 2022
highlighted the role of infrastructure in arresting and reducing
the impact of adverse climate change and protecting the
environment.
TRIG makes a significant contribution to tackling climate
change. Our current commercially operational portfolio of 2GW is
capable of powering 1.8 million homes and avoiding approximately
2.2 million tonnes of carbon emissions per annum ([9]) . TRIG
committed to the Science Based Targets initiative (SBTi) in 2021,
and has published estimated scope 1, 2 and 3 carbon emissions for
its entire portfolio. We will be setting SBTi targets in line with
this initiative during 2023.
Corporate Governance
In accordance with the Board's succession plan, 2022 saw the
retirement of TRIG's initial three Non-executive Directors: Helen
Mahy, Shelagh Mason and Jon Bridel. On behalf of my fellow
Directors and the Managers, I would like to thank them for their
service to TRIG's shareholders and their many contributions to the
success of the Company over the nine years since IPO. John Whittle
has replaced Jon Bridel as the Chair of the Audit Committee and
Tove Feld has assumed the role of Senior Independent Director.
Erna-Maria Trixl and I joined TRIG's Board of Directors in 2022,
and the Board looks forward to welcoming Selina Sagayam as a
Non-executive Director in March 2023. Selina is a successful
practising lawyer, with a wealth of relevant M&A advisory
experience, and also a distinctive expertise in ESG matters, which
will be very welcome as she joins the Board.
Klaus Hammer will step down from the Board during 2023. He too
has made a significant contribution since joining the Board a year
after IPO, bringing considerable commercial and industry experience
to bear as TRIG has built its portfolio. The Board joins me in
thanking Klaus for all he has done during his tenure as a
Director.
Given the importance of responsible investment practices in the
strategy of the Company and recognising the evolving regulatory
landscape, it is the intention of the Board to form a new committee
focused on ESG / sustainability effective June 2023.
In line with good governance practice, TRIG's Nomination
Committee commissioned an external board evaluation in 2022. The
evaluation noted that TRIG's Board is functioning at a high level
and that the transition to new Directors has been smooth.
Principal Risks and Uncertainties
The Board and the Managers monitor and, where practicable,
mitigate a range of risks to TRIG's strategy. TRIG's principal
risks are:
-- Regulation and taxation: government or regulatory support for
renewables changing adversely, or further intervention by
governments in the electricity generation sector to levy generators
for power prices achieved above threshold levels;
-- Power prices: electricity prices falling or not increasing as expected; and
-- Production performance: portfolio electricity production
falling short of expectations, including as a result of
unfavourable weather or asset unavailability.
These and other risks are considered and expanded on in Section
3.4 - Risks & Risk Management.
Outlook
Recent years have been challenging for many. In addition to the
devastating impact on human lives and livelihoods, the conflict in
Ukraine has underscored the importance of energy security and
affordability.
For the energy sector, this has resulted in an increase in the
attraction of, and competition for, renewables infrastructure
assets, and an increase in power prices and resulting government
intervention. In this context, the Company's business model and
investment portfolio has demonstrated its inherent resilience and
relevance. As governments across Europe look to fiscal policy as a
means to address costs to consumers, we believe that our model has
demonstrated the ability to withstand these changes and still
deliver significant returns for our shareholders.
At 2.8GW ([10]) , capable of generating the equivalent to 1.6%
of the UK's electricity usage, TRIG's diverse portfolio is
significant. Within the portfolio, the Managers continue to enhance
value. The Company is delivering new capacity, with a further
538MW24 generation and flexible capacity currently in construction
and development. As a long-term owner of assets with a supportive
shareholder base, TRIG remains well placed to finance new
renewables capacity - both that which is developed and built by
TRIG as well as the acquisition of operational projects from
developers seeking to recycle capital. Through selective
acquisition activity and a focus on value enhancement, we continue
to seek to provide shareholders with accretive growth.
We remain confident in our business model and the Managers'
ability to deliver sustainable returns to shareholders while
contributing towards a net-zero carbon future.
Richard Morse
Chairman, 21 February 2023
2 Investment Report
Financial highlights
The Company's Net Asset Value as at 31 December 2022 was
134.6p/share (31 December 2021: 119.3p/share) and the Company's
Portfolio Valuation was GBP3,737 million. Earnings for 2022 were
21.5p/share (2021: 10.0p/share). Dividends of 6.84p per share were
declared, giving an increase in NAV per share of 15.3p (2021 NAV
per share increase: 4.0p).
The earnings of 21.5p/share in the year were a result of:
-- Continued delivery of the investment strategy and active portfolio management
-- The high revenues generated in the year as a result of
particularly high wholesale power prices coupled with higher
subsidies as a result of inflation indexation passing through
-- Increases in the portfolio valuation as a result of
expectations for power prices and inflation to continue to be
elevated over the short to medium term compared to expectations
last year
-- The portfolio valuation increase has been offset to some
extent by an increase in the portfolio weighted average discount
rate of 0.5%, recognising the increased levels of government bond
yields. The discount rate applied to UK cash flows were increased
by 0.8%, whilst the equivalent rate applied in Europe was increased
by 0.3%, recognising the increased macro-economic volatility in the
UK in the second half of the year.
Greater detail on these movements can be found in Section 3.1 -
Valuation of the Portfolio.
Net cash flow for 2022 was GBP249m[11] (2021: GBP150m) resulting
in dividend cover for the year of 1.5x before the benefit of scrip
take-up (2021: 1.06x). With the benefit of scrip take-up, dividend
cover for the year was 1.55x (2021: 1.12x). Net cash flows in 2022
benefited from high achieved power prices during the period.
Dividend cover is stated after the repayment of project-level
amortising debt, reflecting the Company's capital structure and
prudent debt management which seeks to repay project debt during
subsidy periods without reliance on merchant receipts. GBP174m
project-level amortising debt was repaid in 2022 (2021: GBP145m).
Whilst we believe having an amortising debt profile is the most
appropriate structure for the Company's risk profile, capital
structures do vary between renewables investment companies. Were
dividend cover to be calculated based on operating cash flows
before the repayment of debt, dividend cover for 2022 would have
been 2.55x (2021: 2.1x). The Company has declared a dividend target
for 2023 of 7.18p per share, reflecting the high earnings and
strong cover, but also recognising the importance of the long-term
sustainability of the Company's dividend to shareholders.
The Group also utilises a Revolving Credit Facility ("RCF")
which is used to make new investments and is repaid from surplus
earnings or fund raises. The RCF, which was refinanced in February
2023, has total funding capacity of GBP750m and matures in December
2025. At 31 December 2022, the RCF was drawn GBP399m. Forecast cash
flows from the portfolio, net of Company costs after having paid
the Company's dividend and project-level debt repayments, indicate
that the majority of these drawings can be repaid from
re-investment cash flows over the RCF term. In addition, the
Company may use equity issuance, alternative debt instruments and
the proceeds of any divestments which may be made to enhance
portfolio construction, to repay the RCF.
Investment highlights
The benefit of having a large and diversified portfolio has been
especially evident this year, as the impact of regulatory and wind
resource challenges on the portfolio as a whole have been reduced
by geographic, technological and revenue diversification. The
Company made investments into seven projects during the year, each
of which will contribute to further portfolio resilience:
-- The acquisition of a 49% equity stake in the 264MW Valdesolar
solar PV project, an unsubsidised project in Spain. The Company is
partnered with Repsol, the Spanish-listed global energy company.
The project has the ability to capture merchant power prices.
-- The acquisition of a 10.2% stake in Hornsea One in the UK,
one of the world's largest operational offshore wind farms, and an
incremental investment in the Merkur offshore wind farm taking
TRIG's stake from a 25% to 36% shareholding. Both continue the
strategy of investing in projects that benefit from
government-backed revenue support. Merkur also benefits from the
current higher power prices due to the functioning of the German
Feed-in Tariff which acts as a floor.
-- A strategic milestone was achieved with a significant
investment in the flexible capacity sector through the acquisition
of four in-development battery storage sites. The four projects
have grid connection dates ranging from 2024 to 2031 and, once
built, will have combined capacity of 350MW / 700MWh. Flexible
capacity, including battery storage, is essential to the energy
transition by providing grid-supporting services and responding to
the intermittency of renewables generation. As such, flexible
capacity projects provide a natural hedge within the portfolio for
variability in market conditions.
The power price exposure of the portfolio as a whole is broadly
unchanged as a result of the acquisitions in the year, as the
Managers seek to maintain the power price risk profile of the
Company.
At the Company's 2022 Annual General Meeting, shareholders
supported an increase in the Company's Investment Policy
development and construction limit from 15% to 25% of portfolio
value[12]. Successfully managing projects through development and
construction is a key value driver for shareholders, as these
earlier stage investments represent a lower-priced entry point and
the resulting prospect of higher returns. To date, TRIG has
delivered 10 projects through construction since IPO, with five
further projects expected to be delivered in Q1 2023. Development
and construction also provides competitive access to projects that
are increasingly being traded before construction has begun.
TRIG's construction projects have progressed well during the
year, with the Blary Hill and Haut Vannier projects becoming
operational in 2022. Both Grönhult onshore wind farm and the Cadiz
solar portfolio started initial generation in late 2022 and are now
in the final stages of construction. Ranasjö & Salsjö
foundation works are being finalised, with turbine delivery
scheduled for later in 2023. Sustainability considerations are made
throughout the construction of these projects - for example with
local employment and environmental plans created to maintain a net
positive impact for the community. Construction on the Cadiz
projects has employed the equivalent of 108 personnel for a year
and further hired services in the municipality of San Jose del
Valle, with total local investment reaching EUR750,000. The Company
will begin to recognise the additional value derived from taking
projects successfully through construction as key milestones are
met, typically in the first 6-12 months from the commencement of
operations.
The Managers continue to see construction and development
projects as attractive opportunities to leverage the depth of their
expertise and combined 60-year track record for the benefit of
TRIG, and as some operating history is established we can look for
valuation uplift. As the Company's portfolio matures, extending the
lives or repowering of older sites is expected also to enhance
value. The first sites to be repowered are likely to be four
projects in the south of France, where two of the projects have
secured new feed-in tariffs.
In addition to the markets in which the Company is already
invested, markets with similar characteristics may offer additional
investment opportunities. In particular, these include the wider
Iberian and Nordic regions, particularly Portugal and Finland, and
also the Benelux region.
% of
Portfolio
Net on a
Date of Year Equity capacity Revenue committed
completion Project commissioned share (MW) 32 type 33 Location basis 34
Wholesale
March 2022 Valdesolar solar farm 2021 49% 129 market Spain 3%
-------------------------- -------------- ----------- ----------- ----------- --------- ----------
July 2022 / Contract
October Hornsea One offshore wind for
2022 farm 2020 10.2% 122 difference UK 8%
-------------------------- -------------- ----------- ----------- ----------- --------- ----------
Wholesale
September market
2022 / &
December ancillary
2022 Ryton battery storage Expected 2024 100% 74 services UK 4%
-------------------------- -------------- ----------- ----------- ----------- --------- ----------
Drakelow battery storage Expected 2025 100% 90
-------------------------- --------------------------- ----------- ----------- ----------- --------- ----------
Drax battery storage Expected 2029 100% 89
-------------------------- --------------------------- ----------- -----------
Spennymoor battery
storage Expected 2031 100% 100
-------------------------- --------------------------- ----------- ----------- ----------- --------- ----------
December Merkur offshore wind farm Feed-in
2022 (Incremental investment) 2019 11%(35) 143 Tariff Germany 2%
-------------------------- -------------- ----------- ----------- ----------- --------- ----------
In addition to attractive investment opportunities, the Managers
continue to be alert to opportunities for strategic disposals
should the Managers observe marked dislocations in value across the
jurisdictions in which it invests or other portfolio construction
benefits.
Current outstanding commitments
The Company has outstanding investment commitments of GBP205m
relating to the Swedish onshore wind farm (Ranasjö and Salsjö)
construction projects, and the UK battery storage projects (Ryton
and Drakelow), broken down in the table below, by expected due
date. Further information on Investment Obligations is detailed on
page 63. The Company's GBP750m committed revolving credit facility
was drawn GBP399m as at 31 December 2022.
RCF drawings 2023 2024 2025 Total
Outstanding Commitments (GBPm) 399 97 78 30 205
Portfolio diversification
The TRIG portfolio benefits from being diversified across
jurisdictions, power markets and generating technologies providing
multiple revenue sources, as well as a variety of geographic areas
with differing meteorological conditions affecting wind speeds and
solar irradiation, reducing year-on-year volatility. The portfolio
has been constructed to have low single-asset concentration, with
the largest asset constituting less than 10% of the portfolio value
on a committed basis and the top 10 assets cumulatively accounting
for approximately half.
Revenue profile
TRIG has the benefit of being diversified across several
separate power markets: Great Britain, the Single Electricity
Market (of the Republic of Ireland and Northern Ireland), France
and Germany (which sit within the main continental European power
market), Sweden (which sits in the Nordic electricity market) and
Spain (Iberian power market).
The TRIG portfolio has substantial near-term protection in cash
revenues from movements in wholesale power prices, as the portfolio
receives a high proportion of its revenue from selling electricity
generated via Power Purchase Agreements ("PPAs") with fixed prices,
and from government subsidies such as Feed--in-Tariffs ("FiTs"),
Contract for Differences ("CfDs"), Renewable Obligation
Certificates ("ROCs") or from other hedges, together referred to as
fixed revenues.
Over the next 12 months, 65% (2021: 70%) of revenues are fixed
per unit of generation, with 63% (2021: 66%) fixed over the next
ten years. The decline in these percentages is largely driven by
the elevated power prices in the near term compared to last year's
assumptions.
The large majority of the expected fixed revenues are derived
from government subsidies. Of the 65% fixed over the next 12
months, 83% are drawn from subsidised projects in the UK, Ireland
and France, which benefit from inflation linkage, helping to
preserve Portfolio Value. Inflation is being driven to a large
extent by commodity price increases, which ultimately benefit power
prices. However, if non--energy related inflation were to persist
more structurally, inflation linked revenues could play a key role
in value preservation.
In the longer term, based on its current portfolio, TRIG is
expected to have greater exposure to future wholesale electricity
prices as subsidies and contracts with pre-determined pricing run
off. As existing fixed-price contracts expire, the replacement
contracts may also have fixed-price elements, and any future
additions to the portfolio may have subsidies, decreasing the
merchant proportion.
The Company's prudent capital structure ensures all
project-level debt is repaid within the associated subsidy period,
and projects with merchant revenues do not have any debt in place.
This has the result of releasing a greater portfolio of revenue in
the future for re-investment and dividends.
As described in Section 2.5 - Market developments, governments
in all the markets TRIG has investments in have announced or
enacted interventions to reduce the wholesale power prices received
by renewable energy projects. The interventions do not have an
impact on subsidies revenues, but work to reduce or limit the
wholesale power price achieved by renewable energy projects.
Macro-economic environment
Due to the ongoing commodity price shock (more details can be
found on this in Section 2.5 - Market Developments), together with
other effects of Covid-19 stimulus packages, inflation has risen to
multi-decade highs across the jurisdictions TRIG is invested in.
This has led to central banks increasing base rates to levels not
seen since the introduction of quantitative easing.
Portfolio cash flow forecasts are relatively insensitive to
rising interest costs due to project level debt interest rates
being fixed, providing certainty over long-term interest and
repayments on debt. This is an essential and deliberate element in
the construction of the Company's portfolio, which provides
resilience in the portfolio's cash flows against moves in interest
rates.
In the second half of 2022, the Portfolio Valuation reflects the
rise in both government bond reference rates and inflation with an
increase in weighted average discount rates by 50bps, as described
above on page 21, and near-term inflation forecasts. The Company
benefits from subsidised revenues that are directly linked to
inflation indices in the UK and France, which constitute more than
half of the expected revenues across the Company's portfolio over
the next 10 years.
The direct link to inflation, received from indexed subsidies,
and the indirect link to inflation, observed in power prices over
time, functions to offset potential associated increases in
required investment returns (i.e. the valuation discount rates)
when inflation increases.
This can be demonstrated through the following portfolio
scenario analysis:
-- If annual inflation rates were to be 0.5% higher than assumed
in all forecast periods, portfolio returns would increase by 0.66%,
based on the Company's latest published sensitivities in Section
3.1.
-- If inflation rates were to be 3% higher in 2023 than assumed,
portfolio returns would increase by 0.41%.
Reductions in outturn inflation would have broadly similar
negative impacts.
Increase to assumption Decrease to assumption NAV impact
NAV impact (pence per share)
(pence per share)
+ / - 0.5% change in annual inflation rates 6.1 -5.1
+ / - 0.66% change in portfolio discount rate -6.1 5.7
+ / - 0.41% change in portfolio discount rate -3.7 3.5
+ / -- 3% change in inflation rates for FY 2023 3.5 -3.5
The portfolio return is positively correlated to inflation,
which combined with the ongoing demand for critical renewables
infrastructure make the Company's assets attractive to own in a
shifting environment.
Outlook
The Company has performed well in the year through strong
earnings and NAV growth, benefiting from higher power prices
through generating secure and clean electricity whilst also
contributing to the alleviation of the cost of living crisis
through additional taxation throughout the Company's key markets.
The portfolio is well positioned to benefit from inflation
protection whilst the Company's prudent capital structure ensures
debt is repaid and has fixed costs, providing strong downside
resilience to higher interest rates.
The critical themes of energy security, affordability and
decarbonisation, together "the energy trilemma", underpin the
positive outlook for renewables. Once built, renewable energy
assets provide secure and locally-generated electricity without
carbon emissions. The impetus behind the sector coupled with
sustainability considerations should encourage the development of
local supply chains and reduce the carbon content in
construction.
In the wider context, energy security and affordability has been
brought into sharp focus in 2022. Europe's dependence on external
sources of key commodities has been highlighted emphatically by the
reduction in Russian gas supply into Europe. Nonetheless, due to
unseasonably warm weather spells across the UK and the European
continent and government-guided reduction in energy demand in the
EU, Europe is better placed at the end of 2022 than many had feared
might be the case. Renewables infrastructure will also play an
increasingly critical role in delivering further European energy
independence.
In addition, decarbonisation and the transition to net zero
remain central to government energy strategies, while elevated
energy costs to consumers highlight the essential requirement for
increased domestic generating capacity to make energy more
affordable for all.
Critical investment in the flexibility of grids is needed to
balance the intermittency of renewables and improve reliability. As
such, TRIG has increased its investment plans in this area over the
last twelve months.
As we enter the next year of the energy transition, the Managers
remain well placed to enhance the value of the Company's portfolio,
source growth opportunities and be selective in their approach to
new investments for TRIG.
3 Operations Report
Operations summary
The overall performance of the portfolio was significantly ahead
of budget in the year driven by high electricity prices, REGO and
auxiliary service revenues. This strong performance was somewhat
moderated by the underlying generation from the portfolio falling
5% below-budget in the year.
The geographic diversification of the portfolio meant that the
lower than long-term average weather resource in three regions
(France, GB Offshore and Germany Offshore) was partly offset by
four regions experiencing above budget weather resource (GB
Onshore, Scandinavia, Ireland and Solar).
Some operational performance was affected by grid downtime that
exceeded allowances made in budgets and long-term forecasts, and
other site-specific factors including repair or enhancement works
to generation equipment and electrical infrastructure, which
improves the operational resilience of the portfolio going
forward.
The new acquisitions of Valdesolar Spanish solar farm and
Hornsea 1 GB offshore wind farm are now fully incorporated into the
portfolio and performing well, along with the recently constructed
Vannier French onshore wind farm. The Cadiz Spanish solar farms and
Grönhult Swedish onshore wind farm have also commenced early
generation, as detailed in the Construction section.
Production
Technology Region Electricity production (GWh) Performance vs budget
Onshore wind GB 1,397 -3%
France 542 -8%
Scandinavia 554 0%
Ireland 298 -13%
Offshore wind GB 1,450 -7%
Germany 730 -5%
Solar GB, France, Spain 405 -3%
---------------- ------------------ ---------------------------- ---------------------
Total Portfolio 5,376 -5.2%
------------------------------------ ---------------------------- ---------------------
GB - onshore wind
Performance was good across the portfolio of twenty projects,
with three projects significantly ahead of budget and three assets
that delivered uncompensated budget shortfalls:
-- Solwaybank benefited from higher-than-budgeted availability
under radar curtailment agreements in place at acquisition, due to
good relationships with the neighbouring stakeholders. This
resulted in a significant increase in production compared to
budget.
-- Earlseat and Rothes 2 both performed well, delivering notably above budgeted production.
-- Hill of Towie had pro-active foundation works performed to
protect the long-term integrity of the assets, which are now
complete and not anticipated to recur.
-- Crystal Rig 1 has experienced long-term availability
challenges with turbines which are unique to this site within the
portfolio. The asset manager and O&M provider were challenged
to provide retrofits to deliver long-term solutions for specific
problematic aspects, which are in final stages of
implementation.
-- Crystal Rig 2 underwent planned four yearly high voltage
electrical system maintenance in the second half of 2022.
Performance shortfalls at Blary Hill and Little Raith are
protected by contractual provisions:
-- Blary Hill was curtailed for noise management purposes
following commissioning which has now been resolved, with
commercial protection from the turbine supplier in place for some
of the losses incurred.
-- In addition to the commercial protections associated with
additional maintenance works, Little Raith's performance has
improved in recent months through a constructive approach to
resourcing and additional training for the on-site technicians,
reinforcing the longer-term stability of the project.
There are also a range of technical innovations being trialled
or deployed at various GB onshore windfarms, as referenced within
the Enhancements section.
France - onshore wind
Across the fifteen assets that make up this region, the south of
France suffered some poor wind resource in the middle of the year
whilst the northern sites were in line with budget. Construction
snagging at the Venelle site, which was commissioned at the end of
2020, is being addressed. Venelle's sister site, Vannier, has now
completed construction and the contractual approach is benefitting
from the experience gained at Venelle.
Repowering activities continue to progress well on the older
southern sites, with Claves' and Cuxac's Feed-in Tariff
applications now approved and contractual arrangements progressing
to enable dismantling activities to commence in the second half of
2023. Repowering will commence at Claves and Cuxac; with Haut
Languedoc and Haut Cabardes following thereafter. Repowering under
Feed--in--Tariff mechanisms allows projects to benefit from a new
20--year subsidy period.
Scandinavia - onshore wind
Jädraås continues to perform well operationally with strong
availability. However, power price hedging arrangements have been
challenging in the volatile market, requiring settlement of hedges
at high market prices during periods of low production, which has
impacting financial performance during the second half of the year,
which may continue into 2023 depending on power price levels. The
financial impact on the portfolio as a whole has not been, and is
not expected to be, material. In constructing a balanced portfolio,
Grönhult does not have such hedging arrangements in place and will
receive market electricity pricing under a route-to-market power
price agreement.
Grönhult construction is now substantially complete, with the
project energised and exporting electricity to the grid.
Construction of Ranasjö and Salsjö (collectively known as Twin
Peaks) is progressing well and, as is typical for TRIG's projects
in construction, RES has been contracted to act as Owner's
Engineer. Turbine foundations are laid for both sites, with site
tracks and turbine crane hardstands more than 50% complete and
substation works commenced. The sites are on track to commence
operations in 2024.
Northern Ireland & Republic of Ireland - onshore wind
Consisting of seven projects spread across Northern Ireland and
the Republic of Ireland, this region is the smallest of TRIG's
regions by value. Downtime at the Altahullion and Taurbeg sites
exceeded budgets due to a combination of component failures and
proactive works to enhance the long-term performance of the
sites.
GB - offshore wind
Hornsea 1, our largest acquisition of 2022, has bedded in well
within this region of four projects spread from North Scotland to
East Anglia. Works to inter-array cabling within the wind farms,
connections to the grid and component exchanges at Sheringham
Shoal, each of which adversely affected production in the year, are
now largely complete and expected to improve performance going
forward.
Through extensive negotiations working alongside our investment
partners, one of the offshore projects secured substantially
improved commercial rates mid-term on a core operations contract
during the year, upon the investment case.
East Anglia 1 successfully completed the sale of its associated
offshore substation and grid connection to shore, in accordance
with market requirements.
Beatrice agreed contractual terms for a range of different yield
enhancements, to improve both individual turbine and site-wide
performance, for implementation during 2023.
End of warranty inspections are a core theme for the region
given the young age of the assets, with a campaign of pro-active
investigative works performed or on-going to identify and resolve
any potential defects under warranty, or secure protection against
their subsequent cost of resolution. There are also a range of
ongoing contractual performance protections post warranty.
Germany - offshore wind
Merkur has received an extensive inspection, repair and retrofit
regime in connection with the rear frame defect, which has now been
completed, availability brought back in line with budget and
liquidated damage payments for the associated downtime in the
contract year ended March 2022 received. This good progress in
resolving the rear frame defect was core to the investment case for
an incremental 11% stake in the project, which was acquired from a
co-shareholder in December 2022. Power curve enhancements are
planned to be rolled out in 2023, which are expected to improve
energy yield by c. 2.5%.
At Gode, yaw and pitch optimisations have been implemented to
enhance production, with further specific opportunities being
actively investigated.
A small amount of non-compensated grid downtime was experienced
at both sites at various points during the year.
Solar
The Solar segment of the portfolio currently consists of 29
assets across southern England, France and Spain. Valdesolar in
Spain contributes to over 50% of the segment's generation capacity,
and the four Cadiz projects are also now generating and set to
become fully operational in Q1 2023. As the Cadiz projects become
fully operational they will add further geographical
diversification within TRIG's solar sub-portfolio.
Given the relative greater predictability of solar generation
compared to wind power, projects throughout TRIG's solar portfolio
were able to secure electricity price fixes on pay-as-produced
basis at attractive levels, in the context of the high but volatile
electricity prices experienced in the year, for the next four
years.
This area of the portfolio has already seen diversification
benefits, whereby lower irradiance in France and Spain in 2022 was
offset by high irradiation in GB. The new Spanish site Valdesolar
maintained very high availability across the year but was impacted
by grid curtailment in the summer. New arrangements have been put
in place to reduce future grid curtailment.
Enhancements
As Operations Manager, RES is dedicated to enhancing the
operational performance and shareholder and stakeholder value of
the portfolio through both commercial and technical initiatives.
RES applies a structured framework to identify, appraise and
implement enhancements at both individual and portfolio levels.
Examples of some of the commercial and technical value enhancements
secured in 2022 include:
-- Blade improvements: Aerodynamic improvements to wind turbine
blades have been developed with specialist, independent experts to
increase the efficiency of the blades in extracting energy from the
wind. This enhancement has been rolled out at a Scottish onshore
wind site following a successful trial, in which a 3% increase in
energy yield was secured. Trials allow the site-specific conditions
to be evaluated, including the turbine model and condition, local
topography and wind characteristics such as shear and turbulence. A
second Scottish site trial is currently underway, with other sites
being assessed for further rollout, with greater emphasis on those
onshore sites which use larger blades.
-- Software upgrades: More recent vintages of wind turbines use
sophisticated control systems to determine how the wind turbine
responds to the environmental conditions, such as the yawing of the
nacelle and pitching of the blades. Some of these software upgrades
are more applicable to large turbine arrays with flatter topography
such as offshore wind farms. Alternative software enhancements can
also be used to secure improved performance on older turbines
within the portfolio.
-- TRIG is actively engaging with its offshore wind joint
venture partners to identify and implement a wide range energy
yield enhancements, for implementation during 2023. These
enhancements include wake steering - whereby the overall site
production is increased by reducing the wind obstructed by each
turbine on those downwind from them and high wind ride through -
allowing turbines to respond to and withstand gusting without
shutting down whilst also avoiding excessive loading on the
structures. RES has a deep experience of both identification,
implementation and technical appraisal of the performance of such
enhancements, helping to ensure that appropriate contractual
structures are adopted.
-- A wake steering and collective control trial, which seeks to
enable turbines to optimise the overall yield from the whole site
rather than on a per turbine basis, is progressing at Altahullion
in Northern Ireland, with the next phase of validation to be
completed in H1 2023. Collective control is expected to be
beneficial on any site consisting of a large number of turbines
within an array formation.
-- Pallas onshore wind farm in the Republic of Ireland has
undergone testing to evaluate the provision of certain specific
grid services, supporting grid resilience, for which the site is
remunerated by the grid operator.
-- Active revenue stream management: Due to reduced market
liquidity in 2022, TRIG ensured a disciplined approach to price
fixing, whilst also engaged with offtakers to maximise value of
REGOs across the portfolio (which have seen a tenfold increase in
value on previous years).
-- Repowering activities are progressing at the four older sites
in the south of France, commencing at Claves and Cuxac, then
following on at Haut Languedoc and Haut Cabardes thereafter. New
20-year government-supported tariffs have been secured for Claves
and Cuxac. Decommissioning and repowering contracts are targeted
for signing during the second half of 2023.
-- Work has continued on extending the life of existing
operational sites across the wholly owned UK and Ireland portfolio
with planning extensions submitted for several solar and wind sites
during the year. In addition, a review of the UK and Ireland
onshore wind portfolio has been undertaken to identify likely
repowering opportunities. Several opportunities have been
identified and these will be progressed over the coming years.
Health and Safety
A strong focus on Health & Safety has always been core to
TRIG's operations and the ethos of its Board and Managers. Each
quarterly meeting of the TRIG Board starts with a discussion of
Health & Safety across the portfolio. Health & Safety
performance is reviewed at every project company board meeting
throughout the year, using reporting obtained for every site in the
portfolio, providing information on both leading and lagging
indicators.
Leading indicators are those activities pro-actively performed
or data collated to help reduce the risk of an accident ever
occurring, such as performing internal or external safety audits,
safety-focussed site walk-overs supported by discussions with site
personnel, as well as collating and sharing information on:
-- Good Catches - potential hazards that are identified and controlled;
-- Hazard Identifications - hazards that have the potential to
cause harm but are currently uncontrolled.
Lagging indicators are more focussed on collecting data on
events that occurred, ensuring that each is appropriately
investigated and key contributing factors identified to enable
actions to be taken to reduce future recurrence and severity,
including through sharing information across different businesses.
Lagging indicators include:
-- Near-misses - unplanned or uncontrolled events that have the
potential to cause harm or damage.
-- Non-lost time accidents - where an injury is sustained,
however slight, and the injured party is able to return to work on
the same day as the accident. The difference between a near-miss
and a non-lost time accident can often be down to an element of
timing, separation or good fortune that broke the chain of
events.
-- Lost-time accidents: where an injury is sustained and the
injured party is unable to return to work on the day following the
accident. A seven day lost-time accident classification is also
used to reflect a higher degree of severity, such that the injured
party is unable to return to their normal duties within seven days
of suffering the injury.
The following provides an update of Health & Safety items of
note during 2022:
-- There were no severe accidents across the portfolio during
the year. However, the Lost Time Accident Frequency Rate increased
compared to 2021, in part reflecting improved reporting, as well as
a larger construction portfolio and higher offshore activity, with
actions taken to avoid recurrence in the case of each incident.
-- The increased number of incidents is in part reflected by the
increased construction activity in the portfolio with manual
handling incidents (associated with the installation of the solar
panels) seen at the Cadiz solar construction sites, where there
were up to 400 people across the four sites at certain times. There
were also several incidents reported at the Merkur offshore site,
where there was a high level of activity associated with the
rectification of the rear frame issue.
-- The quality of Health & Safety reporting remains high
across most of the portfolio, with good transparency and follow up
of incidents. There has been an increased focus on positive leading
indicators such as the number of independent and internal safety
audits or reviews, hazard identifications and safety walks.
-- Approval was given to install improved welfare facilities across the GB Solar sites in 2023.
-- In addition, further safety equipment within the turbine
towers of some of the older GB onshore wind farms will be installed
in 2023.
-- RES is a Tier 1 member of SafetyOn and sits on the SafetyOn
Management Board. RES's TRIG Operations Management team attended a
collaboration event in November which served as a great opportunity
for owners and subcontractors to share their thoughts on key safety
issues. In the same vein, RES continues to regularly hold its own
Health & Safety coordination group to foster relationships
between the various asset managers across the TRIG portfolio, share
information and discuss matters that have occurred in the
portfolio. This year it allowed those working on UK and German
offshore sites to share their experiences, something that they
wouldn't normally get the opportunity to do.
Projects in construction and development
By acquiring assets at an earlier stage in their development,
TRIG seeks to access improved returns and a wider investment
opportunity set.
The delivery and de-risking of projects through construction and
development enhances value for shareholders who benefit from the
shift to a lower discount rate used to value operational projects;
and enable TRIG's Managers to deploy TRIG's balance sheet to create
new low-carbon generation and flexible capacity to contribute to
the decarbonisation of the electricity system and improve energy
security.
Importantly, TRIG benefits from its Managers' expertise in
investing in and delivering infrastructure projects through
construction and development: InfraRed as a greenfield investor for
the past 25 years and RES as a developer and/or constructor of over
23GW and operator of over 10GW of renewable assets globally.
In sourcing construction and development stage investments,
InfraRed carefully screens opportunities to ensure they are aligned
with TRIG's portfolio construction strategy and are additive to the
portfolio as a whole. InfraRed, with input from RES, then perform
due diligence and structure each opportunity to ensure that risks
are allocated to parties best positioned to manage them and that
the returns reflect the risks being borne by TRIG's portfolio
company. Once an investment is brought into the portfolio, RES,
with input from InfraRed, actively oversees construction and
development activities to manage costs, timetable, quality,
contractor interface, transition into operations, stakeholder
engagement and, importantly, health & safety.
At the balance sheet date, 8% of the portfolio by value was in
construction and development. This represents the Ranasjö, Salsjö
and Grönhult wind farms in Sweden as well as the development
premium for the four battery storage projects in development:
Ryton, Drakelow, Drax and Spennymoor. Taking the expected
construction spend for the Ryton and Drakelow batteries, which are
expected to be contracted in 2023, would increase the construction
and development exposure to 11% of the portfolio by value.
Recently completed construction projects
Vannier, France; completed Q3 2022
Located in the Haute-Marne department in France, Vannier is a
43MW onshore wind farm consisting of 17 Envision E-131 2.5MW
turbines. Construction commenced in February 2020. Construction was
delivered under an EPC wrap by an Envision-Velocita consortium.
Following permit issues at the site, for which full commercial
protection had been previously obtained, construction was resumed
in September 2021, with full commercial takeover achieved in
September 2022.
Blary Hill, Scotland; completed Q1 2022
Located on the Kintyre Peninsula in Scotland, Blary Hill is a
35MW onshore wind farm consisting of 14 Nordex 2.5MW turbines.
Construction started in 2020 and the project was completed early in
2022. Construction was delivered by RES under an EPC wrap, a
management model in which a principal contractor secures each of
the supply contracts and has contractual commitments to deliver the
project on time and on budget. A third-party technical adviser
provided independent oversight of key milestones.
Both the local community and the local environment have been
considered throughout the construction process. Several local
companies were engaged for construction work, with local employment
centres being utilised for the recruitment of labour operatives.
Additionally, habitat management plans will be implemented along
with compensatory planting, to improve the condition of the natural
environment.
Grönhult, Sweden due to complete Q1 2023
Located in southwest Sweden, the 12 x Vestas V162 5.6MW (67.2MW)
project was acquired from Vattenfall in January 2021.
Vattenfall managed the construction to a high standard under a
multi-contract approach with excellent health & safety
performance. Construction commenced in Q1 2021 with all turbines
erected prior to the end of 2022 and early generation achieved in
October 2022. Snagging and commissioning activities are now being
completed.
Construction projects
Ranasjö & Salsjö
Located in Sollefteå, Västernorrland County, Central Sweden, the
two adjacent Ranasjö and Salsjö projects will consist of a total of
39 Siemens 6.2MW turbines (242 MW), with TRIG having 50% ownership
share alongside InfraRed's European Infrastructure Income Fund
4.
The projects continue in line with programme. Civil works,
electricals and foundations are all complete at the Salsjö project
and the final roads and two foundations are left to be completed at
Ranasjö. 'Dry runs' of turbine deliveries to site have been
completed successfully ahead of deliveries scheduled to commence
during the summer of 2023.
The projects are being managed by the developer Arise and are
scheduled for take-over in spring 2024.
Arenosas, Malabrigo, El Yarte and Guita (Cadiz Solar), Spain
Completed Q1 2023
Located in the province of Cadiz, Spain, the four projects have
a total capacity of 234MW. Construction on the projects began in
September 2021 and was delivered by Statkraft under an EPC
wrap.
First export was achieved in December 2022 with commissioning
activities progressing well and due to complete in Q1 2023. Across
all projects, consideration of the local community has been
actively embedded throughout the process, with the construction
contractor engaging with its subcontractors to encourage local
employment for less specialised work and the use of local
businesses.
In total, local labour accounted for the equivalent of 108
people hired for a year, with EUR0.8m of local investment.
Development
Storage
TRIG acquired four consented battery storage projects in the
second half of 2022, which will provide c. 700MWh / 350MW flexible
capacity once built. Located in the North of England, these sites
require detailed design works to be performed prior to procurement
and construction.
The timescale for construction will be dictated by grid
connection dates, which currently vary from 2023 to 2031. Ryton
will be the first to progress, with construction anticipated to
commence in 2023.
4 Valuation of the Portfolio
Introduction
The Investment Manager is responsible for carrying out the fair
market valuation of the Group's investments, which is presented to
the Directors for their approval and adoption. A valuation is
carried out on a six-monthly basis as at 30 June and 31 December
each year.
For non-market traded investments (being all the investments in
the current portfolio), the valuation is based on a discounted cash
flow methodology and in accordance with IFRS 13 and IFRS 10, given
the special nature of infrastructure investments.
The valuation for each investment in the portfolio is derived
from the application of an appropriate discount rate to reflect the
perceived risk to the investment's future cash flows in order to
give the present value of those cash flows. The Investment Manager
exercises its judgement in assessing the expected future cash flows
from each investment based on the project's expected life and the
financial model produced by each project entity. In determining the
appropriate discount rate to apply to a given investment, the
Investment Manager takes into account the relative risks associated
with the revenues, which include fixed price per MWh income (lower
risk) or merchant power sales income (higher risk). Where a project
has both income types a theoretical split of future receipts has
been applied, with a different (higher) discount rate used for an
investment's return deriving from the merchant income compared to
the fixed price income, equivalent to using an appropriate blended
rate for the investment.
The Directors' Valuation of the portfolio as at 31 December 2022
was GBP3,737.0m. This valuation compares to GBP2,725.8m as at 31
December 2021 and GBP3,235.6m as at 30 June 2022[13].
Valuation movement in the year to 31 December 2022
Valuation movement during the year to 31 December 2022 GBPm GBPm
Valuation of portfolio at 31 December 2021 2,725.8
------- -------
Cash investments net of capital return 693.8
------- -------
Cash distributions from portfolio (280.5)
------- -------
Rebased valuation of portfolio 3,139.1
------- -------
Changes in power price forecasts* 265.7
------- -------
Movement in discount rates (176.6)
------- -------
Change in inflation assumptions 233.7
------- -------
Change in foreign exchange** 73.0
------- -------
Balance of portfolio return 201.9
------- -------
Valuation of portfolio at 31 December 2022 3,737.0
------- -------
* The positive impact from the change in power price forecasts
is net of the UK Electricity Generators Levy, which had an adverse
impact of GBP188m.
** Foreign exchange movement is stated before the offsetting
effect of hedges which are held at the Company and subsidiary
levels. Foreign exchange gain reduces to GBP36.6m after the impact
of foreign exchange hedges.
The opening valuation at 31 December 2021 was GBP2,725.8m.
Allowing for net cash investments of GBP693.8m and cash receipts
from investments of GBP280.5m, the rebased valuation as at 31
December 2022 was GBP3,139.1m.
Cash investments of GBP693.8m during the year is predominantly
comprised of the following investments:
% of Committed Invested to 2022 Invested to
Portfolio Valuation 31 Dec 2021 Invested[14] 31 Dec 2022 Total (fully committed)[15]
Hornsea One 0% 8% 8% 8%
Valdesolar 0% 3% 3% 3%
Cadiz solar projects (Arenosas, Malabrigo,
El Yarte and Guita) 2% 2% 5% 5%
Merkur 6% 2% 7% 7%
Battery storage projects (Ryton, Drakelow,
Drax and Spennymoor) 0% 1% 1% 4%
Grönhult 1% 1% 3% 3%
Twin Peaks (Ranasjö and Salsjö) 1% 1% 2% 4%
Further detail on each investment is included in Section
2.5.
Each movement between the rebased valuation of GBP3,139.1m and
the 31 December 2022 valuation of GBP3,737.0m is considered in turn
below:
(i) Forecast power prices
The valuation at 31 December 2022 is based on current updated
power price forecasts for each of the markets in which TRIG invests
overlayed with a portion of the lower prices indicated by the
forward markets over the next c.2 years. The forecasts are
materially up in the short to medium term, but with the longer term
broadly unchanged in real terms, resulting in an overall increase
in valuation of the portfolio from a year ago by GBP453.8m. This is
reduced by the impact of the UK Electricity Generator Levy ("EGL")
which is explained in more detail below which leads to a net
valuation increase arising from increase in power price forecasts
after the impact of the UK EGL of GBP265.7m. This impact includes
the long-term change in power curve inflation (see item (iv)
changes to inflation assumptions).
Over the year, spot power prices and the short-to-medium term
power price forecasts have markedly increased due to supply chain
constraints exacerbated by the conflict in Ukraine and associated
disruption to energy markets. This has had the effect of
contracting the supply and pushing up the cost of natural gas. Many
countries are seeking to reduce and/or eliminate their use of
Russian gas, increasing their demand for other gas sources
(including LNG) in the shorter term and increasing the drive to use
and further develop other energy sources. This includes coal as a
stopgap measure (notwithstanding its high carbon tax). This
transition has resulted in wholesale power price forecasts
remaining elevated across the 2020s before reverting to the levels
similar to those being forecast at the previous year end as
additional demand and supply are broadly expected to balance. Over
the longer term this also includes electricity displacing gas usage
(for example switching to electric heating), introducing the use of
green hydrogen and including more intermittent renewable generation
and/or nuclear generation.
Prior to the Ukraine conflict, near-term power prices across
Europe were already elevated, mainly caused by increasing gas
demand during 2021 and early 2022. Gas storage levels were low over
the last winter period (2021/22) as electricity demand increased
during 2021 as economies came out of lockdown and electricity
generated from other sources, such as wind and nuclear, was lower
than usual (due to unusually low wind levels and outages,
respectively). This has led to European gas prices, and hence
electricity prices, being more sensitive to reduced supply and/or
increased demand.
Power prices are one of the key risks faced by the Company: a
number of factors go into power price forecasting to estimate
electricity demand, including the mix of generation technology
meeting this demand and for each technology, their associated costs
of supply. As such, it is inherently difficult to estimate and then
apply these factors to accurately forecast the outcome of this
dynamic market. Please refer to Section 3.4 - Risk and Risk
Management for further analysis.
The weighted average power price used to determine the valuation
is shown below in real terms (average of 2022 prices) - this is
comprised of the blend of forecasts for each of the power markets
in which TRIG is invested after applying expected PPA power sales
discounts and reflecting cannibalisation[16] and, where it is
believed appropriate, overlaying shorter-term forwards to reflect
current market pricing.
Illustrative blended power price curve (real prices) for TRIG's
portfolio[17]
Region Average Average Average
2023-2027 2028-2050 2023-2050
GB (Real, GBP/MWh) Before EGL 121 41 56
After EGL 100 41 52
Average of 5 euro jurisdictions*
(Real EUR/MWh) After intervention 89 48 55
* France, SEM, Germany, Sweden (SE2 and SE3) and Spain
Cannibalisation is assumed within the adopted power price
forecasts across each jurisdiction. The reduction in captured
wholesale electricity power prices is forecast to be further
impacted in each geography over time as the proportion of
production coming from renewables in each market increases.
The EU markets are imposing windfall taxes via inframarginal
caps applied by EU markets to each county. These materially remove
the benefit of power prices in excess of a threshold (set
individually by country) and this has been incorporated within the
assumed power price forecasts for each affected market. Further
additional legislation applicable in Spain (a gas cap and a more
onerous windfall tax related to gas pricing) is also incorporated
within the power price forecast assumed. Additional detail by
market is included within the market background section.
Electricity Generator Levy (UK-specific)
The Autumn Statement in November announced the introduction of
the Electricity Generator Levy to applicable UK wind and solar
assets. This imposes an effective 70% tax on "excess" revenues from
the sale of electricity (excluding where these are derived from
government support, i.e. ROCs, CfDs and FiTs). Excess revenues are
defined as those above GBP75/MWh. The 70% effective tax comprises a
direct 45% levy on revenues above the threshold and 25% corporation
tax as the levy is not considered a deductible expense for
corporation tax. The levy is expected to be applied for 5 years
from 1 January 2023 and the GBP75 is indexed by CPI, with the first
GBP10m of "excess revenue" provided as an allowance each year (i.e.
escapes the levy).
The impact of the EGL is to reduce the uplift in value from
increased power price forecasts. The adverse valuation impact of
the introduction of the EGL has been GBP188.1m. It also has the
effect of reducing project sensitivity to changes in power prices
down to the GBP75 threshold, as analysed in the key sensitivities
section.
(ii) Movement in valuation discount rates:
The weighted average portfolio valuation discount rate as at 31
December 2022 was 7.2% (31 December 2021: 6.6%). The discount rates
used for valuing each investment represent an assessment of the
rate of return at which it is estimated infrastructure investments
with similar risk profiles would trade on the open market.
During the year we have observed continuing strong competition
for renewables infrastructure, which remains a sought-after asset
class. Whilst transaction evidence is not yet demonstrating a clear
increase in discount rates, the yield of long-term government bonds
has increased since 30 June 2022. The Investment Manager has
applied an average increase of 0.5% to discount rates across the
portfolio. The valuation discount rates applied to investments in
the UK have been increased by more than those in the EU, reflecting
the higher long-term government bond yields in the UK. The average
increase of 0.5% represents an average increase of 0.8% applied to
UK investments and 0.3% to non-UK investments compared to 31
December 2021.
As the portfolio progresses through time, assets with fixed
price arrangements in the earlier years will see their future
returns become proportionally more exposed to market price
movements (unless current arrangements, notably subsidies, are
renewed) and consequently contain an increased level of risk. This
effect has increased the portfolio weighted average discount rate
by 0.1% since December 2021.
During the year, the Company commissioned an independent
valuation of the portfolio and undertook a further review of the
discount rates adopted for the December 2022 valuation, which
confirmed that the rates used were reasonable. This change in
assumption has led to a reduction in the valuation of the
investments of GBP176.6m.
(iv) Changes to inflation assumptions
Throughout 2022, the material increases in energy prices (as
described in (i) above) as well as increases in food and other
commodity prices exacerbated by the conflict in Ukraine have
contributed to material increases in headline inflation (measured
versus price levels 12 months previously) across all the
geographies TRIG invests in.
In respect of energy prices, the most significant increase in
the UK resulted from the step-up in the retail consumer energy
price caps in April and October of 2022 (with a further change in
energy price cap in January 2023), while other contributions have
been more evenly spread. Headline inflation figures are likely to
remain high both from continued inflationary pressures (in energy
and in other factors) and as a result of the "base effect", while
the material increase in April will remain within the headline
figure until the April 2023 inflation figure is released.
Inflation applied to cash flows has been uplifted for actual
inflation in all geographies for the 11 months to November 2022.
For December 2022 we have assumed 6% for UK RPI, 5.25% for UK CPI
and 3% for CPI in the other European countries TRIG invests in.
We have shown below the revised inflation assumptions and also
the effective annual rate for 2022, which combines the very high
actual inflation to date with the expected inflation levels for the
balance of 2022.
Inflation applied to future UK power prices tracks UK RPI till
2030 and is assumed to be 2.25% thereafter.
Inflation assumptions used in the Portfolio Valuation
Index 2022 2023 2024-2029 2030+
Forecast (Dec) full-year
equivalent*
UK RPI 6.00% 13.3% 5.00% 2.75% 2.00%
(December 2021: 3.75%) (December 2021: 3.50%)
UK CPI 5.25% 10.5% 4.25% 2.00% 2.00%
(December 2021: 3.00%) (December 2021: 2.75%)
UK Power Price 6.00% 13.3% 5.00% 2.75% 2.25% (December 2021: 2.75%)
(December 2021: 3.75%) (December 2021: 3.50%)
Eurozone 3.00% 8.2% 3.00% 2.00% 2.00%
(December 2021: 2.00%) (December 2021: 2.00%)
---------------- ------- ------------------------ ------------------------ --------- ----------------------------
* This represents the average inflation across the year 2022
measured against the prior 12 months.
The inflation changes above have had the impact of increasing
the valuation by GBP233.7m. This number was mainly driven by
inflation actuals accounting for approximately 80% of the
total.
(v) Foreign Exchange Movement:
Over the year the sterling has depreciated 5% against the euro
(31 December 2021: EUR 1.1899; 31 December 2022: EUR 1.1304). In
aggregate this has led to a gain in the year of GBP73.0m in the
valuation of the euro-denominated investments located in France,
the Republic of Ireland, Sweden[18], Spain and Germany. After the
impact of forward currency hedges held at Company level are taken
into account, the foreign exchange gain reduces to GBP36.6m.
Euro-denominated investments comprised 41% of the portfolio at
the year end.
The Group enters into forward hedging contracts (selling euros,
buying sterling) for an amount equivalent to its expected income
from euro-denominated investments over the short term, currently
approximately the next 48 months. In addition, the Group enters
into further forward hedging contracts such that, when combined
with the "income hedges", the overall level of hedge achieved in
relation to the euro-denominated assets is typically in the range
of 60% to 80% of their valuation. Hedging is also effected when
making investments using the revolving credit facility by drawing
in euros for euro acquisitions.
The Investment Manager keeps under review the level of euro
exposure and utilises hedges, with the objective of minimising
variability in shorter term cash flows with a balance between
managing the sterling value of cash flow receipts and potential
mark-to-market cash outflows.
(vi) Balance of portfolio return:
This refers to the balance of valuation movements in the year
(excluding (i) to (v) above) and represents an uplift of GBP201.9m
and a 6.4% increase over the rebased value of the portfolio. The
balance of portfolio return mostly reflects the net present value
of the cash flows brought forward at the prevailing portfolio
discount rate (6.6% at 31 December 2021). Accounting for the fact
that the acquisitions during the year occurred partway through the
year and consequently these cash flows were brought forward by less
than 12 months, then the increase in value would be the equivalent
of an annualised rate of 6.9%.
In addition to the unwinding of the discount rate:
-- Actual operating performance has been greater than forecast,
with higher-than-forecast power prices being partially offset by
lower overall generation for the year.
-- Changes have been made to deposit rate assumptions,
increasing interest rate forecasts in line with market expectations
and the recent rises enacted by central banks across TRIG's
markets. The portfolio has a low sensitivity to the changes in
interest rates, which is an advantage to TRIG's approach of
favouring long-term structured project financing rather than
short-term corporate debt. Structured project financing is secured
against the underlying assets, with the substantial majority
benefitting from long-term interest rate swaps which fix the
interest costs to the projects. As such, the overall impact of
interest rate changes is not material. Please see further detail on
page 157.
-- Several projects secured new fixed price power purchase
agreements, while others utilised existing optionality to fix some
prices at attractive rates, providing additional value and revenue
security.
Investment Obligations
At the balance sheet date, the Company had outstanding
investment commitments in relation to the construction of the
Ranasjö, Salsjö and Grönhult onshore wind farms, and the Cadiz
solar projects (Arenosas, Malabrigo, El Yarte and Guita).
The commitment amounts below include further development and
subsequent construction spend on two battery storage projects
(Ryton and Drakelow). These two projects for a combined size of
165MW/30MWh of flexible capacity are expected to become operational
in 2024 and 2025. The expected cost to build these two projects is
included in Outstanding Commitments, even though contracts have not
yet been entered into, given that the contracts to build these
projects are expected to be signed in the short term (in 2023).
TRIG has acquired the rights to develop and construct two
further battery storage projects (located near Spennymoor and
Drax). These projects are scheduled for grid connection in 2029 and
2031, and are expected to have total capacity of c. 190MW / 380MWh
once built. The construction costs for these two projects are not
included in the Company's Outstanding Commitments as no build
contracts have been entered into, nor are they expected to be
entered into in the short term.
Name Acquired Net MW Status Completion Date
Grönhult Feb-21 67.0 Construction Q1 2023
Ranasjö Jul-21 43.4 Construction 2024
Salsjö Jul-21 77.5 Construction 2024
Arenosas Sept-21 58.1 Construction* Q1 2023
El Yarte Sept-21 58.1 Construction* Q1 2023
Guita Sept-21 58.1 Construction* Q1 2023
Malabrigo Sept-21 58.1 Construction* Q1 2023
Ryton Sept-22 74.0 Late Stage Development 2024
Drakelow Sept-22 90.0 Late Stage Development 2025
-------------- -------- ------ ---------------------- ---------------
* TRIG does not bear construction risk on the Cadiz solar
projects. TRIG has a right to put any of the four projects back to
the developer of the projects in the event that a project is not
successfully commissioned by its long stop date.
The timeline of outstanding commitments is presented below
(approximately half in relation to Ryton and Drakelow):
2023 2024 2025 Total
Outstanding Commitments (GBPm) 97 78 30 205
-------------------------------- ---- ---- ---- -----
Fully invested Portfolio Valuation
The valuation of the portfolio on a fully invested basis can be
derived by adding the valuation at 31 December 2022 and the
expected outstanding commitments as follows:
Portfolio valuation at 31 December 2022 GBP3,737.0m
Future investment commitments GBP204.5m
Portfolio valuation once fully invested GBP3,941.6m*
======================================== ============
* Table does not cast due to rounding.
Key sensitivities
For each of the sensitivities, it is assumed that potential
changes occur independently of each other with no effect on any
other base case assumption, and that the number of investments in
the portfolio remains static throughout the modelled life.
The sensitivities assume the portfolio is fully invested and
hence the Portfolio Value for the sensitivity analysis is
GBP3,941.6m. Accordingly, the NAV per share impacts shown above
assumes the issue of further shares to fund the balance of these
commitments.
All of TRIG's sensitivities above are stated after taking into
account the impact of project-level gearing on returns.
The output sensitivity above incorporates an updated calculation
of the portfolio effect which reduces the variability as a result
of the diversification of the portfolio. The increased
diversification of the portfolio has increased this effect and
consequently reduced the sensitivity of the portfolio.
The windfall taxes imposed by the UK (the Electricity Generator
Levy) and the EU (Inframarginal Cap and Spanish-specific
legislation) result in price sensitivity becoming lower while the
assumed pricing exceeds the threshold for the imposition of these
taxes (e.g. for the UK in 2023 for prices in excess of GBP75/MWh,
the valuation sensitivity to change in price would be reduced by
approximately 60% compared to the sensitivity were the Electricity
Generator Levy not in place).
Ten Largest Investments
Set out below are the ten largest investments in the portfolio.
As at 31 December 2022, the largest investment (Hornsea One)
accounted for approximately 9% of the portfolio by invested value.
In total, the 10 largest projects accounted for approximately 52%
of the project portfolio by invested value (2021: 55%).
Ten largest investments - Invested to date basis
% of portfolio by value at
Project Location Type 31 December 2022 31 December 2021
Hornsea One England Offshore Wind 9% -
Merkur Germany Offshore Wind 7% 6%
Jädraås Sweden Onshore Wind 7% 8%
Beatrice England Offshore Wind 6% 10%
East Anglia 1 England Offshore Wind 6% 9%
Gode Wind 1 Germany Offshore Wind 4% 5%
Garreg Lwyd Wales Onshore Wind 4% 5%
Crystal Rig II Scotland Onshore Wind 3% 3%
Valdesolar Spain Solar PV 3% -
Sheringham Shoal England Offshore Wind 3% 3%
December 2022 ten largest investments 52%
------------------------------------------------ ---------------- ----------------
Solwaybank Scotland Onshore Wind 2% 3%
Blary Hill Scotland Onshore Wind 2% 2%
------------------- ---------- --------------- ---------------- ----------------
December 2021 ten largest investments 55% [19]
The table below sets out the top ten largest investments in the
portfolio, including investment commitments:
Ten largest investments - Committed basis
% of portfolio by value at
Project Location Type 31 December 2022
Hornsea One England Offshore Wind 8%
Merkur Germany Offshore Wind 7%
Jädraås Sweden Onshore Wind 6%
Beatrice England Offshore Wind 6%
East Anglia 1 England Offshore Wind 6%
Gode Wind 1 Germany Offshore Wind 4%
Garreg Lwyd Wales Onshore Wind 3%
Grönhult Sweden Onshore Wind 3%
Crystal Rig II Scotland Onshore Wind 3%
Valdesolar Spain Solar PV 3%
December 2022 ten largest investments 49%
5 Analysis of Financial Results
As at 31 December 2022, the Group had investments in 90
projects. As an investment entity for IFRS reporting purposes, the
Company carries these investments at fair value. The results below
are shown on a statutory and on an "expanded" basis as we have done
in previous years. See the box below for further explanation.
Basis of preparation
In accordance with IFRS 10, the Group carries investments at
fair value as the Company meets the conditions of being an
Investment Entity. In addition, IFRS 10 states that investment
entities should measure their subsidiaries that are themselves
investment entities at fair value. Being investment entities, The
Renewables Infrastructure Group (UK) Limited ("TRIG UK") and The
Renewables Infrastructure Group (UK) Investments Limited ("TRIG UK
I"), the Company's subsidiaries, through which investments are
purchased, are measured at fair value as opposed to being
consolidated on a line-by-line basis, meaning their cash, debt and
working capital balances are included as an aggregate number in the
fair value of investments rather than the Group's current assets.
In order to provide shareholders with more transparency into the
Group's capacity for investment, ability to make distributions,
operating costs and gearing levels, adjusted results have been
reported in the pro forma tables below.
The pro forma tables that follow show the Group's results for
the year ended 31 December 2022 and the prior year on a
non--statutory "Expanded basis", where TRIG UK and TRIG UK I are
consolidated on a line-by-line basis, compared to the Statutory
IFRS financial statements (the "Statutory IFRS basis"). The
Directors have provided the non-statutory Expanded basis to assist
users of the accounts in understanding the performance and position
of the Company, by including the cash and debt balances carried in
TRIG UK and TRIG UK I and expenses incurred in TRIG UK and TRIG UK
I.
The necessary adjustments to get from the Statutory IFRS basis
to the non-statutory Expanded basis are shown for the primary
financial statements. The commentary provided on the primary
statements of TRIG is on the Expanded Basis.
Income Statement
The Statutory IFRS basis does not include TRIG UK and TRIG UK
I's costs, such as overheads, management fees and acquisition costs
against income. The Expanded basis includes the expenses incurred
within TRIG UK and TRIG UK I to enable users of the accounts to
fully understand the Group's costs. There is no difference in
profit before tax or earnings per share between the two bases.
Balance Sheet
The Statutory IFRS basis includes TRIG UK and TRIG UK I's cash,
debt and working capital balances as part of portfolio value. The
Expanded basis shows these balances gross. There is no difference
in net assets between the Statutory IFRS basis and the Expanded
basis.
The majority of cash generated from investments had been passed
up from TRIG UK and TRIG UK I to the Company by 31 December
2022.
At 31 December 2022, TRIG UK I was GBP398.5m drawn on its
revolving credit facility (2021: GBP72.8m drawn) being the majority
of the difference between the Statutory IFRS basis and the Expanded
basis.
Cash Flow Statement
The Statutory basis shows cash movements for the top company
only (TRIG Limited). The Expanded basis shows the consolidated cash
movements above the investment portfolio which are relevant to
users of the accounts. Differences include income received by TRIG
UK and TRIG UK I applied to reinvestment and expenses incurred by
TRIG UK and TRIG UK I that are excluded under the Statutory IFRS
basis.
The purchase of investments on the Expanded basis is funded by
both the company's revolving credit facility and amounts passed
down after capital raises. The remaining balance is that of
reinvestment.
Income statement
Year to 31 December 2022 Year to 31 December 2021
Summary income statement GBP'million GBP'million
Statutory Statutory
IFRS Basis Adjustments(1) Expanded Basis IFRS Basis Adjustments(1) Expanded Basis
Operating income 555.2 43.4 598.6 174.8 29.5 204.3
Acquisition costs - (2.6) (2.6) - (1.9) (1.9)
---------------------------- ----------- -------------- -------------- ----------- -------------- --------------
Net operating income 555.2 40.8 596.0 174.8 27.6 202.4
Fund expenses (2.3) (27.1) (29.4) (1.9) (21.9) (23.8)
Foreign exchange
(loss)/gains (32.1) (4.3) (36.4) 37.6 0.0 37.6
Finance costs (0.1) (9.4) (9.5) (0.0) (5.7) (5.7)
---------------------------- ----------- -------------- -------------- ----------- -------------- --------------
Profit before tax 520.7 0.0 520.7 210.5 0.0 210.5
---------------------------- ----------- -------------- -------------- ----------- -------------- --------------
EPS(2) 21.5p - 21.5p 10.0p - 10.0p
---------------------------- ----------- -------------- -------------- ----------- -------------- --------------
1. The following were incurred within TRIG UK and TRIG UK I;
acquisition costs, the majority of expenses and credit facility
fees and interest. The income adjustment offsets these cost
adjustments.
2. Calculated based on the weighted average number of shares
during the year being approximately 2,424.0 million shares.
Analysis of Expanded Basis financial results
Profit before tax for the year to 31 December 2022 was GBP520.7
million, generating earnings per share of 21.5p, which compares to
GBP210.5 million and earnings per share of 10.0p for the year to 31
December 2021.
The EPS of 21.5p reflects high revenues generated in the year as
a result of particularly high wholesale power prices coupled with
higher subsidies as a result of their indexation to inflation, and
increases in the portfolio valuation (which is included in
Operating Income) primarily as a result of expectations for power
prices and inflation continuing to be elevated over the
short-medium term.
Other areas contributing to valuation growth have been foreign
exchange movements as sterling has weakened against the euro.
These increases are partially offset by the Electricity
Generator Levy (EGL) introduced in the UK applied to actual
revenues from the sale of electricity in excess of the threshold
schemes and other government intervention schemes (clawback and
caps) across the other markets. The valuation discount rate has
also been increased in the year with the portfolio discount rate
increasing to 7.2% (2021: 6.6%) reflecting increasing long-term
government borrowing rates. This also had the effect of reducing
the overall valuation. The factors causing the movement in the
valuation are more fully described in Section 3.1 - Valuation of
the Portfolio.
Generation volume in the year was below budget, although this
was more than offset by the higher-than-budgeted power prices
achieved during the year.
Acquisition costs of GBP2.6m (2021: GBP1.9m) relate to the
investments in the year, mostly attributable to the investments in
Hornsea One, Valdesolar, Spennymoor, Ryton, Drakelow and Drax
battery storage projects as well as the incremental investment in
Merkur.
Year to Year to
31 December 2022 31 December 2021
(GBP'million) (GBP'million)
Acquisition costs 2.6 1.9
Total acquisition commitments made in the year 648.1 677.9
Acquisition costs as % of investments 0.4% 0.3%
------------------------------------------------ ------------------ ------------------
An increase in fund expenses in the year to 31 December 2022 as
compared to the year to 31 December 2021 reflects the increase in
the size of the portfolio.
Fund expenses of GBP29.4 million (2021: GBP23.8 million)
includes all operating expenses and GBP26.6 million (2021: GBP21.5
million) in fees paid to the Investment and Operations Managers.
Management fees are charged as follows: at 1% of Adjusted Portfolio
Value up to GBP1 billion, 0.8% of Adjusted Portfolio Value in
excess of GBP1 billion, 0.75% of Adjusted Portfolio Value in excess
of GBP2 billion and 0.7% of Adjusted Portfolio Value in excess of
GBP3 billion. This is set out in more detail in the Related Party
and Key Advisor Transactions note, Note 19 to the financial
statements.
During the year the sterling weakened against the euro by 5%
resulting in a positive foreign exchange valuation movement for
existing euro-denominated assets, giving a valuation gain of
GBP73.0 million (2021: GBP58.7 million loss), partially offset by
loss on foreign exchange hedges and cash and debt balances held at
Company level of GBP36.4 million (2021: GBP37.6 million gain)
recorded in the Income Statement. The net foreign exchange gain in
the period is hence GBP36.6 million (2021: GBP21.1 million
loss).
Finance costs relate to the interest and fees incurred relating
to the Group's revolving credit facility. The finance costs in the
period are higher than the comparative period, reflecting increased
interest rates in the year.
Ongoing charges
Year to Year to
31 December 2022 31 December 2021
Ongoing Charges (Expanded Basis) GBP'000s GBP'000s
Investment and Operations Managers' fees 26,639 21,520
Audit fees 300 272
Directors' fees and expenses 375 342
Other ongoing expenses 1,934 1,519
------------------------------------------ ----------------- -----------------
Total expenses(1) 29,246 23,653
------------------------------------------ ----------------- -----------------
Average net asset value 3,123,518 2,435,718
Ongoing Charges Percentage (OCP) 0.93% 0.97%
------------------------------------------ ----------------- -----------------
1. Total expenses excludes GBP0.1m (2021: GBP1.1m) of lost bid costs incurred during the year.
The Ongoing Charges Percentage is 0.93% (2021: 0.97%). The
ongoing charges have been calculated in accordance with AIC
guidance and are defined as annualised ongoing charges (i.e.
excluding acquisition costs and other non-recurring items) divided
by the average published undiluted net asset value in the year. The
Ongoing Charges Percentage has been calculated on the Expanded
Basis and therefore takes into consideration the expenses of TRIG
UK and TRIG UK I as well as those of the Company.
The decrease in OCP level reflects the tiered Manager Fees that
reduce as Portfolio Value grows as well as the growth of the
Company in the year, meaning the Company's expenses are spread over
a larger capital base. There is no performance fee paid to any
service provider.
Balance sheet
Summary balance As at 31 December 2022 As at 31 December 2021
sheet GBP'million GBP'million
Statutory IFRS Statutory IFRS
Basis Adjustments Expanded Basis Basis Adjustments Expanded Basis
Portfolio value 3,322.6 414.4 3,737.0 2,636.8 89.0 2,725.8
Working capital 12.4 (16.0) (3.6) 13.9 (15.9) (2.0)
------------------- ------------------ ----------- -------------- ------------------- ----------- --------------
Hedging
Asset/(Liability) (16.8) (0.7) (17.5) 27.3 (0.6) 26.7
Debt - (398.5) (398.5) - (72.8) (72.8)
Cash 24.5 0.8 25.3 28.2 0.3 28.5
------------------- ------------------ ----------- -------------- ------------------- ----------- --------------
Net assets(1) 3,342.7 - 3,342.7 2,706.2 - 2,706.2
------------------- ------------------ ----------- -------------- ------------------- ----------- --------------
Net asset value
per share 134.6p - 134.6p 119.3p - 119.3p
------------------- ------------------ ----------- -------------- ------------------- ----------- --------------
1. The hedging liability has been shown net above, this consists
of current and non-current asset and liability balances relating to
FX forward contracts, this is discussed further in note 18 of the
financial statements.
Analysis of Expanded Basis financial results
Portfolio value grew by GBP1,011.2 million in the year to
GBP3,737.0 million, primarily as a result of the investments made
in the year to 31 December 2022 and strong valuation growth as
described more fully in the "Valuation of the Portfolio" section of
this Strategic Report.
Hedging liabilities and assets represent the value of
outstanding foreign exchange derivatives used to manage the
Company's risk to movements in the foreign exchange rate between
the sterling and euro. Working capital amounts include debtors,
liabilities and capitalised financing costs.
Group cash at 31 December 2022 was GBP25.3 million (2021:
GBP28.5 million) and credit facility debt drawn at 31 December 2022
was GBP398.5 million (2021: GBP72.8 million).
Net assets grew by GBP636.5 million in the year to GBP3,342.7
million. The Company raised GBP276.3 million (after issue expenses)
of new equity during the year to support investment activity and
produced a GBP520.7 million profit in the year, with net assets
being stated after accounting for dividends paid in the year (net
of scrip take-up) of GBP160.4 million. Other movements in net
assets totalled GBP1.0 million, being the Managers' shares which
form part of the management fee accrued at 31 December 2022 and to
be issued on or around 30 March 2023.
Net asset value ("NAV") and Earnings per share ("EPS")
reconciliation
Net asset value ("NAV") per share as at 31 December 2022 was
134.6p compared to 119.3p at 31 December 2021.
Net assets
NAV per share Shares in issue (m) (GBPm)
Net assets at 31 December 2021 119.3p 2,267.2 2,705.2
Profit/EPS to 31 December 2022 21.5p(1) - 520.7
Shares issued (net of costs)(2) 0.6p(3) 211.7 276.3
Dividends paid in 2022 (6.8)p (165.6)
Scrip dividend take-up(4) - 3.9 5.2
H2 2022 Managers' shares to be issued - 0.8 1.0
--------------------------------------- ------------- ------------------- ----------
Net assets at 31 December 2022 134.6p 2,483.6(5) 3,342.8(5)
--------------------------------------- ------------- ------------------- ----------
1. Calculated based on the weighted average number of shares
during the year being 2,424.0 million shares.
2. Includes shares issued to managers (less costs) during the year.
3 The increase in net assets per share of 0.6p was the result of
accretive share issues where shares were issued above the Company's
net asset value per share.
4. Scrip dividend take-up comprises 3.9 million shares issued during the year.
5. Balance may not cast due to rounding.
Cash flow statement
Summary cash flow Year to 31 December 2022 Year to 31 December 2021
statement GBP'million GBP'million
Statutory IFRS Statutory IFRS
Basis Adjustments Expanded Basis Basis Adjustments Expanded Basis
Cash received from
investments 184.8 98.9 283.7 155.4 20.5 175.9
Operating and finance
costs (2.0) (33.0) (35.0) (1.9) (23.6) (25.5)
------------------------ ---------------- ----------- -------------- ---------------- ----------- --------------
Cash flow from
operations 182.8 65.9 248.7 153.5 (3.1) 150.4
Debt arrangement costs - (0.3) (0.3) - (0.1) (0.1)
Foreign exchange
gains/(losses) 11.8 (6.5) 5.3 3.1 0.5 3.6
Issue of share capital
(net of costs) 276.3 (2.0) 274.3 434.9 (2.0) 432.9
Credit facility
drawn/(repaid) - 325.7 325.7 - 32.8 32.8
Purchase of new
investments (including
acquisition costs) (314.1) (382.1) (696.4) (452.3) (28.6) (480.9)
Distributions paid (160.5) - (160.5) (134.1) - (134.1)
------------------------ ---------------- ----------- -------------- ---------------- ----------- --------------
Cash movement in year (3.7) 0.5 (3.2) 5.1 (0.5) 4.6
Opening cash balance 28.2 0.3 28.5 23.1 0.8 23.9
------------------------ ---------------- ----------- -------------- ---------------- ----------- --------------
Net cash at end of year 24.5 0.8 25.3 28.2 0.3 28.5
------------------------ ---------------- ----------- -------------- ---------------- ----------- --------------
Analysis of Expanded Basis financial results
Cash received from investments in the year was GBP283.7 million
(2021: GBP175.9 million). The increase in cash received compared
with the previous year reflects the increase in the size of the
portfolio. The adjustment reflects working capital movements and
cash flow available for reinvestment and proceeds in the year.
Dividends paid in the year totalled GBP160.5 million (net of
GBP5.2 million scrip dividends). Dividends paid in the prior year
totalled GBP134.1 million (net of GBP7.5 million scrip
dividends).
Cash flow from operations in the year was GBP248.7 million
(2021: GBP150.4 million) and covers dividends paid of GBP160.5
million in the year (2021: GBP134.1 million) by 1.55 times (or 1.50
times without the benefit of scrip take-up), or 2.55 times before
factoring in amounts invested in the repayment in project-level
debt. The Group repaid GBP174 million of project-level debt
(pro-rata to the Company's equity interest) in the year.
Share issue proceeds (net of costs) totalled GBP274.3 million
(2021: GBP432.9 million) reflecting the net proceeds of the 210.1
million shares issued in the March 2022 equity fund raise.
In the year, GBP696.4 million was invested in acquisitions.
These were funded through the March equity fund raise (net proceeds
of GBP274.3 million), drawing on the Company's credit facility of
GBP325.7 million, as well as the reinvestment of surplus cash
flows.
Cash balances decreased slightly in the period by GBP3.2
million.
The company has future commitments relating to the Cadiz solar
projects (Arenosas, El Yarte, La Guita and Malabrigo), Ranasjö and
Salsjö wind farms, Grönhult and Goshawk (Ryton, Drakelow and Drax)
as follows.
2023 2024 2025 Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm)
Outstanding Commitments 98 64 37 205
------------------------- -------- -------- -------- --------
Financing
The Group's recently increased GBP750m revolving credit facility
is with a banking group comprising Royal Bank of Scotland
International, National Australia Bank, ING, Sumitomo Mitsui
Banking Corporation, Barclays, Lloyds, BNP Paribas, ABN Amro,
Skandinaviska Enskilda Banken (SEB) and Intesa SanPaolo. The
facility expiry date is 31 December 2025 with options to extend for
up to an additional 24 months. Margins on the facility when drawn
are 1.85% over the relevant reference rate. The facility can be
drawn in sterling or euros.
The revolving credit facility enables the Group to fund new
acquisitions and to provide letters of credit should they be
required. The facility includes a GBP45m working capital
element.
The short-term financing provided by the revolving credit
facility is limited to 30% of the portfolio value. It is intended
that any drawings used to finance acquisitions are repaid, in
normal market conditions, within a year through equity
fundraisings.
The credit facility was drawn at the commencement of the year
having funded investments in 2021 and was subsequently repaid
following the capital raising in March 2022. During the second half
of the year further new investments were funded in addition to
providing funding to the Spanish solar projects and Swedish wind
projects the Group has in construction. The balance at the year end
is GBP399m.
In addition to the revolving credit facility, the projects may
have underlying project-level debt. There is an additional gearing
limit in respect of such debt, which is typically non-recourse to
TRIG, of 50% of the Gross Portfolio Value (being the total
enterprise value of such portfolio companies), measured at the time
the debt is drawn down or acquired as part of an investment. The
Company may, in order to secure advantageous borrowing terms,
secure a project finance facility over a group of portfolio
companies.
The project-level gearing at 31 December 2022 across the
portfolio was 38% (2021: 40%). Principal repayments in the year
totalled GBP174m, as the debt is retired over the project's subsidy
periods. Gearing has reduced during 2022 partially due to the
scheduled repayment of debt in the year and partially due to the
mix of acquisitions in the year, some of which introduced new debt
in projects and some of which were acquired without project
debt.
The vast majority of the project debt is fixed and has an
average cost of 3.6% (including margin). The project-level debt is
fully amortising and repaid in each case over the period of the
subsidy term. The portfolio weighted average subsidy life remaining
is 11 years.
Foreign Exchange Hedging
At the year end, 41% of the portfolio was located within France,
the Republic of Ireland, Sweden[20], Germany and Spain and hence is
invested in euro-denominated assets.
The Group enters into forward hedging contracts against expected
income from the euro-denominated investments' distributions up to
four years ahead. In addition, the Group aims to enter into further
forward hedging contracts such that, when combined with the "income
hedges", the overall level of hedge achieved in relation to the
euro-denominated assets is at least 50% of their aggregate value.
The group may also make drawings under the revolving credit
facility in euros, which provides further foreign exchange
hedging.
During the majority of 2022, the Group targeted hedging of
approximately 60% to 80% of the overall euro portfolio value. The
Group has been maintaining this increased hedging level since 2019
in light of increased euro / sterling exchange rate volatility risk
related to Brexit and subsequently due to other economic
factors.
The Investment Manager keeps the level of euros hedged under
review, with the objective of minimising variability in
shorter-term cash flows and reducing NAV volatility. It seeks to
maintain a balance between managing the sterling value of cash flow
receipts and mark-to-market cash outflows.
As well as addressing foreign exchange uncertainty on the
conversion of the expected euro distributions from investments, the
hedge also provides a partial offset to foreign exchange movements
in the portion of the portfolio value relating to the
euro-denominated assets.
The impact on NAV per share of a 10% movement in the euro
exchange rate after the impact of hedges held by the Group outside
of the investment portfolio is 1.7p assuming an effective euro
foreign exchange hedge of 60% - this is explained in more detail in
Section 3.1 and Note 4 in the Notes to the Financial Statements
(Valuation Sensitivities - euro/sterling exchange rate).
Going Concern
Having performed the assessment of going concern, the Directors
considered it appropriate to prepare the financial statements of
the Company on a going concern basis. The Company has sufficient
financial resources and liquidity and is well placed to manage
business risks in the current economic environment (including but
not limited to the conflict in Ukraine and current upward
inflationary pressures) and can continue operations for a period of
at least 12 months from the date of these financial statements.
Further information on the Directors, assessment and decision to
prepare the financial statement on a going concern basis can be
found in the Report of the Directors in Section 4.6 of this
report.
Related Parties
Related party transactions are disclosed in Note 19 to the set
of financial statements.
6 Financial Statements
Income Statement
For the year ended 31 December 2022
Year ended Year ended
31 December 2022 31 December 2021
Note GBP'000s GBP'000s
Net gain on investments 6 433,960 68,775
Dividend income 6 - 4,900
Interest income from investments 6 121,247 101,121
------------------------------------ ---- ----------------- -----------------
Total operating income 555,207 174,796
Fund expenses 7 (2,290) (1,904)
------------------------------------ ---- ----------------- -----------------
Operating profit 552,917 172,892
Finance and other (expense)/income 8 (32,207) 37,570
------------------------------------ ---- ----------------- -----------------
Profit before tax 520,710 210,462
Income tax 9 - -
------------------------------------ ---- ----------------- -----------------
Profit after tax 10 520,710 210,462
------------------------------------ ---- ----------------- -----------------
Attributable to:
Equity holders of the parent 520,710 210,462
------------------------------------ ---- ----------------- -----------------
520,710 210,462
------------------------------------ ---- ----------------- -----------------
Earnings per share (pence) 10 21.5 10.0
------------------------------------ ---- ----------------- -----------------
All results are derived from continuing operations. The
accompanying notes are an integral part of these financial
statements.
There is no other comprehensive income or expense apart from
those disclosed above and consequently, a separate statement of
comprehensive income has not been prepared.
Balance Sheet
As at 31 December 2022
As at As at
31 December 2022 31 December 2021
Note GBP'000s GBP'000s
Non-current assets
Investments at fair value through profit or loss 13 3,322,611 2,636,785
Fair value of FX forward contracts 18 1,622 13,219
--------------------------------------------------- ---- ----------------- -----------------
Total non-current assets 3,324,233 2,650,004
--------------------------------------------------- ---- ----------------- -----------------
Current assets
Other receivables 14 12,913 14,232
Fair value of FX forward contracts 18 1,096 14,074
Cash and cash equivalents 15 24,469 28,229
--------------------------------------------------- ---- ----------------- -----------------
Total current assets 38,478 56,535
--------------------------------------------------- ---- ----------------- -----------------
Total assets 3,362,711 2,706,539
--------------------------------------------------- ---- ----------------- -----------------
Non-current liabilities
Fair value of FX forward contracts 18 (16,780) -
--------------------------------------------------- ---- ----------------- -----------------
Total non-current liabilities (16,780) -
--------------------------------------------------- ---- ----------------- -----------------
Current liabilities
Fair value of FX forward contracts 18 (2,753) -
Other payables 16 (440) (362)
--------------------------------------------------- ---- ----------------- -----------------
Total current liabilities (3,193) (362)
--------------------------------------------------- ---- ----------------- -----------------
Total liabilities (19,973) (362)
--------------------------------------------------- ---- ----------------- -----------------
Net assets 12 3,342,738 2,706,177
--------------------------------------------------- ---- ----------------- -----------------
Equity
Share capital and share premium 17 2,770,050 2,488,594
Other reserves 17 1,008 1,008
Retained reserves 17 571,680 216,575
--------------------------------------------------- ---- ----------------- -----------------
Total equity attributable to owners of the parent 12 3,342,738 2,706,177
--------------------------------------------------- ---- ----------------- -----------------
Net assets per Ordinary Share (pence) 12 134.6 119.3
--------------------------------------------------- ---- ----------------- -----------------
The accompanying notes are an integral part of these financial
statements.
The financial statements were approved and authorised for issue
by the Board of Directors on 21 February 2023, and signed on its
behalf by:
Director: John Whittle
Director: Richard Morse
Statement of Changes in Shareholders' Equity
For the year ended 31 December 2022
Share capital and share premium Other reserves Retained reserves Total equity
GBP'000s GBP'000s GBP'000s GBP'000s
Shareholders' equity at beginning
of year 2,488,594 1,008 216,575 2,706,177
------------------------------------ ------------------------------- -------------- ----------------- ------------
Profit for the year - - 520,710 520,710
Dividends paid - - (160,454) (160,454)
Scrip shares issued in lieu of
dividend 5,151 - (5,151) -
Ordinary Shares issued 277,338 - - 277,338
Costs of Ordinary Shares issued (3,033) - - (3,033)
Ordinary Shares issued in year in
lieu of Management Fees earned in
H2 20211 1,008 (1,008) - -
Ordinary Shares issued in year in
lieu of Management Fees earned in
H1 20222 992 - - 992
Ordinary Shares to be issued in
lieu of Management Fees earned in
H2 20223 - 1,008 - 1,008
------------------------------------ ------------------------------- -------------- ----------------- ------------
Shareholders' equity at end of year 2,770,050 1,008 571,680 3,342,738
------------------------------------ ------------------------------- -------------- ----------------- ------------
For the year ended 31 December 2021
Share capital and share premium Other reserves Retained reserves Total equity
GBP'000s GBP'000s GBP'000s GBP'000s
Shareholders' equity at beginning
of year 2,046,237 1,005 147,629 2,194,871
------------------------------------ ------------------------------- -------------- ----------------- ------------
Profit for the year - - 210,462 210,462
Dividends paid - - (134,058) (134,058)
Scrip shares issued in lieu of
dividend 7,458 - (7,458) -
Ordinary Shares issued 439,850 - - 439,850
Costs of Ordinary Shares issued (6,948) - - (6,948)
Ordinary Shares issued in year in
lieu of Management Fees earned in
H2 20204 1,005 (1,005) - -
Ordinary Shares issued in year in
lieu of Management Fees earned in
H1 20215 992 - - 992
Ordinary Shares to be issued in
lieu of Management Fees earned in
H2 20211 - 1,008 - 1,008
------------------------------------ ------------------------------- -------------- ----------------- ------------
Shareholders' equity at end of year 2,488,594 1,008 216,575 2,706,177
------------------------------------ ------------------------------- -------------- ----------------- ------------
In line with the Investment Management Agreement and the
Operations Management Agreement, 20 per cent of the management fees
are to be settled in Ordinary Shares up to an Adjusted Portfolio
Value of GBP1 billion.
1 The GBP1,008,219 transfer between reserves represents the
857,254 shares that relate to management fees earned in the six
months to 31 December 2021 and were recognised in other reserves at
31 December 2021, and were issued to the Managers during the year,
with the balance being transferred to share premium reserve on 31
March 2022.
2 The GBP991,779 addition to the share premium reserve
represents the 748,569 shares that relate to management fees earned
in the six months to 30 June 2022 and were issued to the Managers
on 30 September 2022.
3 As at 31 December 2022, 758,686 shares equating to
GBP1,008,219, based on a Net Asset Value ex dividend of 132.89
pence per share (the Net Asset Value at 31 December 2022 of 134.6
pence per share less the interim dividend of 1.71 pence per share)
were due but had not been issued. The Company intends to issue
these shares to the Managers around 31 March 2023.
4 The GBP1,005,462 transfer between reserves represents the
885,012 shares that relate to management fees earned in the six
months to 31 December 2020 and were recognised in other reserves at
31 December 2020, and were issued to the Managers during 2021, with
the balance being transferred to share premium reserves on 31 March
2021.
5 The GBP991,778 addition to the share premium reserve
represents the 880,719 shares that relate to management fees earned
in the six months to 30 June 2021 and were issued to the Managers
on 30 September 2021.
The accompanying notes are an integral part of these financial
statements.
Cash Flow Statement
For the year ended 31 December 2022
Year ended Year ended
31 December 2022 31 December 2021
Note GBP'000s GBP'000s
Cash flows from operating activities
Profit before tax 10 520,710 210,462
Adjustments for:
Net gain on investments 6, 13 (433,960) (68,775)
Dividend income - (4,900)
Investment income from investments 6 (121,247) (101,121)
Acquisition costs 7 16 -
Movement in other reserves relating to Manager shares 0 3
Realised gains on settlement of FX forwards 9,689 7,643
Finance and other expense/(income) 8 32,207 (36,336)
------------------------------------------------------- ----- ----------------- -----------------
Operating cash flow before changes in working capital 7,415 6,976
Changes in working capital:
Increases in receivables (2) (4)
Decreases in payables 77 63
------------------------------------------------------- ----- ----------------- -----------------
Cash flow from operations 7,490 7,035
Distributions from investments 13 184,763 149,522
Interest on bank deposits 120 1
------------------------------------------------------- ----- ----------------- -----------------
Net cash from operating activities 192,373 156,558
------------------------------------------------------- ----- ----------------- -----------------
Cash flows from investing activities
Purchases of investments 13 (314,059) (452,289)
Acquisition costs 7 (16) -
------------------------------------------------------- ----- ----------------- -----------------
Net cash used in investing activities (314,075) (452,289)
------------------------------------------------------- ----- ----------------- -----------------
Cash flows from financing activities
Proceeds from issue of share capital during year 279,338 441,847
Costs in relation to issue of shares 17 (3,033) (6,948)
Dividends paid to shareholders 11 (160,454) (134,058)
------------------------------------------------------- ----- ----------------- -----------------
Net cash from financing activities 115,851 300,841
------------------------------------------------------- ----- ----------------- -----------------
Net (decrease)/increase in cash and cash equivalents (5,851) 5,110
------------------------------------------------------- ----- ----------------- -----------------
Cash and cash equivalents at beginning of year 15 28,229 23,116
Exchange gains on cash 2,091 3
------------------------------------------------------- ----- ----------------- -----------------
Cash and cash equivalents at end of year 15 24,469 28,229
------------------------------------------------------- ----- ----------------- -----------------
The accompanying notes are an integral part of these financial
statements.
7 Notes to the Financial Statements
1. General information
The Renewables Infrastructure Group Limited ("TRIG" or the
"Company") is a closed-ended investment company incorporated in
Guernsey under Section 20 of the Companies (Guernsey) Law, 2008.
The shares are publicly traded on the London Stock Exchange under a
premium listing. Through its subsidiaries, The Renewables
Infrastructure Group (UK) Limited ("TRIG UK"), and The Renewables
Infrastructure Group (UK) Investments Limited ("TRIG UK I"), TRIG
invests in mainly operational renewable energy generation projects,
predominantly in onshore and offshore wind and solar PV segments,
across the UK and Europe. The Company, TRIG UK, TRIG UK I and its
portfolio of investments are known as the "Group".
These financial statements are for the year ended 31 December
2022 and comprise only the results of the Company, as all of its
subsidiaries are measured at fair value as explained below in Note
2 (a).
2. Key accounting policies
(a) Basis of preparation
The financial statements were approved and authorised for issue
by the Board of Directors on 21 February 2023.
The financial statements, which give a true and fair view, have
been prepared in compliance with the Companies (Guernsey) Law, 2008
and in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") using the
historical cost basis, except that the financial instruments
classified at fair value through profit or loss are stated at their
fair values. All accounting policies have been applied consistently
in these financial statements.
The financial statements are presented in pounds sterling, which
is the Company's functional currency. Foreign operations are
included in accordance with the policies set out in this note.
The preparation of financial statements in conformity with IFRS
as adopted by the EU requires the Directors to make judgements,
estimates and assumptions that affect the application of policies
and the reported amounts of assets and liabilities, income and
expense. The estimates and associated assumptions are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the year in which the estimate is revised if the revision affects
only that year, or in the year of the revision and future years if
the revision affects both current and future years. Note 3 shows
critical accounting judgements, estimates and assumptions.
(b) Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report and also commented on in the
Viability Statement on page 82. The financial position of the
Group, its cash flows, liquidity position and borrowing facilities
are described in the Financial Results on pages 67 to 73. In
addition, Notes 1 to 4 of the financial statements include the
Group's objectives, policies and processes for managing its
capital, its financial risk management objectives, details of its
financial instruments and hedging activities and its exposures to
credit risk and liquidity risk.
The Group has the necessary financial resources to meet its
obligations for the foreseeable future. The Group benefits from a
range of long-term contracts with various major UK and European
utilities and well-established suppliers across a range of
infrastructure projects.
On 3 February 2023, the revolving credit facility was renewed
and extended from GBP600m to GBP750m with an expiry date of 31
December 2025. The revolving credit facility includes a working
capital component of GBP45m and is limited to 30% of Portfolio
Value.
The revolving credit facility is ESG-linked, resulting in a
possible increase or reduction to future interest payments based on
the company's performance against KPIs relating to ESG targets over
time.
The Group's project-level financing is non - recourse to the
Company and is limited to 50% of Gross Portfolio Value. As a
consequence, the Directors believe that the Group is well placed to
manage its business risks successfully.
At 31 December 2022, the Company's leverage was 11% for
fund-level financing (2021: 3%) and 38% for project-level financing
(2021: 40%).
The Company has sufficient headroom on its revolving credit
facility covenants. These covenants have been tested and relate to
interest cover ratios and group gearing limits and the Company does
not expect these covenants to be breached. The Company and its
direct subsidiaries have a number of guarantees, detailed in note
20 of these financial statements. These guarantees relate to
certain obligations that may become due by the underlying
investments over their useful economic lives. We do not anticipate
these guarantees to be called in the next 12 months and in many
cases the potential obligations are insured by the underlying
investments.
A cash balance of GBP24.5m at 31 December 2022 is held by the
Company, with further amounts held in the Company's direct and
indirect subsidiaries. In addition, the Company has a working
capital facility on its revised revolving credit facility of
GBP45m, which remains undrawn at the date of signing this
report.
Further to the above, the Company has a number of outstanding
commitments which are detailed in Section 2.2 of this Annual Report
and Note 20 of these financial statements. These commitments can be
fully covered by the Company's revolving credit facility.
As a consequence, the Directors believe that the Group is well
placed to manage its business risks successfully. The directors do
not believe that there is a significant risk to the business as a
result of the Russian invasion of Ukraine but will continue to
monitor any future developments.
The Company is affected by climate-related risks, as set out in
the Company's TCFD reporting, and the Board consider these when
they assess the Company's ability to continue as a going concern.
The Company continues to assess, monitor and where necessary and
possible, mitigate and manage these risks.
Having performed the assessment of going concern, the Directors
considered it appropriate to prepare the financial statements of
the Company on a going concern basis. The Company has sufficient
financial resources and liquidity and is well placed to manage
business risks in the current economic environment (including but
not limited to the conflict in Ukraine and current upward
inflationary pressures) and can continue operations for a period of
at least 12 months from the date of these financial statements.
(c) Basis of consolidation
The Company applies IFRS 10 "Consolidated Financial Statements",
and as an investment entity is required to measure all of its
subsidiaries at fair value. The financial statements therefore
comprise the results of the Company only. Subsidiaries are those
entities owned by the Company. The Company has ownership of an
investee, when it is exposed, or has rights to variable returns
from its involvement with the investee and has the ability to
affect those returns through its power over the investee as defined
in IFRS 10 "Consolidated Financial Statements".
The Directors believe it is appropriate and relevant to the
investor to account for the investment portfolio at fair value,
where consolidating it would not be.
The Company's subsidiaries, TRIG UK and TRIG UK I, carry out
investment activities and incur overheads and borrowings on behalf
of the Group. The Directors therefore provide an alternative
presentation of the Company's results in the Strategic Report on
pages 67 to 73 prepared under the "Expanded basis", which includes
the consolidation of TRIG UK and TRIG UK I.
An entity shall consider all facts and circumstances when
assessing whether it is an investment entity, including its purpose
and design. Under the definition of an investment entity, as set
out in paragraph 27 in the standard, the entity must satisfy all
three of the following tests:
Obtains funds from one or more investors for the purpose of
providing those investors with investment management services;
and
Commits to its investors that its business purpose is to invest
funds solely for returns from capital appreciation, investment
income or both (including having an exit strategy for investments);
and
Measures and evaluates the performance of substantially all of
its investments on a fair value basis.
In respect of the first criterion, TRIG is an investment company
which enables shareholders to gain exposure to a diversified
portfolio of renewable energy and related infrastructure
investments coupled with the management of these investments.
In respect of the second criterion, the Company's purpose is to
invest funds for returns from capital appreciation and investment
income. The Company's exit of its investments in project companies
may be at the time the existing turbines or other generation assets
get to the end of their economic lives or planning or leasehold
land interests expire, at which point the project companies may be
considering redevelopment (referred to as a "repowering") of the
site. The Company may remain invested in the event there is the
opportunity to repower and undertake the repowering, subject to its
investment limits on construction activity being met and depending
on economic considerations at the time. The Company may also exit
investments earlier for reasons of portfolio balance or profit, as
there is an active secondary market for renewables projects in the
countries in which we operate.
In respect of the third criterion, the board evaluates the
performance of the assets on a fair market value basis throughout
the year as part of the management accounts review, and the company
undertakes a fair market valuation of its portfolio twice a year
for inclusion in its report and accounts with the movement in the
valuation taken to the Income Statement and thus measured within
its earnings.
Taking these factors into consideration, the Directors are of
the opinion that the Company has all the typical characteristics of
an investment entity and meets the definition in the standard.
(d) Financial instruments
Financial assets and liabilities are recognised on the balance
sheet when the Company becomes a party to the contractual
provisions of the instrument. Financial assets are derecognised
when the contractual rights to the cash flows from the instrument
expire or the asset is transferred, and the transfer qualifies for
derecognition in accordance with IFRS 9 "Financial
Instruments".
Financial derivatives are valued using a mark to market
valuation based on the underlying derivative contracts that are
executed with the banks. The movements in mark to market valuation
are recognised in the profit and loss statement.
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in
equity and debt securities, trade and other receivables, cash and
cash equivalents, loans and borrowings and trade and other
payables.
Non-derivative financial instruments are recognised initially at
fair value (including directly attributable transaction costs where
these instruments are held at amortised cost). Subsequent to
initial recognition, non-derivative financial instruments are
measured as described below.
Investments in equity and debt securities
Investments in the equity, loan stock and mezzanine debt of
entities engaged in renewable energy activities are designated upon
initial recognition as held at fair value through profit or loss.
Gains or losses resulting from the movement in fair value are
recognised in the Income Statement at each valuation point.
Financial assets are recognised/derecognised at fair value at
the date of the purchase/disposal. A financial asset (in whole or
part) is derecognised either:
when the group has transferred substantially all of the risks
and rewards of ownership; or
when it has neither transferred nor retained substantially all
of the risks and rewards when it no longer has control over the
asset or a portion of the asset; or
when the contractual rights to receive cash flow have
expired.
The initial difference between the transaction price and the
fair value, derived from using the discounted cash flows
methodology at the date of acquisition, is recognised only when
observable market data indicates there is a change in a factor that
market participants would consider in setting the price of that
investment. For the years ended 31 December 2022 and 31 December
2021, there were no such differences.
The Group manages these investments and makes purchase and sale
decisions based on their fair value.
The Directors consider the equity and loan stock to share the
same investment characteristics and risks and they are therefore
treated as a single unit of account for valuation purposes and a
single class for disclosure purposes.
(e) Impairment
Financial assets
Financial assets, other than those at fair value through profit
or loss, are assessed for indicators of impairment at each balance
sheet date. A financial asset is considered to be impaired if
objective evidence indicates that one or more events have had a
negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
discounted at the original effective interest rate. Significant
financial assets are tested for impairment on an individual basis.
The remaining financial assets are assessed collectively in groups
that share similar credit risk characteristics. All impairment
losses are recognised in the income statement. An impairment loss
is reversed if the reversal can be related objectively to an event
occurring after the impairment loss was recognised. For financial
assets measured at amortised cost the reversal is recognised in the
income statement. Expected credit losses are assessed and measured
annually and where appropriate, recognised as a loss allowance.
(f) Share capital and share premium
Ordinary Shares are classified as equity. Costs directly
attributable to the issue of new shares or associated with the
establishment of the Company that would otherwise have been avoided
are written off against the value of the ordinary share
premium.
(g) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, deposits held
on call with banks and other short-term, highly liquid investments
with original maturities of three months or less. Bank overdrafts
that are repayable on demand are included as a component of cash
and cash equivalents for the purpose of the cash flow
statement.
(h) Investment income
Income from investments relates solely to returns from the
Company's subsidiaries, TRIG UK and TRIG UK I. This is recognised
as it accrues by reference to the principal outstanding and the
effective interest rate applicable and dividends when these are
received.
(i) Income tax
Under the current system of taxation in Guernsey, the Company is
exempt from paying taxes on non-Guernsey source income or capital
gains.
(j) Foreign exchange gains and losses
Transactions entered into by the Company in a currency other
than its functional currency are recorded at the rates ruling when
the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the balance sheet
date. Exchange differences arising on the retranslation of
unsettled monetary assets and liabilities are recognised
immediately in the income statement.
(k) Segmental reporting
The Chief Operating Decision Maker (the "CODM") is of the
opinion that the Group is engaged in a single segment of business,
being investment in renewable infrastructure to generate investment
returns while preserving capital. The financial information used by
the CODM to allocate resources and manage the Group presents the
business as a single segment comprising a homogeneous
portfolio.
(l) Fund expenses
All expenses are accounted for on an accruals basis. The
Company's investment management and administration fees (refer to
Note 7), finance costs and all other expenses are charged through
the income statement.
(m) Acquisition costs
In line with IFRS 3 (Revised), acquisition costs are expensed to
the income statement as incurred.
(n) Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends, this is when they are paid. For
scrip dividends, where the Company issues shares with an equal
value to the cash dividend amount as an alternative to the cash
dividend, a credit to equity is recognised when the shares are
issued.
(o) Statement of compliance
Pursuant to the Protection of Investors (Bailiwick of Guernsey)
Law, 1987 the Company is a Registered Closed-Ended Investment
Scheme. As an authorised scheme, the Company is subject to certain
ongoing obligations to the Guernsey Financial Services Commission
and meets its compliance requirements.
(p) Share-based payments
Equity-settled share-based payment transactions with parties
other than employees are measured at the fair value of the goods or
services received, except where the fair value cannot be estimated
reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at that date the entity
obtains the goods or the counterparty renders the service.
(q) New and revised standards
The Company notes the following standards and interpretations
which were in issue but not effective at the date of these
financial statements. They are not expected to have a material
impact.
Amendments to IAS 1 Classification of Liabilities as Current or
Non-current (effective for annual periods beginning on or after 1
January 2023)
Amendments to IAS 8 Definition of Accounting Estimates
(effective for annual periods beginning on or after 1 January
2023)
New IFRS 17 Insurance Contracts (effective for annual periods
beginning on or after 1 January 2023)
3. Critical accounting judgements, estimates and assumptions
The preparation of financial statements in accordance with IFRS
requires management to make judgements, estimates and assumptions
in certain circumstances that affect reported amounts. The
judgements, estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are outlined
below.
Key source of estimation uncertainty: Investments at fair value
through profit or loss
IFRS 13 establishes a single source of guidance for fair value
measurements and disclosures about fair value measurements. Fair
value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The Board base
the fair value of the investments on information received from the
Investment Manager. Fair value is calculated on a discounted cash
flow basis.
Fair values for those investments for which a market quote is
not available, in this instance being all investments, are
determined using the income approach, which discounts the expected
cash flows at the appropriate rate. In determining the discount
rate, relevant long-term government bond yields, specific risks
associated with the technology (onshore wind, offshore wind,
battery storage and solar) and geographic location of the
underlying investment, and the evidence of recent transactions have
all been considered. The investments at fair value through profit
or loss, whose fair values include the use of level 3 inputs, are
valued by discounting future cash flows from investments in both
equity (dividends and equity redemptions) and subordinated loans
(interest and repayments) to the Group at an appropriate discount
rate.
The weighted average discount rate applied in the December 2022
valuation was 7.2% (2021: 6.6%). The discount rate is considered
one of the most significant unobservable inputs through which an
increase or decrease would have a material impact on the fair value
of the investments at fair value through profit or loss, which are
further discussed in Note 4 under sensitivities.
The other material impacts on the measurement of fair value are
the forward-looking power price curve, energy yields, operating
costs and macro economic assumptions (including rates of inflation)
which are further discussed in Note 4 under sensitivities. The
company considers climate-related risks such as power prices
(including the impact of net zero curves), asset availability and
maintenance costs when assessing these assumptions. Further
information on these climate change risks is discussed in more
detail in part 4 of Section 3.6 in of this Annual Report.
The Investment Manager, when considering the assumptions to
apply to the valuation of the investments at 31 December 2022,
considers several key assumptions.
Key judgements
By virtue of the Company's status as an investment fund, and in
conjunction with IFRS 10 for investment entities, investments are
designated upon initial recognition to be accounted for at fair
value through profit or loss.
The Directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the financial statement are approximately equal to their
fair values.
4. Financial instruments
Financial risk management
The objective of the Group's financial risk management is to
manage and control the risk exposures of its investment portfolio.
The Board of Directors has overall responsibility for overseeing
the management of financial risks, however the review and
management of financial risks are delegated to the Investment
Manager, which has documented procedures designed to identify,
monitor and manage the financial risks to which the Group is
exposed. Note 4 presents information about the Group's exposure to
financial risks, its objectives, policies and processes for
managing risk and the Group's management of its financial
resources.
Through its subsidiaries, TRIG UK and TRIG UK I, the Company
invests in a portfolio of investments predominantly in the
subordinated loan stock and ordinary equity of renewable energy
project companies. These companies are structured at the outset to
minimise financial risks where possible, and the Investment Manager
primarily focuses their risk management on the direct financial
risks of acquiring and holding the portfolio but continues to
monitor the indirect financial risks of the underlying projects
through representation, where appropriate, on the Boards of the
project companies, and the receipt of regular financial and
operational performance reports.
The Company has a diversified portfolio of assets which include
investments with both higher and lower risks and returns. These
risks and return differences relate, but are not limited to,
qualification to receive government subsidies, exposure to
fluctuations in future energy prices and levels of project finance
debt.
Interest rate risk
The Group invests in subordinated loan stock of project
companies, usually with fixed interest rate coupons. The
portfolio's cash flows are continually monitored and reforecast,
both over the near future and the long-term, to analyse the cash
flow returns from investments. The Group may use borrowings to
finance the acquisition of investments and the forecasts are used
to monitor the impact of changes in borrowing rates against cash
flow returns from investments as increases in borrowing rates will
reduce net interest margins.
The Group's policy is to ensure that interest rates are
sufficiently hedged to protect the Group's net interest margins
from significant fluctuations when entering into material
medium-long-term borrowings. This includes engaging in interest
rate swaps or other interest rate derivative contracts.
The Company has an indirect exposure to changes in interest
rates through its investment in project companies, many of which
are financed by senior debt. Senior debt financing of project
companies is generally either through floating rate debt, fixed
rate bonds or index-linked bonds. Where senior debt is floating
rate, the projects typically have similar length hedging
arrangements in place, which are monitored by the project
companies' managers, finance parties and boards of directors.
The revolving credit facility is ESG-linked, resulting in a
possible increase or reduction to future interest payments based on
the Group's performance against KPIs relating to ESG targets over
time. More details can be found in part 11 of Section 3.6 of this
annual report.
Inflation risk
The Group's project companies are generally structured so that
contractual income and costs are either wholly or partially linked
to specific inflation, where possible, to minimise the risks of
mismatch between income and costs due to movements in inflation
indexes. The Group's overall cash flows vary with inflation,
although they are not directly correlated as not all flows are
indexed. The effects of these inflation changes do not always
immediately flow through to the Group's cash flows, particularly
where a project's loan stock debt carries a fixed coupon and the
inflation changes flow through by way of changes to dividends in
future years. Inflation is managed through the use of
inflation-linked swaps where the Group deems it to be appropriate.
The sensitivity of the portfolio valuation is shown further on in
Note 4.
Market risk
Returns from the Group's investments are affected by the price
at which the investments are acquired. The value of these
investments will be a function of the discounted value of their
expected future cash flows, and as such will vary with, inter alia,
movements in interest rates, market prices and the competition for
such assets. The Investment Manager carries out a full valuation
semi-annually and this valuation exercise considers changes
described above.
Currency risk
The projects in which the Group invests all conduct their
business and pay interest, dividends and principal in sterling,
with the exception of the euro-denominated investments which at 31
December 2022 comprised 41% (2021: 37%) of the portfolio by value
on an invested basis and 41% (2021: 42%) of the portfolio by value
on a committed basis. The sensitivity of the portfolio valuation is
shown in this note.
The Group monitors its foreign exchange exposures using its
near-term and long-term cash flow forecasts. Its policy is to use
foreign exchange hedging to provide protection to the level of
sterling distributions that the Company aims to pay over the medium
term, where considered appropriate. This may involve the use of
forward exchange.
Credit risk
Credit risk is the risk that a counterparty of the Group will be
unable or unwilling to meet a commitment that it has entered into
with the Group. Key credit ratings for the Company's counterparties
are detailed in Note 18.
The credit standing of subcontractors is reviewed, and the risk
of default estimated for each significant counterparty position.
Monitoring is ongoing, and year-end positions are reported to the
Board on a quarterly basis. The Group's largest credit risk
exposure to a project at 31 December 2022 was to the Hornsea One
project, representing 9% (2021: Beatrice project, representing 10%)
of the invested portfolio value.
The largest subcontractor counterparty risk exposure (O&M or
OEM whereby the maintenance provider is not always the original
equipment manufacturer) was to Vestas who provided turbine
maintenance services in respect of 21% (2021: Vestas 24%) of the
invested portfolio by value. The largest exposure to any equipment
manufacturer was to Siemens who provided turbines in respect of 46%
of the invested portfolio value (2021: Siemens 46%).
The Group's investments enter into Power Price Agreements
("PPA") with a range of providers through which electricity is
sold; the PPAs are priced into the fair value of the investments.
The largest PPA provider to the portfolio at 31 December 2022 was
Statkraft, who provided PPAs to projects in respect of 17% (2021:
Statkraft 19%) of the invested portfolio value.
At 31 December 2022, there were no loans and other receivables
considered impaired for the Group.
The Group's maximum exposure to credit risk over financial
assets is the carrying value of those assets in the balance sheet.
The Group does not hold any collateral as security.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group's
approach to managing liquidity is to ensure, as far as possible,
that it will have sufficient financial resources and liquidity to
meet its liabilities when due. The Group ensures it maintains
adequate reserves, banking facilities and reserve borrowing
facilities by continuously monitoring forecast and actual cash
flows and matching the maturity profiles of financial assets and
liabilities. The Group's investments are predominantly funded by
share capital and medium-term debt funding.
The Group's investments are generally in private companies, in
which there is no listed market and therefore such investment would
take time to realise, and there is no assurance that the valuations
placed on the investments would be achieved from any such sale
process.
The Group's investments have borrowings which rank senior and
have priority over the Group's own investments into the companies.
This senior debt is structured such that, under normal operating
conditions, it will be repaid within the expected life of the
projects. Debt raised by the investment companies from third
parties is without recourse to the Group.
The Group's revolving credit facility, which was GBP398.5m drawn
at 31 December 2022 (31 December 2021: GBP72.8m), is held by TRIG
UK and TRIG UK I, and is guaranteed by the Company. The renewed
facility is in place until December 2025 and contains an option to
extend.
Capital management
At the date of this report, the Group has a GBP750m revolving
credit facility with Royal Bank of Scotland International Limited,
National Australia Bank Limited, ING Bank N.V, Barclays Bank PLC,
Sumitomo Mitsui Banking Corporation, Lloyds Bank PLC, SanPaolo
S.P.A., BNP Paribas, Skandinaviska Enskilda Banken AB and ABN Amro.
The facility was sized at GBP600m as at 31 December 2022, it has
been renewed and extended to GBP750m since then and expires on 31
December 2025. The facility was GBP398.5m drawn as at 31 December
2022 and has been included in the fair value of investments.
The Group makes prudent use of its leverage. Under the
investment policy, borrowings, including any financial guarantees
to support outstanding subscription obligations but excluding
internal Group borrowings of the Group's underlying investments,
are limited to 30% of the portfolio value.
From time to time, the Company issues its own shares to the
market; the timing of these purchases depends on market prices.
In order to assist in the narrowing of any discount to the Net
Asset Value at which the Ordinary Shares may trade, from time to
time the Company may, at the sole discretion of the Directors:
make market purchases of up to 14.99% per annum of its issued
Ordinary Shares; and
make tender offers for the Ordinary Shares.
There were no changes in the Group's approach to capital
management during the year.
Fair value estimation
The following summarises the significant methods and assumptions
used in estimating the fair values of financial instruments:
Non-derivative financial instruments
The fair value of financial instruments traded in active markets
is based on quoted market prices at the balance sheet date.
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. The
Group uses the income approach, which discounts the expected cash
flows attributable to each asset at an appropriate rate to arrive
at fair values. In determining the discount rate, relevant
long-term government bond yields, the specific risks of each
investment and the evidence of recent transactions are taken into
account.
Derivative financial instruments
The fair value of financial instrument inputs other than quoted
prices traded in active markets is based on quoted market prices at
the balance sheet date. The quoted market price used for financial
assets held by the Group is the current bid price. Note 2 discloses
the methods used in determining fair values on a specific
asset/liability basis. Where applicable, further information about
the assumptions used in determining fair value is disclosed in the
notes specific to that asset or liability.
Classification of financial instruments
31 December 31 December
2022 2021
GBP'000s GBP'000s
Financial assets
Designated at fair value through profit or loss:
Investments 3,322,611 2,636,785
FX forward contracts 2,718 27,293
-------------------------------------------------- ----------- -----------
Financial assets at fair value 3,325,329 2,160,946
-------------------------------------------------- ----------- -----------
At amortised cost:
Other receivables 12,913 14,232
Cash and cash equivalents 24,469 28,229
-------------------------------------------------- ----------- -----------
Financial assets at amortised cost 37,382 42,461
-------------------------------------------------- ----------- -----------
Financial liabilities
Designated at fair value through profit or loss:
FX forward contracts 19,533 -
-------------------------------------------------- ----------- -----------
Financial liabilities at fair value 19,533 -
-------------------------------------------------- ----------- -----------
At amortised cost:
Other payables 440 362
-------------------------------------------------- ----------- -----------
Financial liabilities at amortised cost 440 362
-------------------------------------------------- ----------- -----------
The Directors believe that the carrying values of all financial
instruments are not materially different to their fair values.
The fair value of FX forward contracts is discussed in more
detail in Note 18 of these financial statements.
Fair value hierarchy
The fair value hierarchy is defined as follows:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
As at 31 December 2022
Level 1 Level 2 Level 3 Total
GBP'000s GBP'000s GBP'000s GBP'000s
Investments at fair value through profit or loss - - 3,322,611 3,322,611
-------------------------------------------------- --------- --------- --------- ---------
- - 3,322,611 3,322,611
-------------------------------------------------- --------- --------- --------- ---------
FX forward contracts - assets - 2,718 - 2,718
FX forward contracts - liabilities - (19,533) - (19,533)
-------------------------------------------------- --------- --------- --------- ---------
- (16,815) - (16,815)
-------------------------------------------------- --------- --------- --------- ---------
As at 31 December 2021
Level 1 Level 2 Level 3 Total
GBP'000s GBP'000s GBP'000s GBP'000s
Investments at fair value through profit or loss - - 2,636,785 2,636,785
-------------------------------------------------- --------- --------- --------- ---------
- - 2,636,785 2,636,785
-------------------------------------------------- --------- --------- --------- ---------
FX forward contracts - assets - 27,293 - 27,293
-------------------------------------------------- --------- --------- --------- ---------
- 27,293 - 27,293
-------------------------------------------------- --------- --------- --------- ---------
Investments at fair value through profit or loss comprise the
fair value of the investment portfolio, on which the sensitivity
analysis is calculated, and the fair value of TRIG UK and TRIG UK
I, the Company's subsidiaries, being its cash, working capital and
debt balances.
31 December 2022 31 December 2021
GBP'000s GBP'000s
Portfolio value 3,737,045 2,725,805
TRIG UK and TRIG UK I
Cash 809 225
Working capital (18,342) (19,345)
Debt1 (396,901) (69,900)
-------------------------------------------------- ---------------- ----------------
(414,434) (89,020)
-------------------------------------------------- ---------------- ----------------
Investments at fair value through profit or loss 3,322,611 2,636,785
-------------------------------------------------- ---------------- ----------------
1 Debt arrangement costs of GBP1,602k (2021: GBP2,927k) have
been netted off the GBP398.5m (2021: GBP72.8m) debt drawn by TRIG
UK and TRIG UK I.
The debt figure of GBP396.9m above is held in TRIG UK and TRIG
UK I, the Company's subsidiaries, and represents the revolving
credit facility (less debt arrangement costs). The revolving credit
facility is included within the fair value of the Company's
subsidiaries.
Level 2
Valuation methodology
Fair value is based on price quotations from financial
institutions active in the relevant market. The key inputs to the
discounted cash flow methodology used to derive fair value include
foreign currency exchange rates and foreign currency forward
curves. Valuations are performed on at least a six-monthly basis
every June and December for all financial assets and all financial
liabilities.
Level 3
Valuation methodology
The Investment Manager has carried out fair market valuations of
the investments as at 31 December 2022 and the Directors have
satisfied themselves as to the methodology used, the discount rates
and key assumptions applied, and the valuation. All investments are
at fair value through profit or loss and are valued using a
discounted cash flow methodology.
The fair value of investments has been calculated using a
bifurcated methodology, whereby cash flows are discounted on the
basis of the risk and return profile of the underlying cash
flows.
The following economic assumptions were used in the discounted
cash flow valuations as at:
31 December 2022 31 December 2021
Inflation assumed as measured by the UK Retail Actual inflation applied to Nov-22, 6.00% 3.75% (2022), 3.50%
Prices Index (applies to UK ROC Income)* (Dec-22), 5.00% (2023), 2.75% until 2030, (2023), 2.75% until 2030,
2.00% thereafter 2.00% thereafter
Inflation assumed as measured by the UK Actual inflation applied to Nov-22, 5.25% 3% (2022), 2.75% (2023),
Consumer Prices Index (applies to UK CfD (Dec-22), 4.25% (2023), 2.00% thereafter 2.00% thereafter
Income)*
Inflation assumed to apply to UK Power Prices* Actual inflation applied to Nov-22, 6.00% 3.75% (2022), 3.50% (2023
),
(Dec-22), 5.00% (2023), 2.75% thereafter
2.75% until 2030, 2.25% thereafter
Inflation assumed to apply in Ireland, France, Actual inflation applied to Nov-22, 3.00%
Sweden, Germany and Spain* (2023), 2.00% thereafter 2.00%
UK deposit interest rates 3.00% to 2023, 2.50% thereafter 0.25% to 2025, 1.25%
thereafter
------------------------------------------------ ----------------------------------------- -------------------------
Ireland, France, Sweden, Germany and Spain 2.00% to 2023, 1.50% thereafter 0.0% to 2025, 0.25%
deposit interest rates thereafter
------------------------------------------------ ----------------------------------------- -------------------------
UK corporation tax rate 19% to April 2023, 25% thereafter 19% to April 2023, 25%
thereafter
------------------------------------------------ ----------------------------------------- -------------------------
Ireland corporation tax rate 12.5% active rate, 25% passive rate 12.5% active rate, 25%
passive rate
------------------------------------------------ ----------------------------------------- -------------------------
France corporation tax rate 25% 25%
------------------------------------------------ ----------------------------------------- -------------------------
Sweden corporation tax rate 20.6% 20.6%
------------------------------------------------ ----------------------------------------- -------------------------
Germany corporation tax rate 15.8% 15.8%
------------------------------------------------ ----------------------------------------- -------------------------
Spain corporation tax rate 25% 25%
------------------------------------------------ ----------------------------------------- -------------------------
Euro/sterling exchange rate 1.1304 1.1899
------------------------------------------------ ----------------------------------------- -------------------------
Energy yield assumptions P50 case P50 case
------------------------------------------------ ----------------------------------------- -------------------------
* The stated inflation assumptions apply the stated (annualised)
rate on a monthly basis to the previous month's index.
The table below highlights the power price averages for GB and
the EU markets:
Region Average 2023-2027 Average 2028-2050 Average 2023-2050
GB (Real, GBP/MWh) Before EGL 121 41 56
---------------------------------------- ------------------- ----------------- ----------------- -----------------
After EGL 100 41 52
------------------------------------------------------------ ----------------- ----------------- -----------------
Average of 5 euro jurisdictions* (Real
EUR/MWh) After intervention 89 48 55
---------------------------------------- ------------------- ----------------- ----------------- -----------------
A blended curve is provided in section 3.1.
As identified in Section 2.5, as of the balance sheet date
legislation was enacted or in the process of being enacted within
each of the jurisdictions in which the Group has invested, which
would impact generating assets under specific conditions in
relation to the revenue received from the sale of electricity at
elevated prices.
Within the UK the Electricity Generator Levy ("EGL") (published
as draft legislation in December) is expected to be incorporated
within the Spring Finance Bill 2023. It will have effect from 1
January 2023 to 31 March 2028 and applies a levy of 45% (which is
not deductible for corporation tax, resulting in an effective tax
rate (when considering levy and tax) of 70%) to revenues received
for the sale of wholesale above a threshold level. The threshold
level for revenues is GBP75 per MWh (indexed by the Consumer Prices
Index on 1 April each year from 2024) +GBP10m per annum per group
allowance (with the UK assets the Group holds considered one
group). The EGL has been reflected within the valuation and the
valuation sensitivities for the legislated period (beyond which the
prices assumed would be below the threshold level).
The European Union had introduced a legislative framework to
apply Inframarginal Caps, under which each of the national
governments can introduce legislation within specified parameters.
This would seek to apply a tax in respect of revenues received in
excess of a threshold price (typically the applicable tax rate is
between 90% to 100%). The threshold price is determined by the
national governments and can vary by technology. In general, the
legislation as enacted or planned to be enacted is for a relatively
limited duration with an expectation that this would be extended as
required - as such the valuation and sensitivities assume that the
legislation will apply until the prices drop below the applicable
threshold level, with the threshold level expected to remain
constant in real terms.
Within Iberia, specific legislation applies (which would have a
more significant impact than the inframarginal cap) to both cap the
price of gas used for electricity generation and to clawback prices
received by generators over a level based upon an assumed gas price
where they do not incur the cost of purchasing gas. The valuation
and sensitivities assume these pieces of legislation will be
extended until the prices fall below the threshold level, with the
threshold level expected to remain constant in real terms.
A summary of the intervention measures is included within the
table below:
Legislated
Market Applies above Effective rate applicable Reliefs period
First GBP10m p.
70% a. 1 Jan 2023 to
Electricity Generator Levy UK GBP75/MWh indexed by CPI (45% levy + 25% corporate tax) per group 31 Mar 2028
--------------------------- -------- ------------------------ -------------------------------- --------------- -------------
1 Jan 2023 to
Ireland EUR 120/MWh 100% None stated 30 Jun 2023
--------------------------- -------- ------------------------ -------------------------------- --------------- -------------
Excludes FiT's 1 Jul 2022 to
France EUR 100/MWh 90% and CfD's 31 Dec 2023
-------- ------------------------ -------------------------------- --------------- -------------
Feed in Tariff Allowance for 1 Dec 2022 to
Germany + EUR 30/MWh 90% PPA costs 30 Jun 2023
-------- ------------------------ -------------------------------- --------------- -------------
1 Jan 2023 to
Inframarginal Revenue Cap Sweden EUR 180/MWh 90% None stated 30 Jun 2023
--------------------------- -------- ------------------------ -------------------------------- --------------- -------------
Formula Enacted in
includes an 2021,
Spain allowance to applicable
and A calculated level based reflect some to 31 Dec
Gas Clawback Portugal on assumed gas price 85% costs 2023
--------------------------- -------- ------------------------ -------------------------------- --------------- -------------
Valuation sensitivities
Sensitivity analysis is produced to show the impact of changes
in key assumptions adopted to arrive at the valuation. For each of
the sensitivities, it is assumed that potential changes occur
independently of each other with no effect on any other base case
assumption, and that the number of investments in the portfolio
remains static throughout the modelled life.
The sensitivities assume the portfolio is fully invested and
hence the Portfolio Value for the sensitivity analysis is the sum
of the Portfolio Valuation at 31 December 2022 (GBP3,737m) and the
outstanding investment commitments (GBP204.5m), being
GBP3,942m.
Accordingly, the NAV per share impacts shown below assume the
issue of further shares to fund these commitments.
The analysis below shows the sensitivity of the portfolio value
(and its impact on NAV) to changes in key assumptions as
follows:
Discount rates
The discount rates used for valuing each investment are based on
market information and the current bidding experience of the Group
and its Managers.
The weighted average valuation discount rate applied to
calculate the portfolio valuation is 7.2% at 31 December 2022
(2021: 6.6%). An increase or decrease in this rate by 0.5% has the
following effect on valuation.
Discount rate NAV/share impact -0.5% change Total Portfolio Value +0.5% change NAV/share impact
Directors' valuation -
December 2022 +4.6p +GBP134.4m GBP3,941.6m (GBP125.4m) (4.3p)
------------------------------- ---------------- ------------ --------------------- ------------ ----------------
Directors' valuation -
December 2021 +4.4p +GBP111.7m GBP2,957.0m (GBP103.9m) (4.1p)
------------------------------- ---------------- ------------ --------------------- ------------ ----------------
Power price
The sensitivity considers a flat 10% movement in power prices
for all years, i.e. the effect of adjusting the forecast
electricity price assumptions in each of the jurisdictions
applicable to the portfolio down by 10% and up by 10% from the base
case assumptions for each year throughout the operating life of the
portfolio.
The sensitivity incorporates the impact of the EGL and other
similar legislation across each jurisdiction, with the forecast
power price for the jurisdiction before the legislation is applied
sensitised by 10% and the resulting forecast price is then subject
to the legislation. As such the movement in the applied price
(after the legislation is considered may differ from +/- 10%.
A change in the forecast electricity price assumptions by plus
or minus 10% has the following effect.
Power price NAV/share impact -10% change Total Portfolio Value +10% change NAV/share impact
Directors' valuation - Dec 2022 (9.2p) (GBP270.9m) GBP3,941.6m +GBP258.2m 8.8p
--------------------------------- ---------------- ----------- --------------------- ----------- ----------------
Directors' valuation - Dec 2021 (8.1p) (GBP202.7m) GBP2,957.0m +GBP200.8m 8.0p
--------------------------------- ---------------- ----------- --------------------- ----------- ----------------
Energy yield
The base case assumes a "P50" level of output. The P50 output is
the estimated annual amount of electricity generation (in MWh) that
has a 50% probability of being exceeded - both in any single year
and over the long term - and a 50% probability of being
underachieved. Hence the P50 is the expected level of generation
over the long term.
The sensitivity illustrates the effect of assuming "P90 10-year"
(a downside case) and "P10 10-year" (an upside case) energy
production scenarios. A P90 10-year downside case assumes the
average annual level of electricity generation that has a 90%
probability of being exceeded over a 10-year period. A P10 10-year
upside case assumes the average annual level of electricity
generation that has a 10% probability of being exceeded over a
10-year period. This means that the portfolio aggregate production
outcome for any given 10-year period would be expected to fall
somewhere between these P90 and P10 levels with an 80% confidence
level, with a 10% probability of it falling below that range of
outcomes and a 10% probability of it exceeding that range. The
sensitivity includes the portfolio effect which reduces the
variability because of the diversification of the portfolio. The
sensitivity is applied throughout the life of each asset in the
portfolio (even where this exceeds 10 years).
The sensitivity incorporates the impact of the EGL and other
similar legislation across each jurisdiction.
The table below shows the sensitivity of the portfolio value to
changes in the energy yield applied to cash flows from project
companies in the portfolio as per the terms P90, P50 and P10
explained above.
P90 10 year Total Portfolio P10 10 year
Energy yield NAV/share impact exceedance Value exceedance NAV/share impact
Directors'
valuation - Dec
2022 (15.4p) (GBP451.7m) GBP3,941.6m +GBP490.5m 16.7p
------------------- ---------------- ------------------- ------------------- ------------------- ----------------
Directors'
valuation - Dec
2021 (13.9p) (GBP348.6m) GBP2,957.0m +GBP381.3m 15.2p
------------------- ---------------- ------------------- ------------------- ------------------- ----------------
Inflation rates
The projects' income streams are principally a mix of subsidies,
which are amended each year with inflation, and power prices, which
the sensitivity assumes will move with inflation. The projects'
management, maintenance and tax expenses typically move with
inflation, but the majority of the portfolio debt payments are
fixed, with a proportion of these fixed payments covered by
derivatives, either held at project level or in a holding company.
This results in the portfolio returns and valuation being
positively correlated to inflation.
The assumptions for inflation incorporated in the portfolio
valuation are stated below. The differences in forecast result from
differences in market, in the calculation methodology of the index
or in the basket of goods considered within the index, or specific
good in the case of UK power prices. The sensitivity is applied to
all forecast inflation assumptions (actual inflation assumptions
remain unchanged).
31 December 2022 31 December 2021
Inflation assumed as measured by the UK Retail Actual inflation applied to Nov-22, 6.00% 3.75% (2022), 3.50%
Prices Index (applies to UK ROC Income) (Dec-22), 5.00% (2023), 2.75% until 2030, (2023), 2.75% until 2030,
2.00% thereafter 2.00% thereafter
----------------------------------------------- ------------------------------------------ -------------------------
Inflation assumed as measured by the UK Actual inflation applied to Nov-22, 5.25% 3% (2022), 2.75% (2023),
Consumer Prices Index (applies to UK CfD (Dec-22), 4.25% (2023), 2.00% thereafter 2.00% thereafter
Income)
----------------------------------------------- ------------------------------------------ -------------------------
Inflation assumed to apply to UK power prices Actual inflation applied to Nov-22, 6.00% 3.75% (2022), 3.50% (2023
),
(Dec-22), 5.00% (2023), 2.75% thereafter
2.75% until 2030, 2.25% thereafter
------------------------------------------------------------------------------------------ -------------------------
Inflation measured by national Consumer Price
Indices assumed to apply in Ireland, France, Actual inflation applied to Nov-22, 3.00%
Sweden, Germany and Spain (2023), 2.00% thereafter 2.00%
----------------------------------------------- ------------------------------------------ -------------------------
The sensitivity illustrates the effect of a 0.5% decrease and a
0.5% increase from all of the assumed annual inflation rates as
stated above in the financial model for each year throughout the
operating life of the portfolio, and including the impact upon
inflation derivatives held at project or holding company level.
The sensitivity incorporates the impact of the EGL and other
similar legislation as modelled across each jurisdiction.
Inflation assumption NAV/share impact -0.5% change Total Portfolio Value +0.5% change NAV/share impact
Directors' valuation -
December 2022 (5.1p) (GBP149.8m) GBP3,941.6m +GBP177.7m 6.1p
------------------------------- ---------------- ------------ --------------------- ------------ ----------------
Directors' valuation -
December 2021 (4.3p) (GBP107.7m) GBP2,957.0m +GBP115.4m 4.6p
------------------------------- ---------------- ------------ --------------------- ------------ ----------------
Operating costs
The sensitivity shows the effect of a 10% decrease and a 10%
increase to the base case for annual operating costs for the
portfolio, in each case assuming that the change to the base case
for operating costs occurs with effect from 1 January 2023 and that
change to the base case remains reflected consistently thereafter
during the life of the projects.
Operating costs NAV/share impact -10% change Total Portfolio Value +10% change NAV/share impact
Directors' valuation - December
2022 5.6p +GBP163.4m GBP3,941.6m (GBP162.6m) (5.5p)
--------------------------------- ---------------- ----------- --------------------- ----------- ----------------
Directors' valuation - December
2021 5.2p +GBP129.5m GBP2,957.0m (GBP130.7m) (5.2p)
--------------------------------- ---------------- ----------- --------------------- ----------- ----------------
Taxation rates
The profits of each project company are subject to corporation
tax in their home jurisdictions at the applicable rates (the tax
rates adopted in the valuation are set out in Note 4 to the
financial statements). The tax sensitivity looks at the effect on
the Directors' valuation of changing the tax rates by +/- 2% each
year in each jurisdiction and is provided to show that tax can be a
material variable in the valuation of investments. The
sensitivities incorporate the impact of portfolio-level
reliefs.
Taxation rates NAV/share impact -2% change Total Portfolio Value +2% change NAV/share impact
Directors' valuation - December
2022 2.3p +GBP66.9m GBP3,941.6m (GBP67.0m) (2.3p)
----------------------------------- ---------------- ---------- --------------------- ---------- ----------------
Directors' valuation - December
2021 1.7p +GBP43.5m GBP2,957.0m (GBP43.8m) (1.7p)
----------------------------------- ---------------- ---------- --------------------- ---------- ----------------
Interest rates
This shows the sensitivity of the portfolio valuation to the
effects of a reduction of 2% and an increase of 2% in interest
rates. The change is assumed with effect from 1 January 2023 and
continues unchanged throughout the life of the assets.
The portfolio is relatively insensitive to changes in interest
rates. This is an advantage of TRIG's approach of favouring
long-term structured project financing (over shorter-term corporate
debt), which is secured with the substantial majority of this debt
having the benefit of long-term interest rate swaps which fix the
interest cost to the projects.
Interest rates NAV/share impact -2% change Total Portfolio Value +2% change NAV/share impact
Directors' valuation - December
2022 (0.0p) (GBP1.5m) GBP3,941.6m +GBP3.3m 0.1p
----------------------------------- ---------------- ---------- --------------------- ---------- ----------------
Directors' valuation - December
2021 (0.2p) (GBP5.0m) GBP2,957.0m +GBP0.8m 0.0p
----------------------------------- ---------------- ---------- --------------------- ---------- ----------------
Currency rates
The sensitivity shows the effect of a 10% decrease (euro weakens
relative to sterling) and a 10% increase (euro strengthens relative
to sterling) in the value of the euro relative to sterling used for
the 31 December 2022 valuation (based on a 31 December 2022
exchange rate of EUR1.1304 to GBP1). In each case it is assumed
that the change in exchange rate occurs from 1 January 2023 and
thereafter remains constant at the new level throughout the life of
the projects.
At the year end, 41% of the committed portfolio was located in
Sweden, France, Germany, Ireland and Spain comprising
euro-denominated assets.
The Group has entered into forward hedging of the expected euro
distributions for up to 48 months ahead, and in addition placed
further hedges to reach a position where at least 60% of the
valuation of euro-denominated assets is hedged. The hedge reduces
the sensitivity of the portfolio value to foreign exchange
movements and accordingly the impact is shown net of the benefit of
the foreign exchange hedge in place. The value of the outstanding
commitments on Grönhult, Ranasjö, Salsjö, the Cadiz solar projects
(Arenosas, El Yarte, La Guita and Malabrigo), Ryton and Drakelow
are included in this sensitivity. A 60% hedge is assumed for the
sensitivity below and during 2022, typical hedge levels have been
between approximately 60-80%.
Currency rates NAV/share impact -10% change Total Portfolio Value +10% change NAV/share impact
Directors' valuation - December
2022 (1.7p) (GBP49.5m) GBP3,941.6m +GBP49.5m 1.7p
--------------------------------- ---------------- ----------- --------------------- ----------- ----------------
Directors' valuation - December
2021 (1.8p) (GBP44.0m) GBP2,957.0m +GBP44.0m 1.8p
--------------------------------- ---------------- ----------- --------------------- ----------- ----------------
The euro/sterling exchange rate sensitivity does not attempt to
illustrate the indirect influences of currencies on UK power prices
which are interrelated with other influences on power prices.
Asset lives
Assumptions adopted in the year-end valuation typically range
from 25 to 40 years from the date of commissioning, with an average
31 years for the wind portfolio and 39 years for the solar
portfolio. The overall average across the portfolio at 31 December
2022 is 31 years (31 December 2021: 30 years).
The sensitivity below shows the impact on the valuation of
assuming all assets within the portfolio have a year longer and a
year shorter asset life assumed.
Asset Lives NAV/share impact -1 year change Total Portfolio Value +1 year change NAV/share impact
Directors' valuation -
December 2022 (1.0p) (GBP28.7m) GBP3,941.6m +GBP25.8m 0.9p
--------------------------- ---------------- -------------- --------------------- -------------- ----------------
Directors' valuation -
December 2021 (1.0p) (GBP25.6m) GBP2,957.0m +GBP23.3m 0.9p
--------------------------- ---------------- -------------- --------------------- -------------- ----------------
Additional sensitivities
Given the current macroeconomic environment, in addition to the
sensitivities representing the changes in the long-term assumptions
impacting the portfolio valuation, additional sensitivities
representing short-term one-off reasonably possible changes in
assumptions have also been considered for two key assumptions which
have experienced significant changes in short-term forecasts over
the period.
For inflation, an increase of 3% in annual inflation applied
over the next 12 months would be expected to increase the portfolio
valuation by GBP86.9m (equivalent to 3.5 pence per share); a 3%
decrease over the next 12 months would be expected to reduce the
portfolio valuation by GBP87.6m (equivalent to 3.5 pence per
share).
For power prices, a reduction of short-term pricing in GB to
GBP120/MWh in 2023 and 2024 and to GBP100/MWh in 2025 (and the
forecasters, curve thereafter) is expected to result in a valuation
reduction of GBP56.2m. This level represents an average discount of
24% to the assumptions incorporated in the valuation and an average
discount of 10% to the forward prices as of 17 February 2023.
5. Segment reporting
The Chief Operating Decision Maker (the "CODM") is of the
opinion that the Group is engaged in a single segment of business,
being investment in renewable infrastructure to generate investment
returns while preserving capital. The financial information used by
the CODM to allocate resources and manage the Group presents the
business as a single segment comprising a homogeneous
portfolio.
6. Total operating income
For year ended For year ended
31 December 31 December
2022 2021
GBP'000s GBP'000s
Gain on investments 433,960 68,775
Dividend income - 4,900
Interest income from investments 121,247 101,121
---------------------------------- -------------- --------------
Total operating income 555,207 174,796
---------------------------------- -------------- --------------
Interest income from investments is the long-term loan stock
interest owed to the Company by TRIG UK and TRIG UK I; further
details can be found in Note 19 of these financial statements.
7. Fund expenses
For year ended For year ended
31 December 31 December
2022 2021
GBP'000s GBP'000s
Fees payable to the Company's Auditor:
For audit of the Company's financial statements 232 171
For the other audit-related assurance services 53 45
For additional fees in respect to the prior period - 15
Investment and management fees (Note 19) 200 200
Directors' fees (Note 19) 361 339
Acquisition costs 16 -
Other costs 1,428 1,134
---------------------------------------------------- -------------- --------------
Fund expenses 2,290 1,904
---------------------------------------------------- -------------- --------------
On the Expanded basis, fund expenses are GBP29,376k (2021:
GBP23,759k); the difference being the costs incurred within TRIG UK
and TRIG UK I, the Company's subsidiaries. A further GBP31k of
audit fees relating to the 2021 audits of unconsolidated
subsidiaries were also agreed in the current year. The
reconciliation from the IFRS basis to the Expanded basis is shown
in Section 2.8 of the Strategic Report on page 67.
The fees to the Company's Auditor include GBP53k (2021: GBP45k)
payable in relation to audit-related assurance services in respect
of the interim review of the half-yearly financial statements.
In addition to the above, GBP657k (2021: GBP508k) was paid to
Deloitte LLP (the Company's auditor) in respect of audit services
provided for the 2022 audit to unconsolidated subsidiaries. Please
refer to the Independent Auditor's Report on pages 129 to 137.
The Company had no employees during the current or prior year.
The Company has appointed the Investment Manager and the Operations
Manager to manage the portfolio, the Company and its subsidiaries,
on its behalf.
8. Finance and other (expense)/income
For year ended For year ended
31 December 31 December
2022 2021
GBP'000s GBP'000s
Interest income:
Interest on bank deposits 120 1
------------------------------------------------ -------------- --------------
Total finance income 120 1
------------------------------------------------ -------------- --------------
Gain on foreign exchange:
Realised gains on settlement of FX forwards 9,689 7,643
Fair value (loss)/gain of FX forward contracts (44,107) 28,693
Other foreign exchange gains 2,091 1,233
------------------------------------------------ -------------- --------------
Total (loss)/gain on foreign exchange (32,327) 37,569
------------------------------------------------ -------------- --------------
Finance and other (expense)/income (32,207) 37,570
------------------------------------------------ -------------- --------------
On the Expanded basis, finance income is GBP120k (2021: GBP1k)
and finance costs are GBP9,584k (2021: GBP5,793k); the difference
being the Group's credit facility costs which are incurred within
TRIG UK and TRIG UK I, the Company's subsidiaries. These costs are
shown in Section 3.2 of the Strategic Report on page 68.
9. Income tax
Under the current system of taxation in Guernsey, the Company is
exempt from paying taxes on income, profits or capital gains.
Therefore, income from investments is not subject to any further
tax in Guernsey, although these investments will bear tax in the
individual jurisdictions in which they operate.
10. Earnings per share
Earnings per share is calculated by dividing the profit
attributable to equity shareholders of the Company by the weighted
average number of Ordinary Shares in issue during the year.
31 December 31 December
2022 2021
Profit attributable to equity holders of the Company ('000) GBP520,710 GBP210,462
Weighted average number of Ordinary Shares in issue ('000) 2,424,010 2,103,869
Earnings per Ordinary Share (pence) 21.5p 10.0p
------------------------------------------------------------- ----------- -----------
There are no shares in issue that have a dilutive effect and
therefore the diluted EPS is the same as the basic EPS disclosed.
Further details of shares issued in the year are set out in Note
17.
11. Dividends
31 December 31 December
2022 2021
GBP'000s GBP'000s
Amounts recognised as distributions to equity holders during the year:
Interim dividend for the quarter ended 31 December 2020 of 1.69p 32,167
Interim dividend for the quarter ended 31 March 2021 of 1.69p 35,508
Interim dividend for the quarter ended 30 June 2021 of 1.69p 35,548
Interim dividend for the quarter ended 30 September 2021 of 1.69p 38,293
Interim dividend for the quarter ended 31 December 2021 of 1.69p 38,316
Interim dividend for the quarter ended 31 March 2022 of 1.71p 42,407
Interim dividend for the quarter ended 30 June 2022 of 1.71p 42,425
Interim dividend for the quarter ended 30 September 2022 of 1.71p 42,456
------------------------------------------------------------------------ ----------- -----------
165,6041 141,516
Dividends settled as a scrip dividend alternative 5,151 7,458
--------------------------------------------------- -------- -------
Dividends settled in cash 160,454 134,058
--------------------------------------------------- -------- -------
165,6051 141,516
--------------------------------------------------- -------- -------
(1) Balances do not reconcile due to rounding.
On 2 February 2023, the Company declared an interim dividend of
1.71 pence per share for the period 1 October 2022 to 31 December
2022. The total dividend, GBP42,456,300, payable on 31 March 2023,
is based on a record date of 10 February 2023 and the number of
shares in issue at that time being 2,482,824,562.
31 December 31 December
2022 2021
Pence Pence
Amounts recognised as distributions to equity holders during the year:
Interim dividend for the quarter ended December 2020 1.69
Interim dividend for the quarter ended March 2021 1.69
Interim dividend for the quarter ended June 2021 1.69
Interim dividend for the quarter ended September 2021 1.69
Interim dividend for the quarter ended December 2021 1.69
Interim dividend for the quarter ended March 2022 1.71
Interim dividend for the quarter ended June 2022 1.71
Interim dividend for the quarter ended September 2022 1.71
------------------------------------------------------------------------ ----------- -----------
Total dividend per share 6.82 6.76
------------------------------------------------------------------------ ----------- -----------
12. Net assets per Ordinary Share
31 December 31 December
2022 2021
Shareholders' equity at balance sheet date ('000) GBP3,342,738 GBP2,706,177
Number of shares at balance sheet date, including management shares accrued but not yet
issued
('000) 2,483,583 2,268,104
------------------------------------------------------------------------------------------ ------------ ------------
Net Assets per Ordinary Share at balance sheet date (pence) 134.6p 119.3p
------------------------------------------------------------------------------------------ ------------ ------------
In line with the Investment Management Agreement and the
Operations Management Agreement, 20 per cent of the Management Fees
are to be settled in ordinary Shares up to an Adjusted Portfolio
Value of GBP1 billion.
Shares are issued to the Investment Manager and the Operations
Manager twice a year in arrears, usually in March and September for
the half year ending December and June, respectively.
As at 31 December 2022, 758,686 shares equating to GBP1,008,219,
based on a Net Asset Value ex dividend of 132.89 pence per share
(the Net Asset Value at 31 December 2022 of 134.6 pence per share
less the interim dividend of 1.71 pence per share) were due but had
not been issued. The Company intends to issue these shares around
31 March 2023.
In view of this, the denominator in the above Net assets per
Ordinary Share calculation is as follows:
31 December 31 December
2022 2021
'000s '000s
Ordinary Shares in issue at balance sheet date 2,482,825 2,267,246
Number of shares to be issued in lieu of management fees 759 857
-------------------------------------------------------------------------- ----------- -----------
Total number of shares used in Net assets per Ordinary Share calculation 2,483,583 1 2,268,104 1
-------------------------------------------------------------------------- ----------- -----------
(1) Balance does not cast due to rounding
13. Investments at fair value through profit or loss
Investments at fair value through profit or loss is the sum of
the portfolio valuation and the carrying amount of TRIG UK and TRIG
UK I, the Company's subsidiaries.
31 December 31 December
2022 2021
GBP'000s GBP'000s
Brought forward 2,636,785 2,160,946
Investments in the year 314,059 452,289
Distributions paid to the Company (184,763) (149,522)
Dividend income - 4,900
Interest income from investments 122,570 99,397
Gain on valuation 433,960 68,775
----------------------------------- ----------- -----------
Carried forward 3,322,611 2,636,785
----------------------------------- ----------- -----------
The following information in this note is non-statutory. It
provides additional information to users of the financial
statements, splitting the fair value movements between the
investment portfolio and TRIG UK and TRIG UK I, the Company's
subsidiaries.
31 December 31 December
2022 2021
GBP'000s GBP'000s
Fair value of investment portfolio
Brought forward value of investment portfolio 2,725,805 2,213,030
Investments in the year 693,810 478,928
Distributions paid to TRIG UK & TRIG UK I (280,497) (169,447)
Interest income 85,020 75,167
Dividend income 57,785 33,928
Gain on valuation 455,122 94,199
-------------------------------------------------------- ----------- -----------
Carried forward value of investment portfolio 3,737,045 2,725,805
-------------------------------------------------------- ----------- -----------
Fair value of TRIG UK & TRIG UK I
Brought forward value of TRIG UK & TRIG UK I (89,020) (52,083)
Cash movement 583 (512)
Working capital movement 1,005 (2,135)
Debt movement1 (327,002) (34,290)
-------------------------------------------------------- ----------- -----------
Carried forward value of TRIG UK & TRIG UK I (414,434) (89,020)
-------------------------------------------------------- ----------- -----------
Total investments at fair value through profit or loss 3,322,611 2,636,785
-------------------------------------------------------- ----------- -----------
(1) Debt arrangement costs of GBP1,602k (2021: GBP2,927k) have
been netted off the GBP398.5m (2021: GBP72.8m) debt drawn by TRIG
UK and TRIG UK I.
The gains on investment valuation are unrealised.
The SPVs (project companies) in which the company invests are
generally restricted on their ability to transfer funds to the
Company under the terms of their individual senior funding
arrangements. Significant restrictions include:
- Historic and projected debt service and loan life cover ratios exceed a given threshold;
- Required cash reserve account levels are met;
- Senior lenders have agreed the current financial model that
forecasts the economic performance of the project company;
- The project company is in compliance with the terms of its senior funding arrangements; and
- Senior lenders have approved the annual budget for the company.
Details of investments recognised at fair value through profit
or loss were as follows:
31 December 2022 31 December 2021
------------------------------- -------------------------------
Investments (project name) Country Equity Subordinated loan stock Equity Subordinated loan stock
TRIG UK UK 100% 100% 100% 100%
TRIG UK I UK 100% 100% 100% 100%
Roos UK 100% 100% 100% 100%
The Grange UK 100% 100% 100% 100%
Hill of Towie UK 100% 100% 100% 100%
Green Hill UK 100% 100% 100% 100%
Forss UK 100% 100% 100% 100%
Altahullion UK 100% 100% 100% 100%
Lendrums Bridge UK 100% 100% 100% 100%
Lough Hill UK 100% 100% 100% 100%
Milane Hill Republic of Ireland 100% 100% 100% 100%
Beennageeha Republic of Ireland 100% 100% 100% 100%
Haut Languedoc France 100% 100% 100% 100%
Haut Cabardes France 100% 100% 100% 100%
Cuxac Cabardes France 100% 100% 100% 100%
Roussas-Claves France 100% 100% 100% 100%
Puits Castan France 100% 100% 100% 100%
Churchtown UK 100% 100% 100% 100%
East Langford UK 100% 100% 100% 100%
Manor Farm UK 100% 100% 100% 100%
Parsonage UK 100% 100% 100% 100%
Marvel Farms UK 100% 100% 100% 100%
Tamar Heights UK 100% 100% 100% 100%
Stour Fields UK 100% 100% 100% 100%
Meikle Carewe UK 100% 100% 100% 100%
Tallentire UK 100% 100% 100% 100%
Parley UK 100% 100% 100% 100%
Egmere UK 100% 100% 100% 100%
Penare UK 100% 100% 100% 100%
Earlseat UK 100% 100% 100% 100%
Taurbeg Republic of Ireland 100% 100% 100% 100%
Four Burrows UK 100% 100% 100% 100%
Rothes 2 UK 49% 49% 49% 49%
Mid Hill UK 49% 49% 49% 49%
Paul's Hill UK 49% 49% 49% 49%
Rothes 1 UK 49% 49% 49% 49%
Crystal Rig 1 UK 49% 49% 49% 49%
Crystal Rig 2 UK 49% 49% 49% 49%
Broussan France 48.9% 100% 48.9% 100%
Plateau France 48.9% 100% 48.9% 100%
Borgo France 48.9% 100% 48.9% 100%
Olmo 2 France 48.9% 100% 48.9% 100%
Chateau France 48.9% 100% 48.9% 100%
Pascialone France 48.9% 100% 48.9% 100%
Santa Lucia France 48.9% 100% 48.9% 100%
Agrinergie 1&3 France 48.9% 100% 48.9% 100%
Agrinergie 5 France 48.9% 100% 48.9% 100%
Agrisol France 48.9% 100% 48.9% 100%
Chemin Canal France 48.9% 100% 48.9% 100%
Ligne des 400 France 48.9% 100% 48.9% 100%
Logistisud France 48.9% 100% 48.9% 100%
Marie Galante France 48.9% 100% 48.9% 100%
Sainte Marguerite France 48.9% 100% 48.9% 100%
Freasdail UK 100% 100% 100% 100%
FVP du Midi France 51.0% 100% 51.0% 100%
Neilston UK 100% 100% 100% 100%
Garreg Lwyd UK 100% 100% 100% 100%
Broxburn UK 100% 100% 100% 100%
Sheringham Shoal UK 14.7% 14.7% 14.7% 14.7%
Pallas Republic of Ireland 100% 100% 100% 100%
Solwaybank UK 100% 100% 100% 100%
Montigny France 100% 100% 100% 100%
Rosieres France 100% 100% 100% 100%
Jadraas Sweden 100% 100% 100% 100%
Venelle France 100% 100% 100% 100%
Fujin France 41.9% 100% 34.6% 100%
Epine France 100% 100% 100% 100%
Little Raith UK 100% 100% 100% 100%
Gode Wind 1 Germany 25% 25% 25% 25%
Blary Hill UK 100% 100% 100% 100%
Merkur Germany 35.7% 35.7% 24.6% 24.6%
Haut Vannier France 100% 100% 100% 100%
East Anglia 1 UK 14.3% 14.3% 14.3% 14.3%
Beatrice UK 17.5% 17.5% 17.5% 17.5%
Grönhult Sweden 100% 100% 100% 100%
Ranasjö Sweden 50% 50% 50% 50%
Salsjö Sweden 50% 50% 50% 50%
Arenosas Spain 100% 100% 100% 100%
El Yarte Spain 100% 100% 100% 100%
Guita Spain 100% 100% 100% 100%
Malabrigo Spain 100% 100% 100% 100%
Arcos Spain 100% 100% - -
Valdesolar Spain 100% 100% - -
Hornsea One UK 10.2% 10.2% - -
Ryton UK 100% 100% - -
Drakelow UK 100% 100% - -
Drax UK 100% 100% - -
Spennymoor UK 100% 100% - -
31 December 2022 31 December 2021
------------------------- -------------------------
Investments (project name) Country Ownership Mezzanine debt Ownership Mezzanine debt
Phoenix France - 100% - 100%
In March 2022, the Company exchanged contracts to acquire a 7.8%
equity interest in the Hornsea One offshore wind farm in the UK
from Global Infrastructure Partners. The transaction subsequently
completed on 21 July 2022.
On 19 July 2022, the Company exchanged contracts to acquire a
further 2.4% equity interest in the Hornsea One offshore wind farm
from Global Infrastructure Partners (from whom the Company
announced the acquisition of its original stake on 17 March 2022).
The incremental acquisition brings the total stake to 10.2% and was
completed on 27 October 2022.
Also, in March 2022, the Company acquired a 49% equity interest
in Project Valdesolar, an operating solar park in the province of
Badajoz, Spain from Repsol, a Spanish-listed global energy company.
Together with the Cadiz solar projects, this acquisition further
enhances TRIG's technological and geographical diversification.
On 8 September 2022, the Company exchanged contracts to acquire
the rights to develop three battery storage sites (Ryton, Drakelow
and Draw) in the North of England. Two of the projects (Ryton and
Drakelow), when built are scheduled for grid connection and
commencement of operations in 2024 and 2025. The third site (Drax)
will be built later in line with its grid connection date, which is
in 2029, although it may be possible to bring this date forward.
The transaction subsequently completed on 9 September 2022 and is
in line with TRIG's strategy to complement the renewable generation
assets in the portfolio with flexible capacity.
On 19 December 2022, the Company exchanged contracts to acquire
a further 11.1% equity interest in the Merkur offshore wind farm,
located in the German North Sea. This incremental investment is
approximately 2% of TRIG's portfolio value. The project completed
shortly before year end and brings TRIG's total equity interest in
Merkur to 35.7%.
During December 2022, the Company also acquired 100% equity
interest in Project Spennymoor, a battery storage development
project which will have a total capacity of 100MW / 200MWh when
completed, from RES. The project is located in County Durham, and
is in the late-stage development stage.
In the year, TRIG made additional investments in the Cadiz solar
projects and Grönhult, Ranasjö and Salsjö wind farms to fund their
respective construction programmes, in line with outstanding
commitments.
Further detail of acquisitions made in the year can be found in
Section 2.5 of the Strategic Report.
14. Other receivables
31 December 31 December
2022 2021
GBP'000s GBP'000s
Other receivables 12,913 14,232
------------------------- ----------- -----------
Total other receivables 12,913 14,232
------------------------- ----------- -----------
15. Cash and cash equivalents
31 December 31 December
2022 2021
GBP'000s GBP'000s
Bank balances 24,469 28,229
--------------------------- ----------- -----------
Cash and cash equivalents 24,469 28,229
--------------------------- ----------- -----------
On the Expanded basis, which includes balances carried in TRIG
UK and TRIG UK I, cash is GBP25,278k (2021: GBP28,454k). The
reconciliation from the IFRS basis to the Expanded basis is shown
in Section 3.2 of the Strategic Report on page 67.
As at the year end, cash and cash equivalents on the Expanded
basis consisted of GBP20,000k held with Sumitomo Mitsui Banking
Corporation Europe Limited and GBP5,278k held with Royal Bank of
Scotland International Limited. At 31 December 2022 Sumitomo Mitsui
Banking Corporation Europe Limited had an S&P credit rating of
A-/Stable and Royal Bank of Scotland International Limited had an
S&P credit rating of A-/Stable.
16. Other payables
31 December 31 December
2022 2021
GBP'000s GBP'000s
Management fees1 50 50
Other payables 390 312
------------------------ ----------- -----------
Total current payables 440 362
------------------------ ----------- -----------
(1) For related party and key advisor transactions see Note
19.
17. Share capital and reserves
Ordinary shares Ordinary shares
31 December 31 December
2022 2021
'000s '000s
Opening balance 2,267,246 1,903,403
Issued for cash 210,105 356,289
Issued as a scrip dividend alternative 3,868 5,788
Issued in lieu of management fees 1,606 1,766
---------------------------------------- --------------- ---------------
Issued at 31 December - fully paid 2,482,8241 2,267,246
---------------------------------------- --------------- ---------------
(1) Balance may not cast due to rounding
On 28 March 2022, the Company issued 210,104,535 shares, raising
GBP277,337,986 before costs.
The Company used the funds to repay the revolving credit
facility and to fund the acquisition of Hornsea One.
The Company issued 3,867,789 shares in relation to scrip take-up
as an alternative to dividend payments in relation to the dividends
paid in the year.
The holders of the 2,482,824,562 (2021: 2,267,246,415) Ordinary
Shares are entitled to receive dividends as declared from time to
time and are entitled to one vote per share at meetings of the
Company. The Company shares are issued at nil par value.
Share capital and share premium
31 December 31 December
2022 2021
GBP'000s GBP'000s
Opening balance 2,488,594 2,046,237
Ordinary Shares issued 284,489 449,305
Cost of Ordinary Shares issued (3,033) (6,948)
-------------------------------- ----------- -----------
Closing balance 2,770,050 2,488,594
-------------------------------- ----------- -----------
Other reserves
31 December 31 December
2022 2021
GBP'000s GBP'000s
Opening balance 1,008 1,005
Shares to be issued in lieu of management fees incurred in H1 2021 (Note 19) - 992
Shares to be issued in lieu of management fees incurred in H2 2021 (Note 19) - 1,008
Shares to be issued in lieu of management fees incurred in H1 2022 (Note 19) 992
Shares to be issued in lieu of management fees incurred in H2 2022 (Note 19) 1,008
Shares issued in the year, transferred to share premium (2,000) (1,997)
------------------------------------------------------------------------------ ----------- -----------
Closing balance 1,008 1,008
------------------------------------------------------------------------------ ----------- -----------
Retained reserves
Retained reserves comprise retained earnings, as detailed in the
statement of changes in shareholders' equity.
18. Foreign exchange forward contracts
The Company has entered into forward foreign currency contracts
to hedge the expected euro distributions up to a maximum of 48
months. In addition, the Company has placed further hedges and aims
to reach a position where 60%-80% of the valuation of euro
denominated assets is hedged, providing a partial offset to foreign
exchange movements in the portfolio value relating to such
assets.
The following table details the forward foreign currency
contracts outstanding as at 31 December 2022. The total euro
balance hedged at 31 December 2022 was EUR1,056.9m (2021:
EUR747.5m).
31 December 2022
Foreign currency Notional value Fair value
Average exchange rate (GBP:EUR) EUR'000s GBP'000s GBP'000s
Less than 3 months - - - -
3 to 6 months 1.1447 95,600 83,515 (1,754)
6 to 12 months 1.1119 73,000 65,652 97
12 to 24 months 1.1094 269,400 242,835 (1,194)
Greater than 24 months 1.1164 618,900 554,374 (13,965)
------------------------ ------------------------------- ---------------- -------------- ----------
1.1168 1,056,900 946,377 (16,815)
------------------------ ------------------------------- ---------------- -------------- ----------
As at the year end, the valuation on the foreign exchange
derivatives consisted of:
Bank Payable amount (GBP'000) S&P credit rating at 31 December 2022
NatWest Markets Plc 4,675 A-/Stable
National Australia Bank Limited 5,714 AA-/Negative
Santander UK Plc 4,482 A+/Stable
Barclays Bank Plc 1,944 A/Stable
--------------------------------------- ------------------------ -------------------------------------
Total fair value of FX forward hedges 16,815
--------------------------------------- ------------------------ -------------------------------------
The fair value of the derivative trades have been split in the
following table. At year end, the Company was in a net payable
position of GBP16.8m (GBP2.7m receivable netted off with GBP19.5m
payable).
31 December 31 December
2022 2021
GBP'000s GBP'000s
Assets
FX forward contracts expiring within 12 months 1,096 14,074
FX forward contracts expiring after 12 months 1,622 13,219
------------------------------------------------ ----------- -----------
Total assets 2,718 27,293
------------------------------------------------ ----------- -----------
Liabilities
FX forward contracts expiring within 12 months (2,753) -
FX forward contracts expiring after 12 months (16,780) -
------------------------------------------------ --------
Total liabilities (19,533) -
------------------------------------------------ --------
19. Related party and key advisor transactions
Loans to related parties:
31 December 31 December
2022 2021
GBP'000s GBP'000s
Short-term balance outstanding on accrued interest receivable 1 11,826 13,147
Short-term balance outstanding from TRIG UK, in relation to management fees to be settled
in shares1 1,008 1,008
Long-term loan stock to TRIG UK and TRIG UK I2 1,853,493 1,671,894
------------------------------------------------------------------------------------------- ----------- -----------
1,866,327 1,686,049
------------------------------------------------------------------------------------------- ----------- -----------
(1) Included within Other receivables on the Balance Sheet
(2) Included within Investments at fair value through profit or loss on the Balance Sheet
During the year, interest totalling GBP121,247k (2021:
GBP101,121k) was earned in respect of the long-term
interest-bearing loan between the Company and its subsidiaries TRIG
UK and TRIG UK I, of which GBP11,826k (2021: GBP13,147k) was
receivable at the balance sheet date.
Key advisor transactions
The Group's Investment Manager (InfraRed Capital Partners
Limited) and Operations Manager (Renewable Energy Systems Limited)
are entitled to 65 per cent and 35 per cent, respectively, of the
aggregate management fee (see below), payable quarterly in
arrears.
The aggregate management fee payable to the Investment Manager
and the Operations Manager is 1 per cent of the Adjusted Portfolio
Value in respect of the first GBP1 billion of the Adjusted
Portfolio Value, 0.8 per cent in respect of the Adjusted Portfolio
Value between GBP1 billion and GBP2 billion, 0.75 per cent in
respect of the Adjusted Portfolio Value between GBP2 billion and
GBP3 billion and 0.70 per cent in respect of the Adjusted Portfolio
Value in excess of GBP3 billion. These fees are payable by TRIG UK,
less the proportion that relates solely to the Company (the
advisory fees) which are payable by the Company.
The advisory fees payable to the Investment Manager and the
Operations Manager in respect of the advisory services they provide
to the Company are GBP130k per annum and GBP70k per annum,
respectively. The advisory fees charged to the Company are included
within the total fee amount charged to the Company and its
subsidiary, TRIG UK, as set out above. The Investment Manager
advisory fee charged to the income statement for the year was
GBP130k (2021: GBP130k), of which GBP33k (2021: GBP33k) remained
payable in cash at the balance sheet date. The Operations Manager
advisory fee charged to the income statement for the year was
GBP70k (2021: GBP70k), of which GBP18k (2021: GBP18k) remained
payable in cash at the balance sheet date.
The Investment Manager management fee charged to TRIG UK for the
year was GBP17,183k (2021: GBP13,858k), of which GBP4,538k (2021:
GBP3,290k) remained payable in cash at the balance sheet date. The
Operations Manager management fee charged to TRIG UK for the year
was GBP9,257k (2021: GBP7,462k), of which GBP2,444k (2021:
GBP1,772k) remained payable in cash at the balance sheet date.
In addition, the Operations Manager received GBP12,493k (2021:
GBP13,070k) for services in relation to Asset Management, Operation
and Maintenance and other services provided to project companies
within the investment portfolio, and GBP25k (2021: GBP79k) for
additional advisory services provided to TRIG UK, neither of which
are consolidated in these financial statements.
In line with the Investment Management Agreement and the
Operations Management Agreement, 20 per cent of the Group's
aggregate management fees up to an Adjusted Portfolio Value of GBP1
billion are to be settled in Ordinary Shares. The shares issued to
the Managers by the Company relate to amounts due to the Managers
by TRIG UK. Accordingly, TRIG UK reimburses the Company for the
shares issued.
As at 31 December 2021, 857,254 shares equating to GBP1,008,219,
based on a Net Asset Value ex dividend of 117.61 pence per share
(the Net Asset Value at 31 December 2021 of 119.3 pence per share
less the interim dividend of 1.69 pence per share) were due, in
respect of management fees earned in H2 2021, but had not been
issued. The Company issued these shares on 31 March 2022.
On 30 September 2022, the Company issued 748,569 shares,
equating to GBP991,779, based on a Net Asset Value ex dividend of
132.49 pence per share (the Net Asset Value at 30 June 2022 of
134.2 pence per share less the interim dividend of 1.71 pence per
share), in respect of management fees earned in H1 2022.
As at 31 December 2022, 760,976 shares equating to GBP1,008,219,
based on a Net Asset Value ex dividend of 132.89 pence per share
(the Net Asset Value at 31 December 2022 of 134.6 pence per share
less the interim dividend of 1.71 pence per share) were due, in
respect of management fees earned in H2 2022, but had not been
issued. The Company intends to issue these shares on 31 March
2023.
The Company is governed by a Board of Directors (the "Board"),
all of whom are independent and non-executive. During the year, the
Board received fees for their services. Further details are
provided in the Directors' Remuneration Report on page 121. Total
fees for the Directors for the year were GBP361,044 (2021:
GBP338,500). Directors' expenses of GBP11,477 (2021: GBP3,510) were
also paid in the year. There are no other Key Management personnel
within the Company.
All of the above transactions were undertaken on an arm's length
basis.
20. Guarantees and other commitments
As at 31 December 2022, the Company and its subsidiaries had
provided GBP164.0m (2021: GBP177.0m) in guarantees in relation to
projects in the TRIG portfolio.
The Company also guarantees the revolving credit facility,
entered into by TRIG UK and TRIG UK I, which it may use to acquire
further investments.
As at 31 December 2022 the Company has GBP204.5m of future
investment obligations (2021: GBP231.2m).
More details on timing and amounts can be found in Section 2.2
of the Strategic Report.
The Company and its subsidiaries have issued decommissioning and
other similar guarantee bonds with a total value of GBP44.4m (2021:
GBP22.8m).
21. Contingent consideration
The Group has performance-related contingent consideration
obligations of up to GBP0.4m (2021: GBP1.8m) relating to
acquisitions completed prior to 31 December 2022. These payments
depend on the performance of certain wind farms and other
contracted enhancements. The valuation of the investments in the
portfolio does not assume that these enhancements are achieved. If
further payments do become due, they would be expected to be offset
by an improvement in investment. The arrangements are generally two
-- way in that if performance is below base case levels some refund
of consideration may become due.
22. Events after the balance sheet date
On 2 February 2023, the Company declared an interim dividend of
1.71 pence per share for the period 1 October 2022 to 31 December
2022. The total dividend, GBP42,456,300, payable on 31 March 2023,
is based on a record date of 10 February 2023 and the number of
shares in issue at that time being 2,482,824,562.
On 3 February 2023, the Company renewed and increased its
revolving credit facility from GBP600m to GBP750m with a GBP45m
working capital element.
23. Subsidiaries, joint ventures and associates
As a result of applying Investment Entities (Amendments to IFRS
10, IFRS 12 and IAS 27) and Investment Entities: Applying the
Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS
28), all subsidiaries (including Associates and Joint Ventures) are
held at fair value based on the Company's ownership interest as
opposed to being consolidated on a line-by-line basis. The
following entities have not been consolidated in these Financial
Statements:
Ownership
Name Country interest
The Renewables Infrastructure Group (UK) Limited UK 100%
The Renewables Infrastructure Group (UK) Investments Limited UK 100%
Roos Energy Limited UK 100%
Grange Renewable Energy Limited UK 100%
Hill of Towie Limited UK 100%
Green Hill Energy Limited UK 100%
Wind Farm Holdings Limited UK 100%
Forss Wind Farm Limited UK 100%
Altahullion Wind Farm Limited UK 100%
Lendrum's Bridge Wind Farm Limited UK 100%
Lendrum's Bridge (Holdings) Limited UK 100%
Lough Hill Wind Farm Limited UK 100%
European Investments (SCEL) Limited UK 100%
European Investments (Cornwall) Limited UK 100%
European Investments (Cornwall) Holdings Limited UK 100%
Churchtown Farm Solar Limited UK 100%
East Langford Solar Limited UK 100%
Manor Farm Solar Limited UK 100%
European Investments Solar Holdings Limited UK 100%
Sunsave 12 (Derriton Fields) Limited UK 100%
Sunsave 25 (Wix Lodge Farm) Limited UK 100%
Parley Court Solar Park Limited UK 100%
Egmere Airfield Solar Park Limited UK 100%
Penare Farm Solar Park Limited UK 100%
European Investments (Earlseat) Limited UK 100%
Earlseat Wind Farm Limited UK 100%
European Investments Solar Holdings 2 Limited UK 100%
BKS Energy Limited UK 100%
Hazel Renewables Limited UK 100%
Kenwyn Solar Limited UK 100%
MC Power Limited UK 100%
Tallentire Energy Limited UK 100%
Freasdail Energy Limited UK 100%
Neilston Community Wind Farm LLP UK 100%
Carbon Free Limited UK 100%
NDT Trading Limited UK 100%
Carbon Free Neilston Limited UK 100%
Garreg Lwyd Energy Limited UK 100%
UK Energy Storage Services Limited UK 100%
Solwaybank Energy Limited UK 100%
European Wind Investments Group Limited UK 100%
European Wind Investments Group 2 Limited UK 100%
Irish Wind Investments Group Limited UK 100%
Offshore Wind Investments Group Limited UK 100%
Scandinavian Wind Investments Group Limited UK 100%
European Storage Investments Group Limited UK 100%
Trafalgar Wind Holdings Limited UK 100%
European Investments Tulip Limited UK 100%
Little Raith Wind Farm Limited UK 100%
Blary Hill Energy Limited UK 100%
Offshore Wind Investments Group 2 Limited UK 100%
Offshore Wind Investments Group 3 Limited UK 100%
Offshore Wind Investments Group 4 Limited UK 100%
Offshore Wind Investments Group 5 Limited UK 100%
Offshore Wind Investments Group 6 Limited UK 100%
Offshore Wind Investments Group 7 Limited UK 100%
Offshore Wind Investments Group 8 Limited UK 100%
Scandinavian Wind Investments Group 2 Limited UK 100%
Iberian Solar Investment Group Limited UK 100%
Iberian Solar Investment Group 2 Limited UK 100%
European Storage Investments Group 2 Limited UK 100%
Verneuil Holdings Limited UK 72%
Merkur Offshore Wind Farm Holdings Limited UK 69%
Fred. Olsen Wind Limited UK 49%
Fred. Olsen Wind Holdings Limited UK 49%
Fred Olsen Wind 2 Limited UK 49%
Crystal Rig Windfarm Limited UK 49%
Rothes Wind Limited UK 49%
Paul's Hill Wind Limited UK 49%
Crystal Rig II Limited UK 49%
Rothes II Limited UK 49%
Mid Hill Wind Limited UK 49%
Equitix Offshore 3 Limited (MidCo 1) UK 37%
Equitix Offshore 4 Limited (MidCo 2) UK 37%
Equitix Offshore 5 Limited (BidCo) UK 37%
Bilbao Offshore Investment Limited UK 36%
Bilbao Offshore Holding Limited UK 36%
Beatrice Offshore Windfarm holdco Ltd UK 18%
Beatrice Offshore Windfarm Ltd (ProjectCo) UK 18%
Scira Offshore Energy Limited UK 15%
East Anglia One Limited UK 14%
Horizon Offshore Wind Limited UK 40.6%
Jupiter Investor TopCo Limited UK 20.3%
Jupiter Investor MidCo Limited UK 20.3%
Jupiter Investor HoldCo Limited UK 20.3%
Jupiter Offshore Wind Limited UK 20.3%
Hornsea 1 Holdings Limited UK 10.2%
Hornsea 1 Limited UK 10.2%
European Storage Investments Holdings 1 Limited UK 100%
European Storage Investments Holdings 2 Limited UK 100%
European Storage Investments Holdings 3 Limited UK 100%
Capella BESS Limited UK 100%
Aludra BESS Limited UK 100%
Botein BESS Limited UK 100%
Spennymoor Energy Storage Limited UK 100%
The Renewables Infrastructure Group (France) SAS France 100%
CEPE de Haut Languedoc SARL France 100%
CEPE du Haut Cabardes SARL France 100%
CEPE de Cuxac SARL France 100%
CEPE des Claves SARL France 100%
CEPE de Puits Castan SARL France 100%
Verrerie Photovoltaique SAS France 100%
Parc Eollen Nordex XXI SAS France 100%
CEPE Rosieres France 100%
CEPE Montigny La Cour SARL France 100%
Energies TIlle et Venelle Holdings SAS France 100%
Energies Entre Tille et Venelle SAS France 100%
Haut Vannier Holding SAS France 100%
Haut Vannier SAS France 100%
FPV du Midi France 51%
FPV Chateau France 49.1%
FPV du Plateau France 49.1%
SECP Bongo France 49.1%
SECP Olmo 2 France 49.1%
FPV Pascialone France 49.1%
FPV Santa Lucia France 49.1%
FPV Agrinergie France 49.1%
FPV d'Export France 49.1%
Agrisol 1A Services France 49.1%
SECP Chemin Canal France 49.1%
FPV Ligne des Quatre Cents France 49.1%
FPV Ligne des Bambous France 49.1%
Heliade Bellevue France 49.1%
SECP Creuilly France 49.1%
Akuo Tulip Assets SAS France 49.1%
FPV Broussan France 49.1%
Fujin SAS France 41.9%
Eolienne de Rully France 41.9%
Parc Eollen de Fontaine Macon France 41.9%
Parc Eollen de Vignes France 41.9%
Val De Gronde France 37.3%
Energie du Porcin France 33.5%
German Offshore Wind Investments Group (Holdings) Limited Germany 100%
German Offshore Wind Investments Group Limited Germany 100%
Gode Wind 1 Investor Holding GmbH Germany 50%
Gode Wind 1 Offshore Wind Farm GmbH Germany 25%
Merkur Offshore GP GmbH Germany 35.7%
Merkur Offshore Investment Holdings GmbH & Co KG Germany 35.7%
Merkur Offshore Holdings GmbH Germany 35.7%
PG Merkur Holding GmbH Germany 35.7%
Merkur Offshore GmbH Germany 35.7%
Merkur Offshore Service GmbH Germany 35.7%
Malabrigo Solar SLU Spain 100%
Arenosas Solar SLU Spain 100%
El Yarte Solar SLU Spain 100%
Pisa Solar Holdings SL Spain 100%
Evacuacion Solar Arcos SL Spain 100%
Valdesolar SL Spain 49%
MHB Wind Farms Limited Republic of Ireland 100%
MHB Wind Farms (Holdings) Limited Republic of Ireland 100%
Taurbeg Limited Republic of Ireland 100%
Pallas Energy Supply Limited Republic of Ireland 100%
Pallas Windfarm Limited Republic of Ireland 100%
Sirocco Wind Holding AB Sweden 100%
Jadraas Vindkraft AB Sweden 100%
Gronhult Wind AB Sweden 100%
Hallasen Kraft AB Sweden 100%
Krange Wind AB Sweden 50%
GOW01 Investor LuxCo SARL Luxembourg 50%
Alternative Performance Measures ("APMs")
We assess our performance using a variety of measures that are
not specifically defined under IFRS. These alternative performance
measures are termed "APMs". The APMs that we use may not be
directly comparable with those used by other companies.
These APMs are used to present an alternative view of how the
Company has performed over the year and are all financial measures
of historical performance.
The table below defines our APMs and how they relate to the
Company's subsidiaries, The Renewables Infrastructure Group UK
Limited ("TRIG UK") and The Renewables Infrastructure Group UK
Investments Limited ("TRIG UK I").
Performance Measure Definition
Investments made This is a measure of amounts invested into the
portfolio of investments less any amounts relating
to refinance proceeds or sell-downs.
The IFRS measure of investments made consists
of funding into TRIG UK and TRIG UK I, which
is shown in more detail in Note 13 of these
financial statements.
TRIG invests in its portfolio through its subsidiaries,
TRIG UK and TRIG UK I. This is a measure of
the valuation of the portfolio of investments
only. It is exclusive of cash, working capital
and debt balances in TRIG UK and TRIG UK I.
Directors' Portfolio TRIG invests in its portfolio through its subsidiaries,
Valuation TRIG UK and TRIG UK I. This is a measure of
the valuation of the portfolio of investments
only. It is exclusive of cash, working capital
and debt balances in TRIG UK and TRIG UK I.
The IFRS measure of investments at fair value
through profit or loss is the Directors' Portfolio
Value plus the fair value of net assets including
cash, working capital and debt held in TRIG
UK and TRIG UK I.
Directors' Portfolio Value (or Portfolio Value)
is reconciled to investments at fair value through
profit or loss in Note 13 of these financial
statements.
NAV per share This is a measure of Net Asset Value ("NAV")
per ordinary share in the Company and is calculated
as the NAV divided by the total number of shares
in issue at the balance sheet date.
The calculation uses IFRS measures and is explained
further in Note 12 of these financial statements.
Total shareholders ' The Internal Rate of Return upon the share price
return for the year (share at 31 December 2021 (134.4p) of dividends (quarterly
price appreciation plus as paid totalling 6.82p as detailed in note
dividends paid) 11 of these financial statements) plus the share
price at 31 December 2022 (130.0p).
Total NAV return for The Internal Rate of Return upon the NAV at
the year (NAV per share 31 December 2021 (119.3p) of dividends (quarterly
appreciation plus dividends as paid totalling 6.82p as detailed in note
paid) 11 of these financial statements) plus the NAV
at 31 December 2022 (134.6p).
Dividend Cover Dividend Cover is calculated as Cashflow from
Operations (which is an Expanded Basis measure
explained in section 3.2 and reconciled to the
IFRS measure) divided by Dividends paid in the
year.
Dividend Cover, when expressed on a cash basis,
has cash dividends paid as the denominator and
is calculated as 1.55 times for 2022.
Dividend Cover, when expressed as being without
the benefit of scrip dividends, has the scrip
dividends allocated to shareholders in lieu
of cash dividends added to the cash dividends
paid for the calculation. This slightly increases
the denominator and hence this measure has a
slightly smaller value, which was 1.5 times
for 2022.
Sustainability Terminology Glossary
Term Definition
Renewable electricity The amount of renewable electricity generated
generated by the portfolio during the year, net of the
Company's ownership share.
Tonnes of CO2 avoided The estimate of the portfolio's annual CO(2)
per annum emission reductions, based on the portfolio's
estimated generation as at the relevant reporting
date prepared on the International Financial
Institution's ("IFI") approach to greenhouse
gas ("GHG") Accounting.
Lost Time Accident Frequency A safety at work metric for every 100,000 hours
Rate (LTAFR) worked. Calculated as the number of accidents
which occurred in the given period divided by
number of hours worked times 100,000.
Whilst all accidents are recorded, only accidents
that have resulted in the worker being unable
to perform their normal duties for more than
seven days are included in this calculation,
in line with reportable accidents as defined
by UK HSE RIDDOR.
UK HSE RIDDOR is defined as the UK Health and
Safety Executive Reporting of Injuries, Diseases
and Dangerous Occurrences Regulation.
[1] Based on NAV per share appreciation plus dividends paid
during the year ended 31 December 2022.
[2] From 1 January 2022 to 21 February 2023. Including both
Grönhult and the Cadiz solar projects, which have started exporting
electricity and are in final commission during Q1 2023.
[3] Pro-rated based on TRIG's percentage of ownership.
[4] The RCF is held within TRIG UK and TRIG UK I, and guaranteed by TRIG Limited.
[5] Dividend cover was 1.55x with the benefit of scrip take-up
(which was GBP5.2m in the period).
[6] The Company's dividend policy is to increase the dividend
when the Board considers it prudent to do so, considering forecast
cash flows, expected dividend cover, inflation across TRIG's key
markets, the outlook for electricity prices and the operational
performance of the Company's portfolio.
[7] Including onshore wind, offshore wind, solar PV and flexible
capacity technologies. Flexible capacity is generation technologies
that can store energy and respond to electricity demand levels and
pricing signals, such as batteries, pumped hydro storage and green
hydrogen. Within flexible capacity technologies, the Investment
Manager's current principal focus is on battery storage
projects.
[8] To date the Company has invested in the UK, France, Germany, Ireland, Spain and Sweden.
[9] On a committed basis at the date of this report. Based on
average regional household electricity consumption figures and the
IFI Approach to GHG Accounting for Renewable Energy.
[10] As at 31 December 2022, including investment commitments.
[11] On an Expanded Basis. Please refer to Section 3.2 for an explanation of the Expanded Basis.
[12] Construction and development exposure across the portfolio was 8% as at 31 December 2022.
[13] Directors' Valuation is an Alternative Performance Measure
("APM"). See page 175 for details of APMs. Further, the
reconciliation from the Expanded Basis financial results is
provided in Section 3.2 - Analysis of Financial Results, and a
reconciliation of the Directors' Portfolio Value (APM) to
Investments at Fair Value is provided in Note 13 to the Financial
Statements.
[14] % of Invested portfolio excluding commitments
[15] Committed Portfolio Value is GBP3,942m and includes GBP205m
of investment commitments outstanding at the balance sheet date
[16] Cannibalisation describes the effect that renewables (an
intermittent generator) can have on the overall power prices,
whereby the marginal cost of generation, which in turn drives the
power prices, is lower than the average which would be expected of
a continuous base load generator as a result of the additional
supply when renewables are generating. Rates differ over time and
between markets but all are affected.
[17] Power price forecasts used in the Directors' valuation for
each market are based on analysis by the Investment Manager using
data from leading power market advisers. In the illustrative
blended price curve, the power price forecasts are weighted by the
P50 estimate of production for each of the projects in the 31
December 2022 portfolio. Forecasts are shown net of assumptions for
PPA discounts and cannibalisation. The average level of reduction
to the baseload forecast power price assumed to renewable
generation across the portfolio is approximately 15%-20%.
[18] The majority of the Swedish wind farm income is from
wholesale power sales which in the Nord Pool are denominated in
euros, accordingly the investment is treated as
euro-denominated.
[19] This column does not cast due to rounding differences.
[20] The majority of the Swedish wind farms' income is from
wholesale power sales which in the Nord Pool are denominated in
euros. Accordingly, the investments in Sweden are treated as
euro-denominated, notwithstanding that the smaller subsidy element
of the revenues and some operating costs are denominated in Swedish
krona.
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