Net Asset Value – Q3 2023
27 October 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.
Net Asset Value - Q3 2023
TRIG announces that its estimated unaudited Net Asset Value as at 30 September 2023 is 131.0 pence per share, a decrease of 1.2 pence per share to the Company's last announced Net Asset Value as at 30 June 2023, principally due to an increase in the portfolio weighted average discount rate to 8.1%.
Earnings for the quarter were 0.6 pence per share. An interim dividend of 1.795 pence per share was paid in the quarter and the Company remains on track to pay the target dividend for the full year 2023 of 7.18 pence per share*.
Operational cash flows across the portfolio remain strong and for the full year 2023 are expected to be c. £500m*, being c. 3.0x gross cash cover over the Company's 2023 target dividend (i.e. before the repayment of portfolio-level debt). Portfolio level debt repayments for the year are scheduled to total c. £200m. The Company's net dividend cover for the year (after the portfolio debt repayments) is expected to be c. 1.6x.
The key drivers of the movement in Net Asset Value per share in the quarter are summarised in the table below with further details following:
|
|
Net Asset Value (pence per share) |
Positive Movements |
Negative Movements |
|
NAV per share at 30 June 2023 |
132.2p |
|
|
|
Q3 generation & power prices compared to forecasts |
|
|
(0.3)p |
|
Q3 Inflation and foreign exchange movements |
|
0.7p |
|
|
Increase in forecast power prices |
|
0.4p |
|
|
Portfolio weighted average discount rate increased by +20bps |
|
|
(2.0)p |
|
NAV per share at 30 September 2023** |
131.0p |
|
|
* Past performance is not a reliable indicator of future results. There can be no assurance that targets will be met or that the Company will make any distributions, or that investors will receive any return on their capital. Capital and income at risk.
**NAV per share at 30 September 2023 presented after unwind of the discount rate, company costs and payment of the dividend, which in aggregate sum to net nil impact.
Q3 generation & power prices compared to forecasts
Underlying financial performance in the period was slightly below budget, mainly reflecting lower than expected energy resource. The portfolio-wide energy yield continued to benefit from diversification with below budget German offshore wind generation offset by above budget UK wind generation. Other markets were broadly in-line with expectations. Power prices were close to budget.
Operational performance remains good, and the Operations Manager continues to progress technical and operational value enhancements.
Q3 inflation and foreign exchange movements
The movement in the period reflected foreign exchange gains on euro denominated investments as sterling weakened during the quarter. This was slightly offset by inflation which was marginally lower in the period than forecast.
Over the next 10 years, 56% of the Company's forecast revenue per unit of generation is directly indexed to inflation. Market implied inflation expectations in the UK are c. 0.75% higher than TRIG's long-term inflation assumptions. If these market implied inflation expectations were to be reflected in TRIG's UK inflation assumptions, portfolio-wide return expectations would increase by c. 0.6% (noting that UK investments represent 57% of TRIG's portfolio, by value).
Increase in forecast power prices
Power price forecasts have marginally increased across the duration of the blended curve.
Over the next ten years, 67% of the Company's forecast revenues per unit of generation are fixed through government contracts or long-term power purchase agreements. TRIG continues to adopt the cannibalisation assumptions of power price forecasters.
Active management
On 21 August 2023, TRIG announced the disposal of three onshore wind farms in Ireland. This transaction has now been completed, raising gross proceeds of £22m at a 26% premium to carrying value. The Investment Manager is evaluating further disposals to support portfolio construction objectives and to continue to reduce borrowings under the Group's revolving credit facility ("RCF").
Construction and development stage projects continue to progress well:
· The Ryton battery storage project in the UK reached the Final Investment Decision (FID) stage in the quarter with operational takeover expected during 2025.
· At the Drakelow battery storage project in the UK, infrastructure design is underway with FID expected in early 2024.
· At the Ranasjö and Salsjö wind farm projects in Sweden, towers have been erected for 38 of the 39 turbines with eight turbines now in the commissioning phase.
· The Managers continue to progress further development stage investments including those organically generated such as repowering and co-location, as well as two further battery storage projects.
Portfolio weighted average discount rate
During the period, the Company secured a sale of assets at a significant premium to NAV, whilst transactions across the wider renewables and infrastructure marketplace also seem to indicate that valuations remain resilient. The Investment Manager notes that long-term government bond yields have increased further in the period across the geographies in which TRIG operates.
Balancing these two factors, we have increased valuation discount rates applied in the UK and EU by 0.2%. This brings the total increase in applied valuation discount rates to 1.8% in the UK and 0.8% in the EU over the last 12 months. The portfolio weighted average discount rate has increased to 8.1%, meaning the implied portfolio discount rate premium to 10-year government bond yields at 30 September 2023 was 4.2%.
Capital allocation
Proceeds from the disposal of assets together with internally-generated cash flows in excess of Company costs and dividends paid to shareholders have been applied since 30 June 2023 to reduce the Company's revolving credit facility balance by £40m to £370m.
The Company's investment commitments, which are expected to be fully funded from internally-generated cash flows, relate to the construction of two onshore windfarms in Sweden and two battery storage projects in the UK, totalling nearly 300MW generation or storage capacity. Each of these projects have return expectations that are significantly higher than the portfolio average, serve to further diversify the portfolio and drive long-term value for shareholders.
It remains the priority of the Board and Managers to pay an attractive, resilient dividend to shareholders, fulfil existing investment commitments and reduce RCF drawings. Beyond these priorities, excess cash flows may also be applied to accretive investment opportunities, which may include share buybacks particularly at prevailing share price levels.
Enquiries
InfraRed Capital Partners Limited +44 (0) 20 7484 1800
Richard Crawford
Phil George
Minesh Shah
Mohammed Zaheer
Brunswick +44 (0) 20 7404 5959 / TRIG@brunswickgroup.com
Mara James
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 190 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 capital1 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 rating2 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.
1 Data as at Q4 2022. Equity Capital is calculated using a 5-year average FX rate.
2 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 12GW of operational assets worldwide for a large client base. Headquartered in Hertfordshire, UK, RES is active in 11 countries and has over 2,500 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.
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