Update on COVID-19, Power Prices & NAV
22 April 2020
This announcement contains inside information for the purposes of the market abuse regulation (EU) No.596/2014.
The Renewables Infrastructure Group Limited
("TRIG" or "the Company", a London-listed investment company advised by InfraRed Capital Partners ("InfraRed") as Investment Manager and RES ("Renewable Energy Systems") as Operations Manager)
Update on COVID-19, power prices and potential NAV impact
The Board of TRIG is issuing this update which follows the Company update and investor call held on 23 March 2020 (the "March Update Call"), a transcript of which is available on the Company's website.
Summary
· Power price forecasts reduced, with material impact from COVID-19 in the near term, which if taken in isolation and excluding value enhancements, would imply a reduction in NAV per share of approximately 5p
· Excellent portfolio performance in Q1, with generation 22% above budget, and asset availability is being maintained in line with expectations
· Dividend guidance of 6.76p for year ended 31 December 2020 reaffirmed
Power prices and NAV
COVID-19 is having a materially adverse impact on wholesale power prices as a result of reduced economic activity due to movement restrictions introduced across Europe. The global pandemic has led to a reduction in demand for electricity and caused gas and carbon prices to fall. These impacts are expected to continue over the near term impacting all power generators. In addition, expectations for gas prices in the medium-term have continued to ease, due to expected softer demand and increased supply.
As a result, the most recent power price forecasts received by the Company used as part of its process to arrive at the portfolio valuation, show a material reduction in forecast prices in the near term as a result of COVID-19, and a lesser reduction over the long term as a result of lower gas prices, compared with previous expectations.
Power price forecasts for each of the five jurisdictions across Europe in which the Company operates show similar reductions.
Based on these forecasts, the projected wholesale power prices for TRIG's markets, on a blended basis, have reduced on average by 17% over the next 5 years (including a 25% reduction over 2020 and 2021) and by 5% from 2025 until 2050. In the GB market, this corresponds to an average cannibalised[1] capture price of c. £39 per MWh for the period 2020-2024 and £46 per MWh for the period 2025-2050 (in real prices).
Approximately 74% of the Company's revenues through to 31 December 2024 (and in excess of 80% over the next two years) are fixed, providing strong levels of visibility on cashflows in the near-to-medium term. The Company benefits from having projects in France and Germany with Feed in Tariffs and from fixes entered into for projects in other jurisdictions, as a result of the Company's diversification strategy.
These latest power price forecasts, if taken in isolation, would imply a reduction in NAV per share of approximately 5p. The Company's last published NAV per share was 115p as at 31 December 2019.
A formal valuation exercise will be undertaken for the 30 June 2020 interim results which will take into account the latest available sets of power price forecast assumptions, as well as all other variables and mitigants that are applied in valuing the portfolio including the strong Q1 operational performance and value enhancements. The 30 June 2020 interim results are due to be announced in early August 2020.
Operations
The Company's operating portfolio continues to perform well. Consistent with the out-performance noted for the partial quarter on the March Update Call, generation in the first quarter to 31 March 2020 was 22% above budget overall, with offshore wind farms and the assets in GB and Sweden performing particularly well.
The operational portfolio has enjoyed good availability despite the operational challenges posed by COVID-19, keeping within approximately 1% of the availability budget for March, which has been achieved through the pragmatic, solution-focussed approach adopted by the asset management and the operation and maintenance teams.
Activity at TRIG's three construction investments (representing c. 8% of the portfolio by value) continue to be closely monitored: Venelle in France is partially commissioned with six operational turbines generating revenue, and the remaining 10 turbines delayed but anticipated to be operational this summer. Solwaybank in Scotland is progressing well with commencement of operations still expected by the end of the year. Blary Hill in Scotland is expected to commence construction shortly as scheduled.
InfraRed and RES continue to prioritise safeguarding the health and welfare of their employees and contractors, as well as maximising the operational performance of the Company's portfolio.
Dividends
Notwithstanding that power prices will be lower than expected for 2020, the Company's projected dividend cash cover remains positive. The Company has a strong funding position and reserves which gives further confidence.
The Board reaffirms the dividend guidance of 6.76p for the year ending 31 December 2020. The ex-dividend date of the first quarterly interim dividend payment is 14 May 2020 with a payment date of 30 June 2020.
Enquiries
InfraRed Capital Partners Limited
triginfo@ircp.com
Richard Crawford
Phil George
Maitland/AMO trig-maitlandamo@maitland.co.uk
James Isola
Zara de Belder
Notes
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 targeting an aggregate dividend of 6.76 pence per Ordinary Share for the year to 31 December 2020.
TRIG is invested in a portfolio of over 70 wind, solar and battery storage projects with aggregate net generating capacity of 1,664MW. 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
TRIG's Investment Manager is InfraRed Capital Partners Limited ("InfraRed") which has successfully invested in over 200 infrastructure projects since 1997. InfraRed is a leading international investment manager focused on infrastructure and real estate. It operates worldwide from offices in London, Hong Kong, New York, Seoul, Sydney and Mexico City. With over 190 professionals it manages in excess of USD 12 billion of equity capital in multiple private and listed funds, primarily for institutional investors across the globe. InfraRed is authorised and regulated by the Financial Conduct Authority.
The infrastructure investment team at InfraRed consists of over 85 investment professionals, all with an infrastructure investment background and a broad range of relevant skills, including private equity, structured finance, construction, renewable energy and facilities management.
InfraRed implements best-in-class practices to underpin asset management and investment decisions, promotes ethical behaviour and has established community engagement initiatives to support good causes in the wider community. InfraRed is a signatory of the Principles of Responsible Investment.
Further details can be found on InfraRed's website at www.ircp.com .
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 38 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 17GW in capacity. RES supports over 5.5GW of operational assets worldwide for a large client base. Headquartered in Hertfordshire, UK, RES is active in 10 countries and has over 2,000 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] Cannibalisation is the term given to the tendency for renewables (an intermittent generator) to achieve an overall power price which is lower than the average which would be expected of a continuous base load generator, caused by prices being influenced by the additional supply when renewables are generating. Rates differ over time and between markets but all are affected. This price cannibalisation is allowed for by the Company in its valuation process.
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