Fund Research

The Renewables Infrastructure Group

Last update 19 July 2018

The Renewables Infrastructure Group (TRIG) is a c.£1.2bn Guernsey-domiciled company listed on the LSE and a member of the FTSE 250, which owns a portfolio of renewable energy assets offering long-term cashflows, elements of which are linked to inflation.

TRIG differentiates itself to the majority of the UK renewables infrastructure sector in that the mandate is to invest across geographies and across renewable energy technologies – wind, solar and a small investment in battery storage – providing diversification as well as scale.

Currently the company has the majority of its exposure to wind farms, which represents 77% of the portfolio by value. Of this, 8% is invested in wind farms located offshore. At launch, solar made up only 10% of the company’s assets, but this has risen over time to the current level of 21%.

TRIG’s dividend has increased each year from 6p per share following launch in 2013. In 2016 the board set out a policy for a progressive dividend to the extent that it views it as prudent to do so. The current dividend target is 6.5p per share, equivalent to a yield at the current price of 6%.

In NAV terms, the company has hardly missed a beat, with the only fall being when the UK government removed the Levy Exemption Certificates for renewables. In relative terms, it has performed in-line with the peer group and has been outperforming the FTSE All Share index on a total return basis since launch, with considerably less volatility. Since its initial public offering (to 31 December 2017) the company has delivered NAV total returns of 7.1% per annum. In share price terms it has performed even better.

The company currently has overall gearing of approximately 40%, which is higher than some of the peer group. TRIG employs gearing in two ways. The first is longer-term debt that sits within the SPVs that are used to purchase and own the various assets (currently c.35%, limited to 50% gearing). It is this debt that is amortised over time. Second, the company has the ability to borrow at a corporate level on a short-term basis, which is limited to 30% of portfolio value, which has been used to bridge acquisitions before fresh equity is raised from the market.

TRIG has two managers who work together to achieve the company’s aims: InfraRed Capital Partners, which is responsible for the financial management, sourcing and executing of new investments; and RES, which has a dedicated team of more than 40 providing portfolio-level operations management.

The company has enjoyed robust demand for its shares, and according to data from Numis has traded on an average premium to NAV over the last year of 4.6%. At the current premium of 2.4%, the shares trade at a discount to the sector average premium of 4.8%.

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